SAP reveals it has designs on the mid market

gallery

This week's launch of Business By Design, SAP's mid-market, on demand software system [see News] throws down a challenge to software as a services companies such as NetSuite and RightNow, as well as conventional software firms such as Microsoft and Oracle.

But the greater challenge could be for mid-sized company IT directors and chief information officers - who must now choose between the conventional, on-premise Business All In one, the new Business ByDesign software, and possibly the smaller and simpler Business One suite. And SAP itself, as well as its network of partners and resellers, still need to find the right market for each product.

SAP clearly believes Business ByDesign is about attracting new customers to SAP, rather than offering a simpler and cheaper back-office system for existing customers. SAP executives say the software is aimed at "non buyers" and especially, companies that thought of SAP as too complex and too expensive for their needs.

The market opportunity is certainly there. SAP values the potential market at $15 billion (£7.5 billion), or about 1.2 million companies worldwide. Forrester Research calculates that the level of adoption of software as a service (SaaS) is currently at about 10 per cent among midsize businesses, mostly for point solutions such as human resources and customer relationship management.

A further six to eight per cent of companies have plans to deploy SaaS, so there is certainly plenty of potential for Business ByDesign. The potential could well be greater than SAP's existing offerings in the space: in an interview at the New York launch, SAP's deputy chief executive Léo Apotheker told IT PRO that SAP currently has 29,000 customers in the mid-market space.

SAP, though, is placing a very large bet on its ability to persuade "non buyers" to sign up for Business ByDesign. The software, which uses model-based development, a services-oriented architecture (SOA) and runs on the NetWeaver platform, has taken four years to develop and cost SAP between $300 million (£150 million) and $400 million (£200 million) in development costs.

None the less, SAP is taking an initially cautious approach, with just 20 launch customers (in the US and Germany) and some 300 prospects. UK companies can register to try the service this week, but SAP does not expect Business ByDesign to reach its full operating capacity until 2010.

Ramping up the service will inevitably mean bringing additional data centres on line, as all instances of Business ByDesign are currently hosted at SAP's Waldorf HQ, in Germany. SAP will also have to work out how to divide the attention of its channel between Business ByDesign and Business All in One, and how to provide integration services for customers who want - or need - integration between Business ByDesign and other applications.

"There's no question the mid market needs customisation as much as large enterprises," says Zach Nelson, chief executive of SaaS provider NetSuite. "The decision by Asahi Kasei Spandex America, a division of the $10 billion (£5 billion) Asahi Kasei Group, based in Tokyo to switch from SAP R/3 to NetSuite is a case in point. We needed to build a fairly complex SuiteFlex "suitelet" to meet their business process requirements."

Email to a friend

Print this page