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SAP Unwraps Hosted Platform for SMBs
SAP Unwraps Hosted Platform for SMBs

By Mark Long
September 20, 2007 10:49AM

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SAP Business ByDesign is expected to help midsize businesses reduce their TCO under a per-month pricing structure that starts at $149 per user. The pricing of Business ByDesign is very competitive, noted AMR Research senior analyst Simon Jacobson, but "only over time will we really be able to see what the long-term tangible benefits are."

SAP has unwrapped a new on-demand business software platform targeted at midsize companies (100 to 500 employees) looking to simplify their I.T. requirements while improving the efficiency and flexibility of their business processes.

According to the Germany-based software giant, there are more than 60,000 such companies in the U.S. and Germany alone. Moreover, the company pegs the worldwide market potential of the new offering at more than $15 billion.

With the rollout of SAP Business ByDesign, formerly codenamed A1S, the software-maker is moving to a new service-oriented architecture (SOA) for building applications out of services that otherwise would be intrinsically unassociated units of functionality.

With SAP Business ByDesign, "the technical advantages of SOA enter the level of business processes and allow customers to exploit the full potential of new business trends without becoming I.T. experts," said SAP CEO Henning Kagermann.

Competitive Pricing

SAP Business ByDesign is expected to help midsize businesses reduce their total cost of ownership under a per-month pricing structure that starts at $149 per user (with a minimum of 25 workers) and includes software, infrastructure, services, and support. Moreover, customers in need of limited access will be able to realize further cost savings, the company said.

SAP said that the new hosted platform will fulfill four key customer requirements: completeness, ease of use, adaptability, and significantly cutting total cost of ownership. SAP Business ByDesign is intended to complement the software giant's Business One, Business All-in-One, and Business Suite offerings.

The pricing is very competitive, but "only over time will we really be able to see what the long-term tangible benefits are," noted AMR Research senior analyst Simon Jacobson. "The challenge for SAP will be to qualify their prospects, whether they fit Business ByDesign or Business All-In-One."

Small companies will see Business ByDesign to be "a low-cost manageable solution," Jacobson explained. "The question is, what will this do to Business All-In-One?" Jacobson went on to say that the new offering is not for everyone in the midmarket space, "especially companies with deep micro-vertical requirements." Jacobson added that he expects SAP will have to clarify the differences between the two.

Spawning New Partners

SAP said it expects to rely on its partner ecosystem to help drive adoption of its latest offering. To this end, the software-maker will be inviting current SAP reseller partners to apply and qualify, with the expectation that they will build new businesses around SAP Business ByDesign that reflect the volume nature and requirements of the new hosted platform.

"Eventually this will spawn a new type of partner who can do the sales, consulting, and data conversion" on behalf of new customers," Jacobson noted. "So there will be room for partners, but not in the traditional sense."

Overall, the introduction of SAP's Business ByDesign should result in more interesting competitive dynamics in the market, Jacobson said. "For SAP, one of the hurdles I foresee -- beyond getting over the skepticism of the CIO -- is to not get trapped in the traditional ERP sales cycle."

SAP will attempt to overcome these and other hurdles by offering potential customers personalized trials so they do not have to make an up-front financial commitment.

But the work has only just begun. Paul Hamerman, vice president at Forrester Research, said that the product launch announcement is only the "first step of a lengthy ramp-up process" for SAP, as much work remains to be done to refine the product and go-to-market strategies.

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