Intelligent Enterprise

SAP publicly announced the new software as a service (SaaS) business application suite called SAP Business ByDesign, filling a gap in its market offering. Marketed as the big event, SAP is adding another branded application suite to its portfolio that goes beyond the three on-premise suites it already has for large, medium and small businesses. The applications suite focuses on midsized firms with 100 to 500 employees and provides a new area for growth through both direct sales and channel partnerships. Yes, there is more fanfare, but the application suite is not yet ready for primetime.

Only a small number of early customers have used the application suite. SAP believes it can transform the industry, yet the hosted system is only available, for now, by invitation in the US and Germany. It will become more readily available when the applications are ready for broad use, and when reported performance issues are resolved. The suite will need further validation and testing to see if it can work across a variety of industries. In addition, channel partners have to be trained and qualified to help organizations of this size with the offering.

SAP has taken an all-or-nothing approach to its pricing, with full suite of CRM, SCM and ERP applications priced at $149 per employee per month with minimum of 25 users. The approach may be attractive if you are ready to switch your entire company, but it does not reflect the reality of how organizations operate in adopting applications when they are ready to transform their people and processes to a new application. SAP believes its complete solution and pricing is very attractive compared to multiple, unintegrated best-of-breed applications, but we will have to wait to see how popular it becomes.

SAP still has a lot of work to do to compete against Intacct, NetSuite, salesforce.com, Workday and other providers. SAP has focused on a very narrow segment of companies with a relatively small number (100 to 500) of employees. While SAP works through issues to get SAP BusinessByDesign complete, larger customer organizations are continuing to migrate from on-premise software to on-demand offerings or they're completely outsourcing the business process due to the complexities and costs of business applications.

The real business question is why a CFO and CEO in an organization with 100 to 500 employees would want to adopt the SAP Business ByDesign suite directly or from a channel partner. Is the business case sufficient and will it enable you to be more effective? Beyond the suite of applications and price, does it make sense to convert your entire company to SAP? Be sure you know the answer to many of these business question before you accept the invitation. SAP is always persistent and eventually delivers on what it sets out to accomplish, but the short-term could be a serious challenge for you as an early adopter.

Mark Smith is CEO And Senior Vice President of Research at Ventana Research. Write to him at mark.smith@ventanaresearch.com.