Business ByDesign: the partnering opportunity
As the excitement around Business ByDesign dies down, the questions start flowing. While at the event, Brian Sommer and Charlie Wood asked Leo Apotheker two of the most intriguing questions centering on the partnering opportunity.
Brian has decades experience as a SAP partner during his Accenture days and has undertaken extensive research into this aspect of the IT industry. He questioned SAPs ability to realistically build a volume model for the mid market:
The mid-market channel struggles to hire the best graduates so I'm wondering how SAP will build a market that can be truly effective?
Apotheker's response provided a revealing insight into how SAP plans to build out the BBD market (paraphrased and rearranged for context):
When you study the economics of the mid-market channel, you find they are not really making any margin because the cost of sale is huge. At best they're eeking out a living based on the small number of customers they have. We are building a market from scratch. We will run a campaign to hire partners and we will help partners to understand that this is a different business model that is more sales oriented than consulting led. We will provide training and hire graduates directly. That should mean partners will be attracted by a model that delivers more value for them. But...I wouldn't be surprised if we need to change the model as events unfold.
Brian then asked about financing. Setting up a new business model is hard enough but without adequate financings, the channel will struggle. Apotheker said that SAP will provide financing. That's generous.
My follow up was to question how this would work. If SAP is doing the hiring, why wouldn't these people be working with mid-market channel players in the first place so they can maximize the opportunity from the get go? Leo said that some of them may well want to go on to become indpendent partners in their own right. In other words, this is a backstop measure to ensure SAP can control the early market model to see how it works and adapt if necessary.
It may be that SAP has anticipated Phil Wainewright who warns that SAP need take care it doesn't under-estimate the challenges:
Finding suitable partners and building good relations with them is a journey of adventure that SAP has only just begun. Other more experienced SaaS players know how difficult this can be — and how easy it is to overestimate the capabilities of seemingly well-qualified candidates.
Apotheker's response prompted Charlie to ask about the opportunity for independent developers to run apps on top of BBD.
BBD provides code level access to services. This should mean developing services that complement and flesh out what is currently a very broad offering will be relatively easy. Apotheker thinks SAP's gravitational pull should entice developers to partner in order to gain access to the ecosystem. However, SAP won't stop those same developers from plowing their own furrow. Crucially, there was no talk about an approvals process for developers who choose this route but SAP is bringing in partners via its PartnerEdge program.
I see an alternative scenario. As Charlie noted on his own blog in regard to eWeek's quoting of Adam Gross, VP developer marketing at Salesforce.com:
I'm more interested in the new APIs than I am in the new tools. When you get the new APIs, that's like Christmas morning. ... This is where the next generation of new software companies is going to come from. Now it's about what APIs are available out there on the network.
It's because of this attitude that salesforce.com is the canonical mashup example in the enterprise world, much like Facebook is in the consumer world.
If SAP emulates SFdC's ecosystem approach rather than hogging resources to itself, then it will build a lot of goodwill very quickly. It already plans to mine the SDN/BPX networks and given the right approach, this could give it a very fast on-ramp to industry customizations.
Once again, SAP gives us all pause for thought about a story that will run and run.