SAP's A1S: love, not pricing, is key

SAP's announcement of A1S, it's software as a service (SaaS) product for small business, will take place tomorrow in New York City. Speculation is running high whether this product will succeed or fail, and the impact A1S will have on SAP as a whole. On the stock market side, Bloomberg reports that:

"Investors should take profits on any A1S related hype over the coming weeks,'' [Societe Generale] wrote in a note to investors today. "A1S related costs will continue to ramp throughout 2008, with no noticeable revenues likely until 2009, putting pressure on the core business.''

Closer to home, Dennis Howlett, fellow ZDNet blogger and among the sharpest enterprise software analysts out there, believes that "pricing is the key" to A1S' success, given the availability of low-cost alternatives. While Dennis is correct to assert competitive pricing is necessary, he is wrong to emphasize it. A1S' biggest challenge is the massive psychological and organizational shift required for SAP to truly make friends, and get cozy, with small companies. Change is hard, and SAP must overcome its big company history, tradition, and DNA to make this transition. [I've written previously about this issue here and here.] The success of A1S actually depends on love. Yes, love. You know, that special bond and connection, where you feel respected and appreciated by your partner. SAP can fiddle, tweak, and change features, pricing, business model, and everything else, but that's not enough. In the end, A1S depends on many small companies feeling SAP's love. If SAP can successfully accomplish this transition, its competitors have much to fear. On the other hand, if SAP is unable to overcome corporate inertia and rapidly make the transition, A1S will eventually fade, like the memory of any other failed love.