SMB tough nut for large software players

Summary:One of the big takeaways from the SAP analyst meeting was the company's effort to woo small- to mid-size enterprise customers. The effort is there, but technology executives at these smaller enterprises are a tough nut to crack for large software vendors.

One of the big takeaways from the SAP analyst meeting was the company's effort to woo small- to mid-size enterprise customers. The effort is there, but technology executives at these smaller enterprises are a tough nut to crack for large software vendors.

It comes down to trust. Let's face it; SAP isn't the first vendor to target smaller enterprises.

Ever since the tech boom fizzled in 2001 software giants--including most of the companies Oracle has since acquired and could buy in the future--have courted smaller businesses. Why haven't mid-sized companies run to these giants?

They are skeptical that these software giants will desert them as soon as big customers start buying more. As a result, these SMBs prefer to stick with smaller software companies.

After five years of being courted by larger players perhaps smaller companies are thawing out, but skepticism is likely to remain. That fact is part of the reason analysts are cautiously optimistic, but restrained about SAP's SMB strategy.

A few comments:

Pacific Growth Equities analyst Yun Kim: "In terms of the company's SMB strategy, we are comfortable that the company can continue to show solid growth in the SMB market, although we believe that Oracle remains the dominant market share leader in that market. However, we believe that the SMB market represents a largely untapped market opportunity for all the vendors in the space and that there is room for both Oracle and SAP to show solid near-term growth rates in this market."

Cowen and Co. Peter Goldmacher: "In the mid market, we believe SAP is entering a guerilla war as the low end of the mid market is dominated by a large number of small apps players that offer deep vertical functionality out of the box at a lower cost."

Thomas Weisel Partners analyst Tom Roderick: "With an aim to introduce mid-market products that can be 'up and running in seven days', SAP believes it can continue to bite into the market share of other established software players like Microsoft, as well as upstart Software-as-a-Service vendors like Salesforce.com."

Roderick, however, touches on something that may allow SAP to make some real headway--a growing reseller base. Among smaller companies, software is a people business and smaller shops buy their technology through the channel. That's why it's no surprise SAP is touting its partner base. "SAP continues to emphasize its ever-expanding ecosystem of reseller and SDNs (SAP Development Networks). SAP now counts over 600,000 SDN members and 60,000 SDN 'Business Process Experts,'" reports Roderick.

SAP should talk up its resellers. After all, they hold the keys to SAP's success among small and mid-sized enterprises.

Topics: SAP

About

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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