Business ByDesign, SAP's slow-burning fuse

Business ByDesign, SAP's slow-burning fuse

Summary: In the wake of yesterday's Business ByDesign announcement, some contrasting impressions stand out. SAP executives have backtracked on some projections and become more aggressive on others. Will it all blow up in their faces?

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TOPICS: Cloud, Emerging Tech, SAP
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Reading through the coverage of yesterday's Business ByDesign announcement, some contrasting impressions stand out.

On the one hand, Zoli Erdos calls SAP's new SaaS offering "a game changer." I'm inclined to agree with him, personally. SAP is now backing SaaS, which is a huge validation — and if nothing else, as I said last night I think its full-on adoption of the try-before-you-buy model sets the bar impressively high for every other enterprise SaaS player.

But on the other hand, as Gavin Clarke of The Register commendably reminds us all, SAP only showed us some powerpoint slides and a very limited live demonstration last night:

"[D]espite years in the development labs, SAP failed to deliver a knockout blow ... Customers cannot yet sign up to BusinessByDesign through the SAP website - which was presented as one feature of the service - and they cannot yet review BusinessByDesign's features, which SAP say will also be on that site ...

"SAP isn't declaring general availability - instead saying it's working on a 'completely new business' and this naturally took 'some time and intelligence.' Executives claimed to be working through a pipeline of 20 and 300 customers on an invitation-only basis, and once this was completed, they'd be 'ready to go on volume'."

It's a bit like a mirror-image of the Wizard of Oz — Gavin, playing the role of Dorothy, strides onto the dais, reaches up to the curtain, and to everyone's astonishment reveals that it's still drawn.

Then there's the small matter of SAP's diminishing growth targets. Earlier this year, SAP made great play of its objective to reach a total of 100,000 customers by 2010, hinting that Business ByDesign would play a big part in hitting that target. But when Dennis Howlett questioned Leo Apotheker on this point yesterday, he was shocked to learn that the six-figure target has now become merely "aspirational" and "symbolic". Does this mean SAP has now realized that it underestimated how long (and how much more effort) it would take to bring Business ByDesign successfully to market?

More surprising admissions from Apotheker can be found in an interview with Mary Hayes Weier of InformationWeek. As I noted yesterday, "SAP executives assembled for the launch stonily refused to admit so much as an iota of possibility that Business ByDesign might cannibalize revenues from SAP’s other product lines in any material way ... a clearly untenable position." Apotheker seems to confirm that cannibalization is only a matter of time in his answers to InformationWeek [with my emphasis added]:

"Apotheker: ... SAP All In One [on-premise software] has a very deep vertical solution. Business ByDesign is more broader based and hasn't got very specific functionality, and it will take [SAP] some time to get there.

InformationWeek: You've said Business ByDesign is specific to customers between 100 and 500 employees. What happens when a company grows beyond 500 employees; will you suggest they move to licensed, on premise software?

Apotheker: I think it will scale and we'll continue to develop. It's not the final version. Partners will add to it. It's just the beginning and not the end.

His answers seem to imply that when we get to (if I may put it this way) the end of the beginning, then Business ByDesign will indeed start to scale up to larger enterprises and to diversify into more vertical solutions.

My reading of this is that the slow hand introduction of Business ByDesign is less of an Eric Clapton-style riff and more like the kind of delicate handling that bomb disposal experts apply to live munitions of unidentified origins. SAP knows that in Business ByDesign it has something powerfully explosive on its hands and the last thing it wants it to have it blow up its face. It would rather risk burning the fuse so slow that it might even blow out altogether — that's why the company has now decided to backpedal on its earlier ambitious forecast of reaching the 100,000 customer mark by 2010. But at the same time SAP's leadership recognizes that the company's future depends on whether it can engineer Business ByDesign in such a way that it ignites a controlled explosion to rip through and replace much of its current catalog — before competitors get there first.

Topics: Cloud, Emerging Tech, SAP

Phil Wainewright

About Phil Wainewright

Since 1998, Phil Wainewright has been a thought leader in cloud computing as a blogger, analyst and consultant.

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4 comments
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  • Excuse me?

    "But on the other hand, as Gavin Clarke of The Register commendably reminds us all, SAP only showed us some powerpoint slides and a very limited live demonstration last night"

    That is a disingenuous and, quite frankly a statement of the kind yo'd expect from a trash rag like The Register.
    dahowlett@...
    • Sorry?

      My email's been down the past 24 hours, so perhaps I've missed something. But have any members of the media (EIs even) - let alone the public at large - had hands-on access to Business ByDesign?
      phil wainewright
      • Good question

        I do know certain people (not media) have had their hands on it and it is something I'd dearly like to do for myself. On the basis of what we saw, superficially it looks easy to use but there's ssome serious depth as well.

        The Register must have missed the point that 20 customers are live with the product and were up on stage prepared to talk about it.
        dahowlett@...
  • RE: Business ByDesign, SAP's slow-burning fuse

    The Slow Hand is right. SaaS for SAP has to be balanced on the razor's edge. It feels like something that could tip quickly and will be hard to control, much like the famous "Soft Landings" the Fed is expected to orchestrate for the economy. They never feel very soft, we careen too far one way and then the other.

    Back to SAP, their most effective tool is also their most difficult adversary: their own Sales people. Most customers have to make the SaaS vs On Premise decision pretty early in the sales cycle. It may even affect who is being sold to in the organization, and it certainly affects what benefits to preach. SAP is trying to create what I call a Protected Game Preserve using market segmentation. Using such an approach, all customers of a particular segment are sent down the SaaS path unless they complain bitterly, in which case their salvaged by the core product.

    More on game preserves on my blog:

    http://smoothspan.wordpress.com/2007/09/05/protected-game-preserves-help-transition-on-premises-isvs-to-saas-part-2-of-the-series/

    Provided they have a dedicated SaaS salesforce and the compensation is aligned properly so the other salesforce can't poach, this should be a workable Slow Hand strategy. Over time, as the recurring revenue base builds, it becomes more feasible to sacrifice a bit more perpetual revenue.

    Interesting game they're playing!

    Best,

    BW
    BobWarfield