SAP Business ByDesign 2.5 arrives: what now?

SAP Business ByDesign 2.5 arrives. The burning question has to be how well SAP executes in the market. The next 12-18 months will be a telling time.

SAP has released Business ByDesign 2.5 along with confirmation that it will contract with companies that have as few as 10 users. SAP has also released pricing numbers - something it has never officially done in the past. From the blurbs:

  • Customer relationship management (CRM) starter package - The CRM starter package provides customers with best business practices for sales force automation (SFA), enabling them to efficiently generate leads, manage all stages of the sales process and close deals, while laying the foundation to expand to the entire order-to-cash process. The CRM starter package can be implemented in approximately three weeks at a fixed implementation price of $13,500 (EUR 9,900) and a special subscription price of $89 (EUR 79) per user.
  • Enterprise resource planning (ERP) starter package - The ERP starter package provides customers that have outgrown accounting-only systems with the integrated financials, accounting and analytics capabilities needed to manage the next stage of growth.. The package can be implemented in approximately six weeks or less and is available at a fixed implementation price of $37,500 (EUR 24,900) and the usual subscription price of $149 (EUR 133) per user.
  • Professional service provider (PSP) starter package - The PSP starter package is designed to give small businesses and midsize professional services firms affordable access to the world-class business process management capabilities they need to not only manage their businesses end to end, but also to level the playing field against well-capitalized competitors. Designed to go live in approximately eight weeks, the PSP starter package is available for a fixed implementation price of $45,000 (EUR 34,900) and the usual subscription price of $149 (EUR 133) per user.

While the CRM package is attractively priced, I am less certain about the ERP offering. I don't know for example where SAP is going to find a minimum of 10 ERP users at $149/month/user given it is concentrating upon financials and analytics. I could understand if it was targeting 3 full ERP users and 7 occasional analytics users and pricing accordingly. SImilarly, implementation pricing seems top heavy. I'd willingly pay $20-25K but $37.5K is a stretch. This seems to be signaling a minimum of 20 users on the basis of implementation equaling one years' running cost.

The PSP offering should be attractive and I can see this doing well given the full process capabilities. Even so, $45K for implementation at the 10 person level is hard to justify without a full appreciation of the business advantages I'd expect to see. Perhaps they are signaling the 25 user company?

The good news is that developers can finally get up and running with an SDK that's got meat on the proverbial bone. I am aware of a number of SAP developers that have been gagging to get hold of the SDK so they can test add-on ideas. The problem comes that SAP is still talking about 100 customers in only six countries. If it was talking 1,000 then there would be a genuine incentive for developers. Right now, they will be taking an enormous risk that SAP will quickly ramp customer numbers. If my soundings are anything to go by, the answer to that question is 'maybe' at best and 'no' at worst.

SAP is prepared to put substantial marketing dollars behind ByDesign over the next 12-18 months but it has to get the right channel partners in place and at volume. SAP is working hard on figuring out this part of their ByDesign puzzle but is taking what I believe is an overly cautious approach. That is understandable given SAP's past mis-steps with ByDesign but then I believe the time has come for SAP to be bold. If it plays the right game, SAP has a huge opportunity to quickly dominate the market. SAP knows it can leverage brand strength to kick start its efforts but that alone will not be enough to create a market that impresses.

Progress over the coming year will be keenly watched. If SAP fails then it will be a massive backwards step for all who aspire to the notion of cloud computing. If it succeeds, then it is a massive endorsement. There is no in between.


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