SAP Business ByDesign: Competitive Advantage and the Dynamics of Enterprise Software

Can SAP's Business ByDesign drive competitive advantage for customers? And competitive positioning for the enterprise software market?
Written by Joshua Greenbaum, Contributor

There are lots of reasons why companies chose SaaS/On Demand applications, but driving competitive advantage is not always at the top of the list. That’s why SAP’s Business ByDesign announcement this week in New York looked a little more interesting than other SaaS/OD announcements I’ve attended. The customers that SAP showcased at its BBD launch weren’t just trying to save money or implement enterprise applications more quickly: they expect that their new BBD applications will propel them to the top of the heap in their respective markets.

This signals an important shift in how SaaS/OD is marketed, and represents an opportunity for SAP to do more than just emulate the competition, which has largely focused on low cost, ease of implementation, and, by the way, some increased functionality too. While many customers, SAP’s and others, will be attracted to this class of solutions by the promise of lower total cost of ownership, this rather simplistic message will soon by itself cease to differentiate SaaS/OD products in the market.

Functional superiority can and should become the main criteria for judging these offerings: As with all techno trends, once a critical mass of top vendors adopt the new new thing, whether its SOA or SaaS today, or client/server 15 years ago, it’s time to go back to the real purpose for adopting new technology, and in my book nothing says it better than delivering competitive advantage. The fact that SaaS/OD promises a significantly improve TCO over on-premise takes the other main reason we buy technology – improved relative productivity per dollar spent on IT – off the table.

Business ByDesign has two major techno-trends going for it, model-driven development and SOA-based integration, that promise to support the competitive advantage story. The modeling side provides a means to enhance competitive advantage by allowing rapid change in business models to be reflected in a change in the BBD functional model without having to go through a complex and cumbersome IT-driven change process. (Bear in mind, I fully expect these model-driven changes to be done by someone more IT focused than business focused, at least initially. Just for safety’s sake, if nothing else. But the difference between changing a process in BBD and making a similar change in R/3 is an order of magnitude less complex.)

The SOA integration will allow external services to be integrated to BBD’s existing SOA interfaces with relative simplicity and rapidity, assuming the external services are well-designed and require no modification on the BBD side in order to be plugged in. Again, while this lowers TCO in one of the most expensive areas of enterprise IT – application integration – I believe its main advantage will be seen in how rapidly new composite applications and services can be added to the BBD platform.

Do these advantages alone – and the implied better competitive positioning for customers that BBD can deliver – make SAP’s new mid-market product a slam-dunk in the market? Not a chance. SAP is going to have win this market the hard way, and that will include tying up a number of loose ends, including its channel strategy and the overall impact this new product and business model will have on SAP’s traditional direct sales, My SAP Business Suite business. The road to the mid-market is littered with failed marketing campaigns and innovative new products, and SAP has a lot to prove in order to succeed with BBD.

But I remain convinced that this is a stronger potential mid-market SaaS/OD offering than any currently on the market, including Salesforce.com, NetSuite, and, from what I’ve seen so far, Workday, to mention the three biggest potential competitors to BBD. Some readers of my last blog on what was then called A1S, including a number of my fellow Enterprise Irregulars, think that blog was too favorable to SAP, particularly relative to my criticism of Salesforce.com’s highly-touted, and relatively insignificant, announcement of Force.com and Platform-as-a-Service. That’s their prerogative, but I remain convinced that, regardless of its success, this week’s announcement of BBD represents one of the most significant enterprise software announcements in recent memory.

The market-leader’s entry, with a potentially paradigm-busting vision of how to drive competitive advantage, and with a product that brings SOA, SaaS, and model-driven development and deployment to the mid-market, is a genuine watershed event. Even if SAP falls short of its ambitious goals for BBD, the onus is on its competitors to upgrade their vision and positions and products to meet and/or exceed SAP’s positioning. That competitive struggle alone will make the BBD launch more important than anything else that happened this week in the market, and, potentially, for a long time to come.

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