SAP sense tests its SME messaging at CeBIT

In advance of SAPPHIRE, how well constructed is SAP's messaging around its SME offerings? CeBIT provided a trial outing.
Written by Dennis Howlett, Contributor

I have successfully avoided CeBIT for 20 years and this year was no exception. Even so, the live feeds coming through offer plenty of entertainment for those of us keeping a close eye on what SAP might have up its sleeve for SAPPHIRE which runs 14-16 May in Orlando.

Jim Hageman Snabe, co-CEO SAP was joined by Lars 'Mr. Cloud' Dalgaard, CEO SuccessFactors in an hour long heads up and investor Q&A in front of what could best be described as a friendly crowd. Most of the questions were softballs or only required the minimum of disclosure. Even so, Snabe gave what I thought was his most accomplished and robust performance to date, making clear that in his view: 'We believe SAP can be for every company.'

That comment naturally drew observations from the peanut gallery on Twitter:

Adrian Pearson aka TopAccountants: RT @dahowlett "We believe SAP can be for every company" - Snabe #sap #cebit2012 < don't think so!

Gabriel Gheorghui: RT @dahowlett: "We believe SAP can be for every company" - Snabe #sap#cebit2012 <what are the companies saying?

Snabe was referring to the announcement that BusinessOne is now offered as an OnDemand solution (BO-OD) which will be offered at prices starting at: €99/user/month. Precise details of what that includes were not disclosed but the biggest area of confusion is around how this is delivered.

Chris Kanaracus at PCW said:

SAP has created a multitenant version of its Business One ERP (enterprise resource planning) suite, which will be sold exclusively through partners as Business One OnDemand, the company is expected to announce Tuesday during the Cebit conference in Hannover, Germany....

..."It's great to see that SAP realizes that multitenancy is an important part of a cloud solution," said analyst Ray Wang, CEO of Constellation Research. "True multitenancy gives customers the lowest-cost delivery model and the quickest way to consume innovation."...

...The engineering work on the multitenant version is complete, and it will become available from partners in the second quarter, according to SAP spokeswoman Angelika Pfahler.

Cindy Jutras commented:

No, the latest cloud offering, Business One On-Demand, does not use the ByDesign platform but given the breadth of the entire SAP product portfolio, there appears to be room for multiple offerings and more than one platform.

I must admit to being confused by the statements and analysis. Here is why:

  • We have been consistently told that future cloud apps will be developed using the ByDesign framework. Why hasn't SAP taken advantage of that engineering effort?
  • In the information I received from SAP, the expression 'multiple tenants' was used. There was also reference to multi-tenancy. I'm now no longer sure what this means.
  • In the official press release, there was no mention of multi-tenancy although the word 'cloud' was used liberally. We should beware of these terms being used liberally without a full understanding of the buyer implications for cost. Especially as the sticker price of €99 is only 'suggested.'
  • In other documents I saw mention of delivery via Citrix. Is this CloudStack? How does SAP get away from client/server? From everything I have seen, attempting to re-engineer C/S for multi-tenancy is not only tough, but struggles to provide a cost effective solution.
  • BusinessOne supports many customisations. It is difficult to see how these can be economically maintained in a multi-tenant environment without major changes in the way BusinessOne is customised. A significant number of customisations are little more than configurations. My primary concern is for those VARs that have developed industry specific modules they maintain.
  • Jutras points out that SAP is looking for telco partners. They may well be able to provide infrastructure that supports a multi-tenant architecture but I have yet to see a telco successfully build an ERP business. How will that work?

These are just some of the representative questions that SAP did not get at this outing but will almost certainly turn up over time.

Some will argue that it doesn't matter because SAP is now firmly positioning BO-OD for the 10-50 user market while Business ByDesign is positioned for organisations with 50-150 user counts. As Jutras correctly points out, that avoids the potential for any cannibalisation of the SME target groups. That's OK provided the solution works as well as the on-premise offering and is capable of delivery at the price points SAP is suggesting while not sacrificing any of the necessary customisations.

The messaging from Dalgaard was tepid. Several times, questions were raised around cloud strategy. This could have been a great opportunity to provide hints as to what we might see at SAPPHIRE. We've got them for HANA so why not the broader cloud category?

Dalgaard chose to pepper his remarks with everything being either 'amazing' or 'exciting,' preferring to leave questioners dangling in the wind by saying there are plenty of good things in store. I guess it is a valid approach and in fairness, he's only been officially in post a matter of days so may not have figured out how to pull the broad strokes together. He did however reveal that some SuccessFactors technology is achieving 6,000x speed improvement using HANA. One worrying remark was around a pointed question about data privacy as it applies in the EU and Germany in particular. Rather than provide a specific answer, Dalgaard limited himself to saying several times: "We take privacy very seriously." To me, that was a non answer.

Perhaps the most interesting nugget came from Snabe who said that the secret to profitable cloud business comes in managing operational costs and massive scaling. I've heard this before but remain unconvinced. On the evidence I've seen from companies like Salesforce.com and NetSuite, they are loss making or at break even because they are in hyper growth mode with a model that is radically different to the on-premise model. Take your foot off the marketing gas and the pull through from deferred revenue alone provides an instant profit.

The cross and upsell opportunities for SuccessFactors have been well rehearsed but the fact remains sales people still have to go out and sell solutions. What was missing from the Q&A was a sharp discussion about how that element of the profitability equation gets resolved by SAP's management.

Overall, I imagine investors will have been moderately satisfied with what they heard. Upbeat leaders telling a story that sounds mostly credible is always welcome and in that regard, both Snabe and Dalgaard deserve credit. But as we move towards SAPPHIRE, the company will need to put a lot more meat on these bones and especially around the technical details that impact buyers.

Editorial standards