SAP's on-demand software strategy: An FAQ

SAP's software as a service strategy has multiple moving parts and the company wasn't exactly screaming its plans from the rooftop at its Sapphire conference. Here's an FAQ shedding light on SAP's on-demand plans.
Written by Larry Dignan, Contributor

SAP's Sapphire customer powwow is a wrap and a few key questions about the company were answered. However, piecing together the software as a service strategy for SAP was a bit of an Easter egg hunt. You'd find a nugget of information here and then have an executive give you another later. Ultimately, you were connecting more than a few dots.

Simply put there are a few SAP moving parts when it comes to SaaS. SAP's strategy is more than Business ByDesign, the SaaS suite for small to mid-sized companies. In addition to Business ByDesign, there's another effort to provide extensions to on-premise software. That latter approach is easy to understand and makes a ton of sense.

In an effort to get my head around the strategy---and answer a few emails all at once---here's an FAQ that attempts to put the various Easter eggs I collected at Sapphire in one basket.

Why was SAP doing the piecemeal approach to SaaS messaging this week? My hunch is that the company was torched in 2007 when it made a big splash with Business ByDesign only to rewrite the thing over the last three years. Now the on-demand suite is almost in general availability (coming in July) SAP is almost too soft about the effort. See: Business ByDesign: a marketing dive

Why has Business ByDesign been a three-year crawl to general availability? We'll let SAP chairman Hasso Plattner explain this one:

Is Business ByDesign the flagship SaaS product? Yes to a degree. Long-term it's not so clear. SAP spent a good bit of time---dished out in parts---talking about Business ByDesign. However, there are multiple parts to ponder. What's the go-to-market? What's the channel strategy? What happens when Business ByDesign goes multi-tenant? Can Business ByDesign scale without growing pains like outages and the like? The far cleaner SaaS story this week was detailed by SAP co-CEO Jim Hagermann Snabe, who outlined on-demand "business extensions." SAP will offer on-demand Expense Management, Sourcing OnDemand, Sales On-Demand and People Management to compliment on-premise systems.

See: SAP topic page

Are SAP's on-demand extensions about offense or defense? Both. The game is to current customers happy while keeping them from considering other options that would require data model integration. John Wookey, executive vice president of large enterprise on demand at SAP, summed it up in an interview. Customers have come to SAP and "said it would sure be nice if you could provide these things on-demand so we wouldn’t have to go to all of these other vendors," said Wookey.

What's the Business ByDesign and on-demand extensions split? On-demand extensions are targeted at large customers and Business ByDesign is focused on small and mid-sized companies.

When will these on-demand extensions be available? Late 2010 and into 2011, according to Wookey.

Is Business ByDesign in general availability? Snabe said Business ByDesign will be volume by the end of July. SAP's initial statement on Business ByDesign was vague on general availability.

What features are coming to Business ByDesign? SAP's SaaS suite is in version 2.5. New features planned include single and multi-tenancy support, starter packages, mobile support, improve user interface and real-time analytics. See SAP's test drives.

Will Business ByDesign scale? That's a little unclear since SAP is just going for volume now this summer. Business ByDesign has 100 customers, who essentially have single implementations. BendPak CTO Sina Moatamed used Business ByDesign to consolidate two CRM systems and 1 ERP suite. BendPak makes car lifts and other gear you'll find in commercial auto garages. Moatamed said the Business ByDesign implementation gave him one data set of record and has been useful. But he also wonders what happens when Business ByDesign goes multi-tenant down the line. Today his system is customized and he realizes "that model won't scale."

Will SAP host Business ByDesign? The other question about Business ByDesign revolved around infrastructure. Cloud providers talk a lot about the fancy data centers they are building. SAP has been relatively quiet. We're told SAP will host Business ByDesign in its own data centers initially and later outsource infrastructure once it has experience at scale. Dennis Howlett reported that SAP can now host 250 users on one blade for the full Business ByDesign suite. SAP expects to get to 500 users on a blade.

What's the channel strategy for Business ByDesign? If you've followed NetSuite for any amount of time you know that it is betting big on building a channel. Why? SaaS ERP is a bit harder than just hooking hitting individual categories like CRM. Simply put, SAP needs value added resellers to hit that lower end of the market for Business ByDesign. SAP execs said they will build out the channel and offer financial incentives to move Business ByDesign. SAP also brought out two resellers---long-time partner itelligence and a next-gen partner Skyytek that only focuses on SaaS. For Skyytek, a reseller focused on Salesforce.com, NetSuite and Zoho CRM, Business ByDesign just means more volume. For itelligence, selling Business ByDesign is a business shift. Itelligence CEO Steven Niesman said that his outfit specializes in SAP's All-in-One suite for consumer product products, chemical and wholesalers. The company's sweet spot is the midmarket ($100 million to $500 million in revenue) and the upper midmarket ($500 million to $3 billion). Niesman said there's no conflict since Business ByDesign would be a move downstream to a new market, but we'll see. The jury is out on the channel for Business ByDesign.

How low will Business ByDesign go? SAP executives said the suite will support as few as 10 seats, down from 25 before.

Will the SaaS businesses be funded? Numerous executives said they are getting more funding for on-demand extensions and Business ByDesign than at any other time in their careers. Meanwhile, the on-demand groups are split off from the on-premise folks.

Can SAP get the user interface game down? The front-end for Business ByDesign is Microsoft's Silverlight. In theory, SAP should be able to use Silverlight for some user interface mojo. Screenshots of the on-demand extensions---notably the sales automation service---looked clean.

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