SAPs Business ByDesign

By Renee Boucher Ferguson  |  Posted 2007-09-28 Print this article Print

Brings Partner Conundrums in SAAS Model "> SAP has spent four years and somewhere between $400 million and $500 million building its newly announced Business ByDesign software suite, an on-demand integrated package of applications geared toward the midmarket. Billed as the worlds largest business applications company, SAP is pitching the suite as something that is completely different from its legacy, on-premises ERP (enterprise resource planning) software. In contrast, Business ByDesign will be affordable, much faster to deploy and have a lower total cost of ownership, company officials have said.
That approach—faster, easier and cheaper—will require a different way of thinking not only for SAP, but for the partner channel the Walldorf, Germany, company is looking to build. While SAP currently has about 2,500 partners selling its midmarket software to between 25,000 and 29,000 customers, the fact is those partners have built their business around a rather standard business model in the software industry: relatively low volume and high earnings based on annual license and maintenance revenues.
The Business ByDesign model, in contrast, is one of high volume and relatively low monthly revenues. Companies like, which has built one of the largest SAAS (software as a service) channels in the world, are already charting the on-demand byways. Its no secret that the road to profitability is longer in the SAAS world than it is in the on-premises one. Click here to read more about the battle for on-demand supremacy between SAP and Theres also a shift in the type of partners SAP will need to sell Business ByDesign. Whereas the companys current partners are by nature technically savvy, those skills will likely not be as heavily relied upon with Business ByDesign, which uses an integrated software model to enable business processes. The idea, said SAP Deputy CEO Leo Apotheker, is that systems integrators will not be part of the Business ByDesign implementation road map. "What we need [are] partners that have an understanding of the business of customers. You dont necessarily need to have superior deep technology and IT knowledge. What you need to have is business savvy to support customers, to be able to visualize and help customers get the most benefits out of the technology," Apotheker said in an interview with eWEEK. "You dont have to be a technology company to [resell] Business ByDesign. We will supply the technology." But in its quest to sell Business ByDesign to 10,000 new customers by 2010—and build a channel to do so—SAP has some challenges in front of it. AMR Research analyst Simon Jacobson said in a Sept. 21 research note that outside of CRM [customer relationship management] and some business-to-business functions, "we have yet to see whether the market for SAAS-based ERP products is viable. Overcoming the skepticism of CIOs to have all their enterprise data hosted outside their firewall is no small undertaking. Demonstrating to partners that there is a profitable reality to participating in the evolving ecosystem to support this new application will not be easy." The catch comes in the fact that demonstrating to partners that there is a profitable reality to participating in the Business ByDesign ecosystem will not be easy, Jacobson said. Business ByDesign is targeted toward companies with between 100 and 500 employees. It is designed to fill the gap between SAPs two current midmarket products: SAP Business One, for companies with fewer than 100 employees, and SAP All-in-One, for companies with more than 500 employees. Apotheker said he expects partners to come from a variety of sources—SAPs existing All-in-One partner channel, NetWeaver (the underlying integration and orchestration platform for Business ByDesign) and totally new sources. "Some of our existing All-in-One partners have expressed an interest in a separate business model for Business ByDesign and we have some new partners showing up," he said. "Some partners are actually creating businesses to support and resell Business ByDesign. All variety of partners are approaching us on this." Apotheker said he is not trying to build a single channel but rather multiple channels. "There is a great business opportunity as well for partners to use our infrastructure, our components, our composition capabilities to build solutions," he said. "So, for example, if someone has a desire to build Web 2.0 add-ons or widgets, this company would be using SAP technology to sew together [components] with SAP Business ByDesign." While using Business ByDesign as a platform would arguably bring in those tech-savvy partners used to working with SAP now—particularly SIs specializing in building composite applications using NetWeaver—the model still represents a shift from old to new. Page 2: SAPs Business ByDesign Brings Partner Conundrums in SAAS Model


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