"The main challenge is that SAP is asking for something that companies havent traditionally asked for in a channel," said Joshua Greenbaum, an analyst with Enterprise Applications Consulting. "On the one hand, they are asking partners to be very savvy selling business solutions to a business person. On the other hand [the partners would need to be] content on making profits of low margin, high volume. Business ByDesign removes the implementation, integration and customization costs that have traditionally been the bread and butter of most partners." There are not, according to Greenbaum, many examples of high-quality, high-volume partners out there. "Its going to be a challenge for SAP to find, nurture and build a critical mass" of partners for Business ByDesign, he said. "On the other hand, the product has enough promise that it will happen.""SAP is hoping Microsoft partners will take an interest," said Greenbaum. "But [partners] are going to have to take sides. Microsofts approach has been to go after SAPs customers. Thats going to put partners in a positionand they probably wouldnt want to play that competition gamewhere they will have to pick one or the other." While Microsoft has largely relied on an indirect channel model to sell both its Dynamics suite of applications, as it moves to more of a SAAS model for delivery, the Redmond, Wash., company faces issues similar to SAPhow to get technology-heavy partners to sell business solutions. "Its not going to emerge overnight," said Greenbaum. Microsoft is investing $20 million in its Dynamics partner network. Click here to read more. Interestingly, Microsoft announced Sept. 27 that it will offer its Premier Support to its Dynamics customers. The offer is designed to simplify the processes and decrease the complexity involved in supporting the Dynamics portfolio of applications. The Premier Support package includes a single point of contact through a technical account manager, a single process for engagement, access to expertise on infrastructure and applications, and on-site support. The interesting part is that the service will be supported by Microsoft and not its partner channelleaving questions of just how much partner roles are changing in the evolving applications market. "We work together with partners to deliver Premier Support Offering to our customers via one point of contact, which is the best of both worlds in terms of partner insight and vendor knowledge," Andy Beadle, group manager of Worldwide Enterprise Support Services at Microsoft, said in an e-mail to eWEEK. "Premier allows us to continue the best practices collaboration skills demonstrated in the Microsoft Dynamics Support business and engage with the Microsoft Dynamics implementation partners (both verbal and automated) for both proactive and reactive services." Not only will SAP host the Business ByDesign suitecutting that part of the equation out for potential partners, at least in the short termit will also perform the application management services for a centralized upgrade and support structure, said AMRs Jacobson. "This ultimately fosters a closed loop between how SAP manages the products sale and management. While SAP is doing the initial hosting, expect it to farm that function out over time," he said. But SAP, like Microsoft, has the luxury of time afforded by a hefty bank balance to develop a channel-building strategy. SAP is taking a phased approach to releasing Business ByDesignits been tested by 20 beta customers and will be tested by 20 more, with 40 additional customers in the pipelineuntil its full release next year. SAP will also take a phased approach to building a channel, putting its direct sales team on board first and using much of 2008 to figure out how to build its channel. "SAP will rely on a direct sales force to create the model, create the demand, and fulfill it," Jacobson wrote in his research note. "Once it hits the appropriate volume, SAP can then truly begin to rely on the partners to fulfill the heavy lifting." Jacobson said SAP is proposing a royalty split that creates the incentive for partners to sellthough its not clear yet what that split is. He said that because the deals are designed to reach people who traditionally do not buy SAP software, he expects to see new skill sets emerge from the partner channel. Those could include telesales and marketing, data conversion tool sets for some legacy packages, and eventually hosting services. As Business ByDesign takes on critical massultimately a measure of the softwares success or failureGreenbaum sees a different set of partners emerging, those who do a lot of integration work, bridging Business ByDesign with SAP and non-SAP systems. "Initially there will be relatively few companies in terms of doing rather complex integrations," he said. "But if Business ByDesign is going to be successful, it is going to be integrated with a lot of back-office, non-SAP systems. That will in effect be the measure of its successhow central it is to an overall company and how deeply committed they are to the product." Check out eWEEK.coms for the latest news, reviews and analysis about productivity and business solutions.
As Greenbaum and other IT analysts have said, where SAP will find a critical mass of partners is a complicated question. The issue is two-fold. First, SAP has to be careful not to cannibalize its current channel. While All-in-One partners who already sell to the midmarket would be a natural fit for Business ByDesignmaybe building SAAS as a second line of businessthe volume versus low value might not be a sufficient motivator for those partners. The other issue, while unspoken by SAP, is that the company will likely look to Microsofts well-established midmarket channel as a logical place to cull from. But that leaves potential partners in a quandary.