Confusion Clouds Introduction of SAP Business ByDesign

By John Pallatto  |  Posted 2010-05-18

Confusion Clouds Introduction of SAP Business ByDesign

With the approach of its SapphireNow international user conference, SAP had been signaling for months that it would be ready to announce the release of the long-delayed Business ByDesign on-demand enterprise resource planning package for midsize companies.

But there was marked confusion as the SapphireNow conference convened May 17 in Orlando, Fla., and Frankfurt, Germany, with SAP emphasizing what prospective customers would find when the company issues a new release of Business ByDesign sometime in July.

In the meantime, SAP says that Business ByDesign is officially "currently available" and working at more than 100 "charter client" sites in the United States, Germany, the United Kingdom, France, China and India.

SAP has been developing and testing Business ByDesign since 2007. In May 2008 SAP announced it was slowing the testing and rollout of Business ByDesign because the company needed more time to develop the software-as-a-service package to run efficiently enough to compete with existing on-demand products.

With its release, SAP officials said customers will have a choice between running Business ByDesign under a "single-" or "multi-tenancy" model, which is fundamentally the difference between running the application as a single instance installation or accessing the software on the Web along with hundreds or thousands of users from many different computers at many different locations. Single-tenancy is more like the one-to-one on-premises application software installations that enterprises have been using for decades.

Multi-tenancy is an essential requirement for all true on-demand application services and is a model that has long been implemented by SAP's prospective on-demand competitors, such as NetSuite and

The fact that SAP is coming late to the market and is chasing long-established on-demand competitors means that SAP is going to have to make a long-term commitment to making Business ByDesign a market success, said Shawn Rogers, vice president of research with Enterprise Management Associates, a market research firm based in Boulder, Colo.

SAP is "certainly going to be meet, especially around the CRM side, with some solid competition," including and others such as NetSuite, which markets an on-demand enterprise resource management package, Rogers said.. Both companies will directly compete directly with SAP in the midsize market.

SAP will also have to be careful about how it will market Business ByDesign without cannibalizing its existing on-premises business, including the business it has already established with small and midsize customers, he said.

In It for the Long Haul


Rogers said he was encouraged by comments made by SAP co-CEO Jim Hagemann-Snabe that he is not counting on a rapid surge in new revenue from Business ByDesign in the early stages. Instead, he is looking for a steady rise in the number of users who start working with the product. That suggests, Rogers said, that "they are willing to be in it for the long haul and they are willing to absorb some financial hits against it as they go forward."

The new summer release of Business ByDesign will include what SAP describes as a rich client user interface developed with Microsoft Silverlight that will provide simplified navigation, interactive graphics and close integration with Microsoft Office. The interface, which is designed to run effectively on the Web, desktops and mobile devices, will also enable users to create their own "mashups" of application services and content, according to SAP officials.

Support for mobile devices will enable remote access to Business ByDesign applications that SAP says will give users greater operational flexibility at a lower total cost of ownership.

It will also include support for real-time, "in-memory analytics" to support business intelligence and decision support applications. Business ByDesign will enable bidirectional Microsoft Excel integration that will let users access and manipulate data using Excel spreadsheets.

Next, SAP is recognizing that building a vibrant user and partner community is essential to the success of an on-demand application platform by making plans to "provide a development environment"  that will allow partners to extend the Business ByDesign platform with "additional services, scenarios and industry-specific functionality." The development environment will support the creation of vertical industry applications that have been important to other SAAS platforms, such as

With the new release, SAP will also have Business ByDesign starter packages that give customers the basic "general business" or "customers management functionality" for rapid deployment. As the business grows, customers can expand their Business ByDesign installation and turn on additional functionality built into the platform, according to SAP officials.

One of SAP Business ByDesign's prospective competitors, NetSuite, indicated that it has little reason to believe that Business ByDesign will represent a serious market challenge in the near term.

NetSuite has more than 6,600 customers and the company reports more than 1.4 million user log-ins, said Mini Peiris, NetSuite vice president of product marketing.

Most of the features that SAP announced for its summer release, such as real-time analytics, support for multi-tenancy with a single-tenancy option, support for mobile devices, and a rich Web user interface, are features that NetSuite has had for years, Peiris said.

The introduction of multi-tenancy for Business ByDesign at this stage in the development of the on-demand software market demonstrates SAP's "lack of understanding of the cloud in some ways," since "it took them this long to rearchitect [the product] to get to a multi-tenant solution that they feel they can now go to market with," Peiris said.

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