Business process management software maker IDS Scheer announced in January that it had signed an agreement with SAP America, the U.S.arm of SAP AG, to support its efforts to build a partner ecosystem and distribution model for SAP‘s new on-demand suite, Business ByDesign. The back story for that announcement is that in 2006 SAP announced that it would spend somewhere in the neighborhood of $400 million to build an on-demand ERP (enterprise resource planning) suite for the midmarket. Released in September 2007, Business ByDesign represents a brand-new business model for SAPas well as for its partners. Dr. Dirk Oevermann, a member of the IDS Scheer Executive Board responsible for Global Consulting and Small and Midsized Enterprises, and Lutz Lambrecht, senior vice president of Consulting Services at IDS Scheer, recently discussed with eWEEK Senior Writer Renee Boucher Ferguson the company’s strategy and plans to develop a Business ByDesign practice.
What is your strategy as a SAP Business ByDesign partner?
Oevermann: Just to start with an overview, we [have been] working as a close partner with SAP for many, many years now. I think since 20 years we are a very close partner. In my role in worldwide consulting, SAP makes approximately 60 percent of our overall business-the SAP implementation and process-related business. The Business ByDesign area is a special area of the midmarket strategy of SAP and it also becomes for us at IDS Scheer a more important area. We originally started our business process business in the large account area, and since four to five areas, we worked in this midmarket area, starting with [SAP’s] All-in-One suite. We are quite strong in the United States, Canada and some countries in Europe. One is Germany, the other is Russia. We had several discussions with SAP-should we step into Business ByDesign or not-because this is a segment of the market we did not address so far. So we decided to step into this business and we will start our Business ByDesign business in the U.S. and the next country we will focus on will be Germany next year.
Based on the process-centric, integrated business model of Business ByDesign, what is IDS Scheer’s rationale for partnering with SAP in this area?
Oevermann: The story behind this target strategy of SAP and IDS Scheer is a very interesting one. If you see the large account areas, for example, in Germany, the penetration of SAP is 95 percent in the large account area. So this midmarket area, especially the lower midmarket, is a very interesting area for SAP and for IDS Scheer. This [Business ByDesign] is a solution that is very much configured and process-oriented, and this is very close to our business and to our know-how, which is business process management-oriented, especially the process area. And all the mythology behind ARIS is very close to Business ByDesign.
Since customers can configure processes right from the start, with the test drive of Business ByDesign, my assumption is that SAP would have process modeling capabilities already built into the suite. So where does IDS Scheer fit in as a partner?
Lambrecht: We start even earlier, when you quote and select processes. Where does ARIS fit in? It’s kind of what we do in the normal All-in-One consulting side. We don’t have SAP customizers, we have these two consultants that we bring out and combine the business process knowledge and the SAP knowledge. Business ByDesign brings that to a new level because it’s totally preconfigured, pretty much. You don’t go out and analyze the client and then set up the client. You take a solution, you can adjust it a little, but that’s it. That’s why we don’t play in every single industry; we play in the areas where we speak the language of the client in specific business processes in these areas. Then they learn the SAP customizing, which is probably the smallest part. So it brings this consulting to a whole different level.
OK, but when you go out and engage with customers, are you going out and saying, Let’s figure out your processes? What level do you come in to a customer engagement at?
Lambrecht: In the traditional approach you go out and say, OK, show me your processes and we set up a system. This is more [that] we would go out and say to the customer, Where does this system match to you? So it’s a totally different approach.
Oevermann: For us, it’s a different approach and we need to build up really dedicated resources for this business. It’s not our traditional business. It would work in a different way than All-in-One [consulting] with different delivery resources. So we decided to build dedicated teams for this Business ByDesign business. It’s more of an out-of-the-box approach with this configurator. It’s not a traditional consulting practice.
Exactly, which is why I asked the question about where you come in with consulting engagements…?
Oevermann: Right, yeah. We clearly have to learn, our organization has to learn how. We only can be successful if we build up these dedicated resources, separated from our original or normal consulting organization within a separate team.
In terms of the team you are looking to build, what are the skills you are looking to develop?
Lambrecht: We have an inside sales team and a shared service team. We have the first certified sales person in the world on Business ByDesign. So she’s already very active, and they have some very good leads already and we’re more or less trying to schedule an implementation, which is very early because we’re just certified the first consultants [by SAP] on Business ByDesign. Even the first project would be-they call it a shadow project. So our consultants would go out there together with an SAP consultant to do the project together.
When you go out and sit with a client, are you selling ARIS or are you just helping to configure processes?
Oevermann: We have no way of knowing. But it’s not the first step to sell ARIS, because the methodology of ARIS in this dedicated area is part of SAP. But thinking in the future, that would be exactly the right question because if the client implements Business ByDesign they can use ARIS, but you can just look at old reports. But if you want to continue with ARIS, then you would have to buy ARIS.
Would it be ARIS or ARIS-light, given that this is a midmarket product?
Lambrecht: Probably it would be ARIS on demand.
That makes sense, since Business ByDesign is on demand.
Oevermann: We have decided so far to really address the market with the on-demand solution. We are in a testing phase with several customers, but it has not been decided whether we will approach the market with an on-demand solution like Salesforce.com. Currently we are working with our basic solution in this area. But this is not the first step of our market approach right now to sell ARIS to these customers because now we are really building up some experience in this new SAP solution, and we’re building up the teams right now. The next step will be really to cross-sell our own products in this area.
If you were going to have an on-demand solution for the market, would that require rearchitecting your software for multitenancy or any other development considerations?
Oevermann: Right now I don’t want to give any comments to this area. It has not been decided and we are really not in the position to talk about a possible on-demand solution for ARIS.
How much of your own [IDS Scheer’s] resources are you putting into the Business ByDesign practice?
Oevermann: One dedicated team in the U.S. It depends on how things go, but probably shared teams of seven to eight people in Germany.
What are your expectations? Do you think this is going to be a big part of your business?
Oevermann: No comment. We don’t give any numbers or something like this. To be very clear, for us 2008 will be an investment.
With the consulting that you do, do you focus on SAP or are Oracle and Microsoft in the mix as well?
Oevermann: On a global level, we decided [in the] ERP implementation business to focus on SAP. That does not mean we don’t work in the business process area with Microsoft and Oracle, but for the hard-core implementation of ERP we decided to focus on SAP. This has been our practice for many, many years
What are you looking for in terms of a skill set to build out IDS Scheer’s Business ByDesign team?
Oevermann: This will be different from our traditional approach and the skills are very different. For example, on the consulting side, it’s not the approach we had in the past, it’s more of an aggressive sales approach because we want to, and SAP also wants to, have a higher number of customers, and the sales cycle will be much shorter than in the past. Our typical sales cycle is between four and six months … the Business ByDesign cycle will be between one and three months, so we will need different people for the sales to hit this target.
What is your expectation with customers, that they will have systems they remove in place of Business ByDesign, or that they use the software as an addition to what they already have?
Oevermann: My expectation is that we will see customers that do not have any ERP software so far. And in other cases this will replace another solution-so maybe 50-50. We don’t have a good feeling for this right now.
Are divisions of larger companies a target market?
Oevermann: Not yet. SAP has decided not to open this whole market segment yet.
Does the whole on-demand environment change process requirements at all?
Lambrecht: I don’t think it changes the needs. It’s a different delivery process but the need behind why am I doing this is the same. The process development time is not shortened either. It’s different because you go to strongly preconfigured. So the client needs to adapt more than they probably would in traditional software, although the level of preconfiguration [with Business ByDesign] is going deeper and deeper.
Did SAP provide any resources back to you to develop a Business ByDesign practice?
Oevermann: Yes, yes there is a strong development program and training program because SAP knows that if they do not have partners [for] this special kind of business, together we will not be successful.