Performance and efficiency problems with the early beta version of Business ByDesign has prompted SAP to slow down the pace of the market rollout of its on-demand product suite, according to software industry analysts.
Business ByDesign is currently in an early beta test phase and SAP officials have said it won’t be able to meet its original goal of selling the product to 10,000 customers generating $1 billion in revenue by 2010. The company estimates that it will now take at least another 12-18 months to achieve those milestones.
Business ByDesign is a suite of ERP (enterprise resource planning) applications for midmarket companies.
The reason they are slowing the sales ramp up is because of performance problems. “They can’t get the software to run in a cost-effective manner. It uses too many resources,” said Joshua Greenbaum, principal analyst Enterprise Applications Consulting.
This in turn is slowing down the effort to build a partner network that can profitably support an on-demand suite such as Business ByDesign, Greenbaum said. Partners will be essential for the suite’s long-term success, he said.
SAP itself has tried to soft-pedal the reasons for the slower sales ramp up. “Overall the response from customers about performance is excellent,” said Jeff Stiles, SAP senior vice president of small and medium enterprise solutions. The company is going to take more time to work on the product because “we feel we need to meet those expectations and in fact exceed them,” Stiles said.
SAP isn’t slowing the development of the product, but “moderating the pace of our go-to-market efforts,” Stiles said. “We want to make sure we have every element” of its Business ByDesign marketing effort prepared to scale to volume, he said. SAP has gotten good feedback from early support customers “and we want to make sure they are happy companies,” he said.
The product has been released to early support customers in the United States, China, the United Kingdom, Germany and France, Stiles noted. The product will be introduced in India in the second half of 2008 and in additional companies in 2009, he said.
Greenbaum said SAP is wise to take its time with the product introduction because it’s a relatively late entrant to the on-demand software market. SAP can’t afford to come out with a product that has any serious glitches.
“SAP would really get clobbered if it came out with Business ByDesign and then had some performance and/or reliability problems. So I think they are being a little cautious,” Greenbaum said. He estimated that SAP only has about 50 beta test customers around the globe. Thus there is no risk that customers are going to be discouraged by the performance of an early support product.
On the other hand, there is little risk that the delay will dampen customers’ interest in Business ByDesign, he said. “There is so much untapped demand in the midmarket for software of this caliber that if they can put the product together and put the channel together,” the product should be a success for SAP, Greenbaum said.
But AMR Research analyst Simon Jacobson said he doesn’t believe that SAP’s decision to slow the rollout is a reflection of fundamental concerns about product quality.
“If anything, I think we’re seeing what happens when the market places semi-absurd expectations on SAP for a product that was formally announced last September and slowly rolled out to a select set of geographies earlier this year,” Jacobson said.
He noted that while SAP’s position of “we won’t ship it until it’s perfect” shows a commitment to quality development, there is a risk that SAP will “forget to let the market drive demand.” SAP, he noted, had done a good job of building interest in Business ByDesign in 2007 before the formal product launch by giving the industry “sneak peeks and project codenames along the way.”