NEW YORK—After perhaps the biggest build up in recent memory, at least in the business applications sector, SAP unveiled its on demand suite built for the mid-market Sept. 19 at an event here at the Nokia Theater.
SAPs long-standing code name for the product, A1S, is now officially buried. The new product name: SAP Business ByDesign.
SAP has billed the introduction of Business ByDesign as not only a new product but a new business model and market for the company. If the demonstrations of the product prove accurate, SAP may be on to something, according to analysts.
The Business ByDesign suite is an integrated suite of products that interact with each other as processes are kicked off by specific events.
SAP is shying away from traditional terms like ERP [enterprise resource management], SCM [supply chain management] or CRM [customer relationship management]. Instead the suite contains familiar components that companies typically look for to run their business: financials, human resources, SCM, CRM, product management, compliance management and the like.
The applications themselves are completely new, written from scratch, according to Peter Zenke, SAP executive board member and technical lead for Business ByDesign. “The [application] code is 95 percent fresh code.” Underlying the applications is also a new Foundation Layer that is comprised of “all the key objects” a company would need to define highly personalized items like products, bill of materials or recipes, according to Zenke.
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The user interface for Business ByDesign is also new, although it is roles based, similar to Microsofts UI approach. SAP has decoupled the UI from the business logic which lets users (through consultants) design their own interfaces. Within the applications themselves, users are able to connect to live user communities and to SAP to get help.
Zenke said that about four years ago Hasso Plattner, co-founder of SAP, came up with the concept of building a new suite of applications to address the mid-market, one that would enable customers to have a much lower total cost of ownership than SAPs traditional on premise ERP suite. In fact SAP—and its enterprise application developer brethren—has been saying for at least as long that it needs to tap into the huge mid-market to make up for the withering market for massive, multi-year, multi-million software implementations.
[SAP Business ByDesign] is not just a new product for us. Its much more. Its a new era of SAP. We enter now into a new volume business,” said SAP CEO Henning Kagermann, during his keynote address at Wednesdays event. “[The new suite] is full of innovations. In my 25 years in this company, this is the most important announcement in my career to date.”
SAP has put a huge stake in the ground with its on demand model. At the beginning of 2007—after a shaky fiscal 2006 with two poor quarters—Kagermann said the company would spend between $414 and $552 million (300 to 400 million euros) over eight quarters to build Business ByDesign.
SAP A1S Morphs into
If it works, the effort could pay off for SAP in a big way, according to analysts.
“Three out of four customers I spoke with said using Business ByDesign gave them a competitive advantage. If that is sustainable that is a huge differentiator in on demand,” said Josh Greenbaum, principal of Enterprise Applications Consulting. “On demand now is really not, in most cases, about a distinct competitive advantage. Its about low cost, a level playing field or a stop gap. But it doesnt bring you up a notch.”
During the keynote and demonstrations unveiling Business ByDesign SAP talked a lot about what the suite can do for users, but stayed light on actual technical details. Whats clear at this point is that the suite is built on NetWeaver, SAPs integration platform, to enable the composition and integration of services, which is the way the applications are served up.
Surprisingly, SAP has taken the core of its Max DB database back from the open source world and is utilizing that as the underlying database for the suite. About half the suite also utilizes SAPs in-memory database, called T-Rex internally, to enable faster queries and processing. Zenke said it is SAPs plans to extend the technologys use.
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The software itself is designed around four key principals: completeness, ease of use, adaptability and lower TCO. The cost is $149 per user, per month with a minimum of 25 users. A $54 per month per user price is available for up to five users—a plan designed for companies looking to access limited portions of the suite.
One thing hasnt changed with SAPs model: its taking its time releasing Business ByDesign. The software is released now to 20 beta customers and will be released to an additional 20 more the remainder of this year. Leo Apotheker, SAPs Deputy CEO, said there are more than 40 in the pipeline.
To distribute the software SAP will utilize a channel model, relying on partners to sell and configure the software for customers. “Partners will generate money from working on top of SAP,” said Apotheker, “whereas we will receive royalty payments. We are validating the model throughout the rest of the year.”
Apotheker said later in an interview with eWEEK that SAP has about 2,500 channel partners now that sell its on premise software geared toward the small and mid-sized business market.
While some critics have said that SAP has cobbled together an on demand offering to respond to market pressures, primarily the success of Salesforce.com, which provides not only on demand CRM software, but a development platform as well. Kagermann, during his keynote, said the reason for SAPs timing with Business ByDesign is “obvious.”
“There are trends in globalization, a digital revolution, a new world of business. Deeply integrated vertical [software] is replaced by [integrated processes]. Networks are key. On the other side people work in more collaborative teams,” said Kagermann.
“The key point is that this will require a change in architecture. We wanted to bring the technical advantages of SOA. Thats why we want to deliver this modern architecture to all our customers.”
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