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BusinessByDesign: iPhone for ERP, Or AS/400 for 21stC?

SAP has long been associated with complexity and high end software, but as the IT industry reboots around hosted Software as a Service models (SaaS), the German software giant sees an opportunity not just a threat. Salesforce.com has changed the game, but that doesn’t mean SAP can’t play under the new rules.

The result – BusinessByDesign- an end to end business application suite, designed from the ground up to be hosted. The goal – delivering SAP business application functionality to smaller businesses at around a tenth of the cost of its more traditional on premises software. The suite is specifically designed to not be customised. It also shows SAP in horizontal, rather than vertical mode.

SAP now has a portfolio with multiple entry points for customers.

SAP Business Suite           greater than 2,500 employees

SAP Business All in One    less than 2,500 employees

SAP BusinessByDesign      100-500 employees

SAP BusinessOne              <100 employees

Jason sees portfolio overlap issues.

SAP is expecting 10k customers a year to be coming online from 2010. That is some serious growth. Maybe investors will be excited after all, Dennis. In fact for the business to be sustainable SAP has to sell that many seats. Its a lower margin business model.

The Concept Car approach

SAP designed to build from the ground up – to create a “concept car”. Software development for the suite was model based, running on NetWeaver. All componentry is isolated with message-based integration. SOA meets SaaS.

It seems to me that SAP still needs to get over its Not Invented Here mentality though. It built its own tools for AJAX support on the front end, for example, rather than looking to open technologies such as the Dojo toolkit. Even Apple takes advantage of open source and other people’s technology in its products, even if it hides them well…

But then like Apple, as far as SAP is concerned black boxes are ok. Its all about interfaces, not code and implementation details. Frankly, much like Apple, SAP doesn’t want third parties to build on the platform. It needs to closely control the environment to offer the right quality of service to customers. Whatever the eventual channel model- QoS will be key to BusinessByDesign success. No customisation. No platform choice. Just application services.

Or at least that was how I understood it initially. During the launch announcement it became clear that customisation may still be a big part of the BusinessByDesign story. [I need to dig into this. more later.]

Built in analytics- SAP is not going to be selling any Oracle database licenses this time around. But then again, some SAP partners, let alone competitors, may be a little uncomfortable with SAP as a hosted model. IBM’s iSeries business, for example, could see a material impact.

iSeries is an interesting platform to look at, because the target customer for BusinessByDesign is exactly the kind of shop that would traditionally buy a packaged application running on an AS/400. The kind of customer that would forget about its server and put it behind a drywall…

BusinessByDesign will effectively offer Master Data Management for SMBs out of the box. I was surprised it wasn’t positioned thus.

One interesting approach is to drive Community collaboration as a core element of the platform. SAP could learn from Spiceworks here. SAP would like to customers to help each other with tech support and business issues, which will lower its own costs. SAP also plans to minimise training cost with online help and user community interaction.

Missed Opportunities

The UI represents a missed opportunity, in my opinion and shows how SAP’s Not Invented Here approach can cause problems for the firm. I kept wondering where is the real AJAXy goodness? Hitting F5 repeatedly is hardly the key to few clicks.

i was surprised to see a search for a particular report require the user to hit the search button. Why not just have interaction between front and back end, and pop up the report names as the user types? Frankly I would love to work with SAP on this- it could take a lot of clicks out of the system.

To be fair the drag and drop modeling looks pretty solid and the ability to step back and look at all of the processes a business is using is quite interesting.

Customer Feedback

One customer said they had budgeted far higher to retool their IT infrastructure before they came across the product. Once he had gotten over the concern about outsourcing key functions they were able to deploy a “tremendous amount of capital to other areas”. Very happy alpha customers.

One classic moment came when a customer explained that he first considered BusinessByDesign when an SAP executive acquired a plane from them!

SAP has 20 customers live so far, and there were 40 in the pilot.

QuickTake

I am pretty positive about BBD’s chances in the market, and it looks a powerful set of apps for $149 per month per user. I do however feel SAP could have really smacked the ball out of the park had it driven harder on Web 2.0 front end interaction. Time for SAP to get Javascript religion.

Final Note to SAP: Take a look at Zimbra‘s demo and borrow from it. There is on need to open new browser windows all the time. Punching through contexts within one pane of glass makes apps powerful.

Categories: SAP.

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24 Responses

  1. For 500 users (the upper limit of their target market) you are looking at ~$900k/yr (implies an equivalent purchase cost of ~$4.5 million) – I don’t know if that represents value or not …

    What of implementation/configuration (always the big part of ERP costs) – do we still have a feeding trough for consultants here?

    While this seems a step in the right direction, I still don’t see enough removal of cost for the buyer – and I think Vinnie Mirchandani will still find plenty of holes to pick in this particular set of (emperor’s?) clothes …

  2. Indeed, which company would not look at rapid implementation time and a quick return on investment – SAP could have hit the sweet spot.

  3. Just this morning was having a conversation with a mate in a charity looking for a new HR system but was sure SAP was out of their league (800 employee business). Funny how these things have a habit of coinciding!

  4. Ric- obviously you know about the perils and costs of ERP implementation a lot better than I do, and I must admit at first glance the sticker price doesn’t exactly seem cheap as chips. however in comparison with other SaaS players SAP is definitely on the money.

    Ever since the whole on demand bandwagon kicked in it has always struck me that people forget it can be more expensive to rent. that’s why people buy their houses, get mortgages and so on. You’d be mad to rent a car every day to drive 365 days a year. i “rent” a PVR from my service provider. not cheap – but works well.

    SAP is trying very hard to reduce implementation costs- indeed one of the only “oh crap no” moments of the launch was when they drilled into a component to show the code…. don’t do it, guys!

    Dominic- if the charity would be interested in joining the early adopter program let me know – i will see what i can do. It might be a nice use case/case study for SAP and the size of the org is right on.

  5. @Ric: that’s the sticker price. 500 users won’t be paying that figure. Of that you can be sure. But remember in doing so, SAP is bundling up all the nasties that come bite companies in the derriere after the license cost has been paid so you have to compare with the rolled up cost ex-implementation.

    On implementation, I’ve floated the idea of getting a bunch of us Irregular types to kick the tyres and see what’s involved. I imagine there will be a number of inquiries of that kind.

    Leo Apotheker and Henning Kagermann wer both very clear: no feeding trough for consultants. But…

    The process map looks like spaghetti junction. As James says – don’t go there man – except for simple add-ons that extend functionality.

    There is an interesting play for small dev shops to build on top but I’m not sure SAP has thought too hard about that element. More to say later today.

  6. James/Dennis … have they made it service-based? In theory at least that should allow “customisation” via re-mixing standard service components.

    Hopefully they aren’t pitching it as the “only software you’ll ever need”, and make it easy to interoperate with.

    As for the price – I take your point about the “rental” aspect, and implementation should be somewhat less grief. It still seems like a premium price for a commodity though … and I’ll believe “no consultants” when I see it!

  7. ric- no feeding trough for consultants isn’t quite the same as no consultants.. perhaps ByDesign is a feeding bowl for consultants.

    there is also the old issue SAP has its own definition of customisation. Vendorprisey explained it once.

    the key though is lessconfig. lessconfig of process. lessconfig of production systems.

    BusinessByDesign needs to be about convention over configuration in order to succeed, i think.

  8. One thing that I have been wondering about since SAP’s BBD announcement is: who is going to sell it? SAP tends to focus on selling the larger suites and, for example, has a structured reselling program for All-in-One, the non-hosted SAP solution for the midmarket.

    I talked to a couple of All-in-One resellers, not interested in going on the record, who told me that they were not the least bit interested in getting involved in selling a hosted solution. They wanted to focus on selling All-in-One, which provides a greater promise of consulting revenues than a hosted model, in their view.

    In the U.S., SAP seems to be doing much more mass marketing to small businesses. You see ads on football games now, and I have had friends who didn’t understand what I did in SAP for years now telling me, “I saw SAP on TV!”

    To me, this implies that SAP is intending to sell BBD directly, or at least develop a sales channel that is less dependent on resellers who need consulting income to make it worth their while.

    Perhaps others have an inside perspective on this, but I was struck by the reluctance of the All-in-One resellers I talked to to embrace BBD.

  9. who will sell it is a key question. SAP needs to build a whole new channel model for this one

  10. dont see the as400 connection here? is it even mentioned?

    • you dont see the as400 connection in a totally integrated system with low to no people overheads, that “just runs” applications?

      James GovernorMay 14, 2009 @ 4:54 pmReply



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