Author – Becky McCray, Small Business Survival (with commentary from Ramon Ray)
SAP, known for serving huge corporate customers, is reaching out to mid-sized businesses with Business by Design, a web-based business management software service which moves away from its traditional software.
Businesses with 100 to 500 employees can use SAP’s new hosted service to draw together data from different parts of their business.
As midsized companies look to integrate more of their businesses processes and related technologies they evaluate “ERP” software that integrates, sales, marketing, finance, CRM, HR, Payroll and other critical business functions.
NetSuite would be the closest, “all-in-one” competitor to SAP’s new service.
SAP Business By Design includes eight areas of data analytics and management are: finances, human resources, supply chain, goals, customer relationships, projects, supplier relationships, and compliance.
The service will cost $149 per month per user. There is a minimum of 25 licensed users, and the cost includes software, infrastructure, services and support. SAP says this inclusive pricing is intended to lower the Total Cost of Ownership, a factor that is usually hard to quantify.
Group pricing for efficiency users, those needing limited access to the software (such as for self-service entering of time and expenses, and purchase confirmations), will be at $54 per month for a set of five users.
SAP has spent four years building the product, announced September 19. Commentary around the launch has focused on the difficulty of shifting sales channels, from customizing for each large corporate customer to now providing a general solution for the more diverse mid-size market. Oracle CEO Larry Ellison, interviewed in eWeek.com, knocked SAP’s move. Ellison said the SME market contains “no synergy” and limited profit potential.
“We don’t call on small businesses, and it’s very expensive to call on small businesses,” Ellison said. “It’s very expensive to do ERP implementations in small businesses. The cost of sales is high. The cost of implementation is high. There are virtually no synergies in sales, marketing, and product development and support.”
SAP Deputy CEO Leo Apotheker answered criticisms in an Information Week interview.
“We have been developing this whole business model and product for the last four years,” Apotheker said. “There’s been a tremendous readying inside the company to really support this business model. We understand that if we want to take SAP to the next level we need to be a partner to the business community, [one] that can really reach out from the very small to very large company. We didn’t dump this stuff on the market to see what happens; we’re doing this in a very organized fashion.”
Currently SAP draws 30% of its yearly software orders from their 28,000 customers classified as Small to Medium Enterprises (SME). One element that may help convince companies to consider Business ByDesign is a “try before you buy” opportunity. Companies can configure the service to their business without losing the work if they decides to purchase it.
Availability is limited to selected early customers starting in the USA and Germany and is being rolled out through 2008 and 2009.
SAP Business ByDesign complements the existing SAP Business One, SAP Business All-in-One and SAP Business Suite solutions, allowing SAP to address the business requirements of all sizes of companies from the smallest businesses, through all types of midsize companies and larger enterprises. SAP Business One is designed for the small business segment, while SAP Business All-in-One is built specifically for midsize companies that need deep industry-specific functionality and extensibility to meet their precise requirements. In making today’s announcement, SAP said it had aligned the product names of its solution portfolio, adjusting the name of its existing midmarket solution to SAP Business All-in-One.
The Associated Press writes “SAP will encounter a fair amount of competition: Microsoft Corp. and several smaller vendors offer less-expensive tools that handle aspects of what Business By Design rolls together, and some of it comes over the Web as well. SAP will have to persuade those buyers that its package is truly better and less complex than they might fear.”
In having a look at other players in this market (direct and indirect) NetBooks, is built for smaller businesses and provides an integrated set of offerings. It only launched in September though and so its place in this market will need time to develop.
Intuit’s QuickBooks is used by millions of small businesses and while not providing the functionality of an integrated “ERP” system it provides a robust set of core features for accounting / bookkeeping functionality. Of course Payroll, HR and other business processes can be used with Quickbooks as add-ons.
For small businesses there are many tools that provide specific functions such as email marketing (Constant Contact), Payroll (ADP, Intuit), and etc. But there is not a particular software (or SaaS) that provides a range of services under one roof.
Let’s also remember database software such as File Maker, Microsoft Access and Alpha Software that provide a range of functionality such as inventory management, customer databases and other things.