A few weeks ago, SAP re-sync’d its go-to-market strategies with its various small-to-mid market product lines. This is important as 85% of net-new SAP customers are small-to-medium sized firms. SAP defines small businesses as having less than 100 employees and small-to-medium sized firms as having less than 1,000 employees.
This event brought a number of SAP SME customers, partners and SAP executives together with a number of IT industry analysts and press. It was an interesting event especially since SAP itself seems to have reached new levels of clarity around its offerings especially in light of Oracle’s takeover of SME stalwart NetSuite.
NetSuite wasn’t just any ordinary tuck-in acquisition for Oracle. NetSuite’s products are on a single platform (NS-BOS), are quite extensive in breadth and depth of functionality and are all-cloud. It’s multi-tenant, too.
In fact, that new SAP clarity was quite evident in the resurgent role of SAP’s Business ByDesign product line. But, I’m getting ahead of things.
How are SAP’s product lines organized?
SAP salesforce is organized into two teams: large enterprise and General Business Segment. The latter team roughly focuses on businesses with 1,500 or fewer employees and/or less than $1 billion in revenue. The General Business group accounts for 30% of SAP’s revenues. More importantly, SAP expects this part of the firm to grow threefold by 2020.
The General Business group will sell three product lines: SAP Business ByDesign, S/4 HANA and SAP Business One. SAP Anywhere will be sold by the SMB Team Anywhere salesforce.
The S/4 HANA products will be sold to companies with 1500 or more employees.
SAP Anywhere is a cloud-based product and an architecture. It competes with Shopify, Magneto and other commerce products although some customers use it as a cloud access mechanism to older on-premises accounting solutions. Both SAP and select partners are creating these integrations to pre-existing accounting solutions. Aspects of SAP Anywhere can be used to provide cloud services to on-premises software products. Customer sizes for SAP Anywhere start at the 10 employee and up.
The Business One product line is sold by 700 or so partners in over 150 countries and used by one million users. The product has been localized for 43 countries and in 27 languages (some partners may support additional locations). It is an on-premises and private cloud solution. SAP partners can leverage the Business One Cloud Control Center (CCC) technology to run multi-tenant clouds for their customers. Sales of on-premises solutions still are popular especially in geographies with slow, intermittent or non-existent internet access. The target buyer for Business One is a firm with 350 or fewer employees. SAP is providing hosting services for its Australian Business One partners. Over time, SAP may use some of the SAP Anywhere cloud services to extend the useful life of the Business One product line. The Business One product line has a HANA underpinning (3000+ customers are currently using this version).
Business One release 9.2 was launched in June 2016 (Version 9.1 was launched 18 months prior). Approximately ½ of the Business One install base is on version 9.1 or 9.2. Most of the remainder customers are on version 8.
Business One has over 500 micro-verticals for 18 industries many of which were created by partners. Microsoft Dynamics (and their numerous partner product extensions) is a major competitor to Business One. Going forward, SAP expects even more competition for the Business One product line to come from NetSuite (now part of Oracle).
SAP Business ByDesign is a multi-tenant cloud product that can be a divisional solution for a large firm (a la two-tier ERP). This product line is targeted for firms with 250-1,500 employees and like Business One, it has a HANA underpinning. The ByDesign suite includes an MRP and MES set of functionality. As such, it is a very complete ERP product line.
SAP Business ByDesign – a recap
While my colleague Den Howlett has talked about this ad nauseum, it is worth revisiting Business ByDesign’s history.
SAP Business ByDesign’s tortured history within SAP is hopefully at an end. Launched with great fanfare in 2007, the product originally offered ‘mega-tenancy’ – a kind of multi-tenancy where each customer’s data was physically separated on different server blades. The product was reworked to possess a more traditional multi-tenant architecture and to permit the solution to scale more effectively and cheaply.
The product’s breadth and depth were expanded significantly over the years. It went from a solution that could support service firms and high growth startups to possessing a full manufacturing capability. But the product underwent other changes, too. The software was enhanced to make it viable in more countries. It also needed its underlying architecture to be upgraded to utilize the HANA in-memory database technology.
Each re-working of this product line made it stronger and better but it also put a cloud around it, too (no pun intended). SAP’s internal support for this product line seemed to fluctuate over the years. These attitude changes were noticed by many analysts and, apparently, some partners, too.
What troubled the product line in the past was that it was in competition with other solutions. It was a product without a clearly defined market niche. BusinessOne, the Enterprise Suite (ECC, R/3) and other products had their niches but SAP Business ByDesign’s was AWOL or always in flux.
Oracle acquiring NetSuite – a wake up call
While Oracle’s acquisition of NetSuite was no surprise to industry watchers, the consummate of that particular marriage changed everything for SAP Business ByDesign. NetSuite has a full multi-tenant ERP cloud suite and had made a number of sales as a divisional solution for large enterprises. Coincidentally, these were the same markets that SAP Business ByDesign had excelled in as well. Customers could run the SAP ECC solutions at corporate and ByDesign at the divisional level. Today, ByDesign is needed in the portfolio if only to keep Oracle out of the divisions of its enterprise suite customers.
There is a flip side to this element of the discussion. It is far from clear whether the team running Oracle Fusion has the appetite to absorb NetSuite into the Oracle portfolio or whether it will – at least in the short term – suffer the same fate that befell ByDesign for some years. We shall have to wait and see.
Will SAP Business ByDesign perform well? It should. It’s got the functional breadth, country-specific versions, the SAP support infrastructure, etc. to succeed. It will need all of that and more to match Oracle’s market firepower. More partners will help too. In speaking with SAP Business ByDesign partners, one finds executives that really like the product. For my two cents, this product line has finally found its place within SAP and it’s about time.
There are still some kinks to work out though. There are considerable education and communication rollout items that must be addressed. Speaking with some of the partners and SAP executives at this event showed that not all persons have the same level of understanding regarding the positioning of all product lines.
Can we get some naming convention clarity?
SAP’s website and other content/collateral needs updating. For all the importance that the SME solutions have within SAP, it’s really hard to find SME product focused information on the SAP website.
How SAP names products is unclear. In the SME case, it appears that SAP has defaulted to the (in)famous SAPenese nomenclature.
Product names such as “SAP® S/4HANA for SAP Business All-in-One” are just too long and too confusing. Then there’s “SAP Business All-in-One” that may or may not be the same thing as the previous product line. Just look at the subset of SAP solutions that can be hosted on Amazon’s AWS cloud service:
You need a scorecard and a decoder ring to understand which product family is appropriate for your firm and the deployment method you desire. Next, you need to cross-reference the potential solution with all of the alternate names/brands it may be known by. Throw in some other naming words like NetWeaver, Cloud or Simple and it gets even more confusing.
This is a big problem as today’s prospective customers do a lot of pre-selection ‘research’ on the web before ever contacting a vendor or software channel partner. If they can’t easily figure out which product line they need, they’ll abandon SAP as a potential solution provider. Even if they persist, they’ll get frustrated working their way through that website. Too many confusing/changing product names, too much irrelevant material to wade through, etc. make shopping for SME solutions a chore. Something as simple as the deployment/employee matrix I provided at the beginning of this article would be a great addition to their website.
A sensible upgrade path
One other area that SAP should address is the potential migration of SAP Anywhere or Business One customers to a more upmarket solution like SAP Business ByDesign or S/4HANA. This isn’t so much a cannibalization play as it is recognition that high growth firms will want a seamless migration path to other products as their business needs change.
For example, one should expect some percentage of Business One customers will want to move to a multi-tenant cloud solution that can scale up more. The logical choice is to move them to ByDesign. But, while both product lines have HANA underpinnings, the SAP Business ByDesign product has a different way of integrating bolt-on or integrated applications. Also, the data models of each product line are slightly different.
While partners can do these migrations on a one-off (and expensive) basis, SAP should develop these migration tools for two powerful reasons:
- If a customer has to investigate new upgrade options, it could open up the SAP install base to predation by competitors. If there is a pre-defined, pre-built mechanism for enabling Business One customers to move to SAP Business ByDesign, then existing customers are less likely to consider other, quite different, solutions.
- A pre-built conversion mechanism makes the cost to upgrade much lower for customers. This gives customers an economic incentive to stay with SAP instead of looking for true love elsewhere.
I’d also recommend that SAP create migration tools for non-SAP ERP suites to SAP Business ByDesign. There are tons of older client server installations of competitor products out there. Those users might very much want to move to a more modern multi-tenant cloud solution but the conversion costs and implementation may be more than they want to (or can afford to) stomach. Taking this conversion cost issue away could be just the deal motivator they need and want.
In closing I should add that Howlett and I were among the very first people to take an in depth look at SAP Business ByDesign way back when. At the time we liked what we saw but were cognizant of many missing functional piece parts. That’s all history. Today, SAP Business ByDesign is a highly credible player in an otherwise much underserved market.
Endnote: Check out the links below this story for more color and research around SAP Business ByDesign
Image credit - TechVentie where noted and SAP
Disclosure - SAP, Oracle and NetSuite are premier partners at time of writing. SAP covered most of the author's T&E for attending the event.