When I scanned my agenda for SAP TechEd && de-code, I noticed time set aside to spend with Rainer Zinow, SVP SAP. Zinow and I have a long history and so while I mentally noted the appointment time. I gave no thought to what he might wish to discuss. For me, SAP Business ByDesign (BYD) was an embarrassing but closed book. Last July I said:
It turns out that commentary was only partially correct because of some misdirection by SAP but also because we were not fully aware of what was going on internally. SAP chose not to disavow me or others of our opinion and BYD promptly fell off all RFP lists. Fast forward to today and what do we have?
Business ByDesign, the red headed bastard child of former exec Peter Zencke’s imagination which, by any measure, has been a disaster.
[Frank] Scavo notes that the language used by CEO Bill McDermott is ambiguous but leads to the conclusion that ByDesign is no longer part of SAP’s core strategy. He says (quoting McDermott and then adding color):
ByDesign is still part of our product portfolio and we now have ByDesign on SAP HANA, which is absolutely a game changer because everything is faster and better on HANA as you know. [Emphasis mine.]
McDermott is a careful speaker, and his use of the word “still” is revealing. He wouldn’t dream of saying, “The Business Suite is still part of our product portfolio,” or “SAP HANA is still part of our product portfolio.” The word “still,” therefore, indicates that ByDesign is not part of SAP’s core strategy.
In the intervening period the following facts have emerged:
- SAP had a clear out of 'friends and family' accounts running on BYD. These were accounts SAP concluded that BYD was not appropriate. Nor was that group financially viable for SAP. That chopped the customer count by some 25%.
- Since then, the customer count has increased back to its 2013 levels including over 100 new customers in China.
- The number of users added to BYD implementations grew 40% and is now in low six figures.
- BYD is now running on HANA and has seen some performance improvements but not as much as customers expected. This is because prior to implementing HANA, BYD was routing all SELECT statements to the TREX secondary in memory columnar store persistency. TREX was a key antecedent to HANA so already bore some of the speed characteristics that HANA brings to the table.
- BYD is now fully localised for 19 countries with Belgium being the latest. Parters have provided or are working upon localizations for 32 other countries including places like Ukraine, Belarus and Kazakhstan.
- Professional services is by far the most popular market segment with 44% of all sales, high technology takes another 10%. BYD supports a further 22 industry verticals.
- SAP is pursuing a 'two-tier strategy for selling BYD, mostly into existing accounts.
- SAP continues to develop functionality and has a detailed roadmap running well into 2015. Functional enhancements have picked up since the HANA migration was completed in mid-2014.
- All new customers are on HANA, existing are being migrated to HANA at a modest pace.
- BYD has been repositioned to meet the sweet spot of 50-500 users. Pricing remains largely as it was before 2013, i.e. $149/user/month for suite users and $12/user/month for occasional access users.
- SAP recently won a multi-million deal with a large high tech company.
- Customers like Shell, Lufthansa and Hilti continue to increase their BYD investments. Hilti has deployed BYD in 17 countries.
BYD has not been given a UI makeover and SAP continues to optimise performance. Some aspects are clunky. So for example there is no one click button for starting a clock and one click to stop the clock in time and expenses for professional services.
SAP needs BYD to succeed so that it can continue to contribute to the company's cloud numbers. The fact it is a marginal contributor is of less relevance than its potential impact on numbers the leadership can discuss in future earnings calls.
BYD's fate up to present has been littered with major errors in marketing and design. Configurations are still complicated and SAP is still in what I would call 'marketing beta.'
The SAP brand took a beating internal to its customer portfolio when BYD was put on mute. Some customers were understandably furious, imploring SAP to continue development. In the general market, other solutions have continued to gain ground. Zach Nelson, CEO NetSuite recently told me that he expects to maintain bookings guidance for the current year at something like $540 million and counts some 20,000 entities. That makes NetSuite by far and away the leading provider in the mid-market.
SAP will likely continue with its two-tier sales strategy since this is an easy way to acquire customers. How it goes to the wider market remains to be seen but there will need to be some creative and clever marketing in order to make a dent in the mid-market to which it aspires. Whatever happens, SAP must not fall into the trap of doing the 'biggest, widest, shiniest' kind of marketing that doesn't work for this market segment.
SAP needs ISVs/SIs but those same partners will likely already have the more mature All-in-One solution in their kitbag. AiO is much more mature and is a natural selection for the companies at which SAP is positioning BYD.
There needs to be clarity around benefits HANA brings for the development of add on modules by partners.
SAP has devoted sensible internal R&D resource to BYD but I suspect it will need to ramp efforts in order to ensure the solution remains relevant and modern.
There is a lot to do and while Zinow and I had a frank and robust discussion, I am pleased to see BYD come back into market since I was one of the very first to put time into understanding the solution and saw its potential as a player in its chosen space. I still believe there is a place for BYD.
Competitors might wish to remember that SAP still holds considerable sway among a very large number of customers and that will help SAP in deals.
As always, the growth proof will come via the customer conversations which I have urged SAP to bring into the public domain., coupled with SAP's ability to execute on multiple fronts.
The video below provides further insights into what Zinow is thinking. As a personal aside, it was good to hear Zinow's obvious enthusiasm for a solution into which he has dedicated many years of his professional career.
Disclosure: SAP is a premier partner at time of writing.