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SAP ByDesign, the corporate spin-off platform

Phil Wainewright Profile picture for user pwainewright December 9, 2014
SAP Business ByDesign has found a niche for itself in corporate spin-offs and M&A

Other use cases include high growth companies and two-tier ERP

Integration to other SAP products and flexible business objects are seen as strengths


Most successful technology products find an early niche or two — specific pain points the product serves especially well. By proving themselves in these initial beachheads, they gain the traction to expand out into other market opportunities as they grow their market presence.

For Business ByDesign — SAP's cloud-native business system, recently revived after many observers had all but written it off as a spent force after a succession of false starts — it turns out there is a special sweet spot to act as the business platform for corporate spin-offs and acquisitions. As senior VP of SAP Cloud Rainer Zinow told me when we caught up by phone recently:

Where I see ByDesign super-often is in high tech, in M&A situations. Companies want to spin off a part of their organization. They don't want to ruin the financial position they've built up by having to buy new ERP licenses. Getting the spin-off to run on a cloud-based ERP is very attractive.

With 800 seats, the largest example yet of this use of ByDesign is Nokia, the technology developer left behind as a standalone business after Microsoft's acquisition of the rest of the Finnish mobile phones giant. The company had originally wanted to clone its existing SAP business system, but the timescales made that impossible. ByDesign gave them the full set of business processes they needed — including order-to-cash and HR as well as core financials — and was live within eight weeks, said Zinow.

Another example is Evonik, a global specialty chemicals business based in Essen, Germany, with annual revenues close to €13 billion ($16bn). SAP says that it has adopted ByDesign as part of its official methodology for acquisitions and spin-outs after a successful project to spin out an Arkansas-based business unit that made foams.

Led by a ByDesign partner that had already developed a proof-of-concept for this use case, the project was completed in just five weeks, including process analytics and scoping, migrating data out of the existing SAP ERP system and training US employees.

Accommodating change

What these examples have in common with other use cases in the ByDesign customer base is the need to rapidly accommodate change, said Zinow.

The more an industry is in change, the faster you will see cloud adoption in that industry.

Recognition of a cloud-based solution's ability to cope with change is leading to a welcome shift in the market, he added:

In 2014 I've seen the first companies who came and said, I only want a cloud solution — on-premise is not an option for me.

High growth is another change factor, where companies welcome the scalability of a cloud-based solution to grow as their business grows. Headphones maker SkullCandy bought ByDesign when it had just fifteen people. Now it has 3,500 employees. Zinow explained:

They said, 'We have ambitious growth plans. We will do an IPO. We never want to switch the underlying architecture.'
It's pretty often companies with pretty heavy growth ambitions that buy ByDesign.

Two-tier ERP

The other common use case is in two-tier ERP, where a large enterprise that runs SAP centrally adopts Business ByDesign to bring more standardization and better visibility into its subsidiary operations.

Here, the forty integrations built into ByDesign that connect into other SAP products for processes such as financial consolidation or drop shipment are a clear advantage. At Lufthansa, all clearing and payments coming out of ByDesign go through a shared financial services center that runs on the airline's core ERP system. Construction equipment maker Hilti replicates ByDesign data from nineteen subsidiaries into the corporate BW system.

Oil giant Royal Dutch Shell illustrates the scale of the two-tier opportunity. A loyal SAP shop, it nevertheless has some 700 subsidiaries not running on SAP, due to acquisition history or often simply because their operations are not large enough to justify a conventional SAP ERP instance. One of the attractions of adopting Business ByDesign is its ability to integrate to Business Suite for cross-business transparency.

Shell Downstream, a division that refines and supplies products such as chemicals and lubricants, rolled out its first Business ByDesign project last year for the retail operations at a chain of gas stations in Poland. After completing a successful roll-out in eight weeks, it is now working on a pilot for a lubricants business in South-East Asia.

Change management

Such rapid deployments are only possible when there is minimal disruption to existing processes, said Zinow:

Eight weeks will only work if you have to do little change management.

I've seen quite a few projects run into difficulty because the companies didn't put enough effort on the change side of the house.

But there is plenty of scope, he added, to find a match between what the business needs and the library of business objects built into ByDesign or available as extensions.

What makes this unique is that you get all of the business 'LEGO's that ByDesign brings to the table.

Companies look at the map of the business processes we have in ByDesign and see if they fit.

One common stumbling block is the difficulty of bringing data across from older systems. Despite "excellent" migration capabilities built into ByDesign, Zinow said customers often find imported records won't validate because the data isn't clean, leading to an arduous manual checking exercise. Having competed this task, many feel it wasn't worth the effort, he said.

Quite a few customers have said, 'Thanks, but if I could do it again I would not take the data with me.'

Disclosure: SAP is a diginomica premier partner.

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