SAP Debuts Midmarket Apps, Seeks to Expand Partner Roster

Business ByDesign, known until now as A1S, will target midmarket customers with between 100 and 500 employees, SAP CEO Henning Kagermann said while introducing the product in a press conference in New York Wednesday.

"We will set a new standard for software for midsize companies," Kagermann said. The company's goal is to have 10,000 customers using the software-as-a-service applications by 2010.

Business ByDesign is an integrated set of on-demand applications including financial, human resource management, executive management support, project management, supply chain management, CRM, supplier relationship management, business analytics and compliance management software.

SAP is pricing Business ByDesign at $149 per user per month for the complete application package with a minimum of 25 users. But the company will also provide a limited-access price of $54 per user per month for workers that only need access to specific components of the package, such as sales representatives that access CRM tools using mobile devices.

SAP is positioning Business ByDesign between its Business All-in-One, an integrated package of on-premise applications for companies with up to 2,500 employees, and BusinessOne, which is designed for businesses with fewer than 100 employees. The company's flagship SAP ERP 6.0 and SAP CRM applications are designed for large companies with 2,500 or more employees.

Business ByDesign marks a major step by SAP into the world of software-as-a-service applications, bringing it into direct competition with Salesforce.com, NetSuite and others. While SAP has offered an on-demand version of its SAP CRM application since early last year, sales of that product have been modest.

Some SAP channel partners see the new offering as a major opportunity. "This really leverages our vertical market expertise," said Steve Niesman, president and CEO of Itelligence, a Westchester, Ill., solution provider that currently resells Business All-in-One. Business ByDesign will mean shorter sales cycles and shorter implementation times for resellers. "It will become more of a volume business," Niesman said.

Some current SAP resellers have raised concerns that the new product could create market confusion or hurt sales of BusinessOne or Business All-in-One. But SAP Deputy CEO Leo Apotheker was adamant Wednesday that the new software would not cannibalize sales of the older products because its target market is so different. "These are two completely different businesses," he said.

Business ByDesign is a tightly integrated application set, linked by Web services and offered as a single product. That's a break from the traditional view of ERP applications as separate products, Apotheker said. "It requires a completely different go-to-market strategy. And so the partners we are looking for need to have a similar mindset," he said.

Because the on-demand product will require less implementation work than traditional on-premise applications, Business ByDesign resellers will put more emphasis on selling and on providing services and expertise in business processes and vertical industries. While SAP will initially rely heavily on its direct sales force to jumpstart Business ByDesign sales, "I expect the vast majority of our business to be generated by our partners," Apotheker said.

SAP already has 20 channel partners from its existing base of resellers working with Business ByDesign, said Michael Sotnick, SAP senior vice president of small and midsize business.

One such partner is Apollo Consulting in San Francisco, currently a BusinessOne reseller. "This will extend our reach up into the mid-market," said Scott McMahon, business development director at the company. He said the on-demand software would also be an effective employee-recruiting tool because young talent always wants to work with leading-edge technologies.

About 40 companies are currently using Business ByDesign with some 300 others in the pipeline. But SAP executives hedged when asked when the product would be generally available. SAP executive board member Peter Zencke said Business ByDesign's availability would be expanded as the product's stability and the scalability of the hosted environment SAP will provide are proven.

While some early customers have signed multiyear contracts to use Business ByDesign, SAP executives have not yet set a standard contract length for the product. Sotnick said SAP is also still developing financial details for channel partners, such as the margins they will earn for Business ByDesign sales. But he said channel partners would own the customer relationship and hold the contract with their customers.