SAP: Need To Cut Business ByDesign Costs Slows Rollout


"We will continue to fine-tune the model," said co-CEO Leo Apotheker, referring to SAP's go-to-market strategy for Business ByDesign, speaking during a press conference at the company's Sapphire user conference being held this week in Orlando.

SAP unveiled Business ByDesign, a set of software-as-a-service applications targeting midsize companies with 100 to 500 employees, last year and predicted sales would reach $1 billion by 2010. But last week, while detailing SAP's first-quarter results, co-CEO Henning Kagermann said SAP was slowing the Business ByDesign rollout and wouldn't hit the $1 billion sales mark for 12 to 18 months later than forecast.

At the time Kagermann said SAP was still working to find the best ways to sell, deliver and support Business ByDesign and the delay was not a change in the overall strategy for the software

Tuesday, speaking at the press conference, Kagermann expanded a bit on the problem and said SAP needed to get the new product's total cost of ownership for customers down by better automating how the service is delivered and supported. Kagermann said the product's technology is solid. He added that selling on-demand applications required a very different business model from what the vendor has relied on for its 35-year history.

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SAP will initially focus on selling the on-demand applications in the U.S., U.K., France, Germany, India and China before making it available across the rest of the world, Apotheker said. Business by Design will be sold both directly and by SAP channel partners and so far the company has recruited about 50 solution providers to work with the service.

Mountain States PipeSupply is an early adopter of the human capital management module of SAP Business ByDesign and plans to implement the CRM and project management services as well, said IT director Mario Mileto. The Colorado Springs, Colo.-based company evaluated on-demand applications from a number of vendors with help from consultant Tatum LLC of Atlanta before opting to go with the SAP service. "It was the most comprehensive product we have ever looked at," Mileto said. "This product will scale to any size we want to," he said. While he added that early versions had some performance issues, he said the company is very satisfied with the most recent releases.

Kagermann also said there are no plans to offer on-demand versions of SAP's Business All-in-One and BusinessOne application sets, although he would not rule out some application management tools from those products being offered as services.

In other Sapphire news, SAP said it's long anticipated business process management and business rules management tools would be available for customers to begin working with in the third quarter. The software will be generally available in early 2009 when the vendor ships an enhancement package for its NetWeaver Composition Environment platform of which the tools will be part. There are some 38,700 NetWeaver installations, SAP executives said.

"Business model innovation is more important than product innovation" Kagermann said during his keynote speech Tuesday morning, noting that tough economic times require flexible business processes. "Strategic agility is in fashion."

The new tools will provide unified modeling and business rule management capabilities and help organizations develop executable process models and ad-hoc user collaboration processes.

During the press conference Kagermann, who is retiring next year and turning management of the company over to Apotheker, was asked what he considered to be his legacy from his tenure at the helm of the software giant. He mentioned overseeing the re-architecture of SAP's software line and proving that the company can grow both on its own and through acquisitions.

"It's interesting how you get asked about your legacy 12 months before you leave," he joked. Apotheker chimed in: "The better his legacy, the easier my job will be."

About 15,000 SAP customers and business partners are attending the Sapphire conference. Rock musician Eric Clapton is scheduled to provide the entertainment at the conference party Tuesday night.