SAP Preps On-Demand BusinessOne Service

But even ERP—where many companies are loath to trust their data and transactions to outsiders—is evolving to an on-demand world. SAP plans an on-demand version of its BusinessOne ERP offering for small- and midmarket companies although timing, packaging and delivery channels have yet to be worked out.

There is even talk—roundly denied by management—that NetSuite is weighing a pilot to sell its hosted ERP suite via Best Buy For Business.

Sources close to the San Mateo, Calif., company say channel chief Kristen Brown is backing a pilot to begin soon in the Northeast. CEO Zach Nelson said he is unaware of any such plan.

Such a tactic—by any ERP vendor—should not be considered beyond the pale, however. These suppliers are struggling to penetrate small- and midmarket companies that represent a huge growth opportunity. Many of those target companies now use shrink-wrap accounting products. Store-bought wares like Intuit’s QuickBooks and Sage Software’s Peachtree Accounting could be the stepping stones to ERP for these companies.

The difference is that “NetSuite deals can be $200,000, $500,000 depending on the number of seats,” said one NetSuite source. “Good grief, this isn’t an iPod,” said a longtime NetSuite partner. He said early on NetSuite, then known as NetLedger, tried—and quickly dropped—a similar promotion with Best Buy at retail.

SAP remains the ERP player to beat and the Waldorf, Germany-based company is working on an on-demand version of its BusinessOne offering. SAP has talked up its hybrid on-demand/on-premises CRM game plan but has been less public on plans for new delivery models of ERP.

“We’re going to offer [BusinessOne as a hosted service] but we’ll offer it in different ways. Maybe only the CRM functions, so ERP data will be on premise and CRM off. We’re looking for the right model,” said Gadi Shamia, senior vice president of solution management for SAP Labs LLC, Palo Alto, Calif. BusinessOne is SAP’s small- to midmarket ERP play.

SAP CEO Henning Kagermann said on-demand is a more difficult concept than hosted ERP, which SAP has offered for years. “For smaller companies—I think that can happen over time, if it’s only pieces of ERP that are administrative. For the logistics, the backbone, the less I believe in it. People want to own [their transactions]. I can’t say yes or no, it depends on usage,” Kagermann told reporters at Sapphire 2006 in Orlando, Fla., last Thursday.

Generally, ERP partners would be interested in on-demand solutions provided they’re not shut out of the supply chain. Donna Troy, SAP’s executive vice president of Global SME Indirect Channels, said the company is still working through potential delivery models for such an offering but said it would be a “multichannel opportunity.”

NetSuite’s Nelson said there is plenty of ERP business to go around and that the advent of ERP-as-a-service will give rise to new partner plays.

“My view is there are so many customers, it’s not possible to over-distribute. There are seven million small and midsize businesses in North America,” he said. “It’s great to have all these VARs but apps like NetSuite take geography out of the equation. There will be some company focusing on mid-market ERP across geographies. With AccPac and Great Plains you needed local feet on the street. With NetSuite you don’t.”

SAP, for its part, recruits a select group of partners as opposed to huge numbers, which makes profitability easier to attain for those who make the cut. Some in the Microsoft world say that company’s “carpet bomb” approach to partnering has led to over-distribution and margin erosion as partners compete for business.

Quincy Faison, president of Netsirk Technologies of Sunrise, Fla., says SAP’s model is working out well for him. Netsirk added BusinessOne to its IBM hardware practice a few years back and has grown from five to 15 employees. There is plenty of business and little partner vs. partner conflict because there are just four or five BusinessOne partners in the state, he said.

SAP, which built its high-end ERP power on direct sales of R/3, now positions itself as a partner champion.

Executives point to a compensation-neutral sales model rolled out early this year. That means SAP salespeople make the same commission whether sales go direct or through partners.

“We’re the most partner-friendly company in the world,” said SAP executive board member Shai Agassi. “We’ve created tremendous opportunity for everybody who works around us.”