SAP Aims for SaaS Suite Spot with Business ByDesign

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Remember the old Paul Masson commercials with Orson Welles featuring the master thespian intoning, "We will sell no wine before its time"?


SAP has been using essentially the same line to explain the delay of its first software-as-a-service product. The global giant announced its intent to enter the SaaS market in 2007 and has been developing and testing its Business ByDesign on-demand ERP software ever since. While that's not a terribly long time by traditional software-development standards, it's an eternity in the world of Web-based applications. SAP in 2008 slowed its efforts to bring ByDesign to market, saying it needed more time to get the product just right, prompting critics to say SAP lacked a fundamental understanding of the differences between SaaS and on-premise software.


SAP finally feels Business ByDesign is ready for prime time. Addressing attendees at this week's Sapphire 2010 show taking place simultaneously in Orlando, Fla., and Frankfurt, co-CEO Jim Hagemann Snabe said Business ByDesign "is not a fantasy. It's a real product. We wanted to perfect the infrastructure. You only get one chance."


Some parts of SAP's vision have remained the same since 2007, while others have changed. Though critics contend that small and midmarket companies, the ostensible target audience for ByDesign, don't necessarily want to purchase an entire software stack from a single vendor, SAP remains committed to offering a SaaS suite rather than point solutions. SaaS buyers will ultimately favor SAP's approach, said Jeff Stiles, SAP's global marketing lead for ByDesign, who predicted integrated suites will be "the next wave in on-demand."


Another differentiator, Stiles told me, is ByDesign's native in-memory analytics capability. In fact, in-memory computing appears to be emerging as one of the biggest themes of Sapphire. More on that in a later post.


Perhaps the biggest architectural tweak to ByDesign was SAP's adoption of a multi-tenant model, the approach used by most SaaS vendors as a cost-effective way to provision computing resources. While SAP will still offer a single-tenant option to customers who want it, they'll pay more for it. (While no pricing has been released for ByDesign, Stiles confirmed single instances of the software will cost more.)


SAP currently has 100 "charter clients" in the United States, Germany, the UK, France, China and India. It is planning a broader rollout in late July. One of the biggest questions revolves around how SAP will sell ByDesign. Instead of the direct-sales approach SAP employs with its enterprise clients, it will rely mostly on "a co-selling model with partners," Stiles said. SAP will first focus on existing resellers of its products. Stiles said SAP expects partners to benefit from higher sales volume and also from building and selling packaged services such as data-migration services. SAP plans to share revenue not just on the initial purchase of the software, but on renewals, "to give partners an incentive to own relationships with customers," Stiles said.


SAP will also offer a development environment in hopes of emulating Salesforce.com's success with its Force.com development platform. Due later this year is a software development kit and a Microsoft Visual Studio-based environment for customers and partners, which may win ByDesign fans among .NET developers. Echoing the suite idea again, Stiles said:

Clearly over time our plan with on-demand is to leverage the capabilities we have around BI (business intelligence), around collaboration and stream work, in creating structured transaction processes in cloud-based applications and delivering them to partners and customers as a coherent platform they can build on top of and deploy.

A software development kit is the "first step" in that strategy, he said.