SAP this morning launched its new hosted offering SAP Business by Design. Some quick observations on the positive side of the spectrum:

• SAP Business by Design runs NetWeaver. UI still runs on services and the product can access all the services in the overall SAP Enterprise Service Repository. Customers and prospects should expect SAP to fill in gaps and last-mile solutions via composites from partners. Though SAP will have to grow this new ecosystem, they've proven they can do that very well.
• T-Rex and Max DB reduce dependence on Microsoft and Oracle. Finally, SAP stops funding Microsoft and Oracle with database cash. MaxDB is now the underlying database and T-Rex, the in-memory database (debuted in BIA), is put to use throughout the suite.

However SAP will have many areas of improvement in future releases to come. Here are some areas based on conversations with SMB prospects:

• SAP gets the midmarket but the product still remains complex. The vendor currently leads in the mid-market by revenue ($2.563B in 2006). SAP has spent a considerable amount of research to understand this market and its requirements from a marketing perspective. Yet simplicity and ease of use still remains elusive to the vendor. Key features like easy access to reporting features, quick portal construction, and easy integration to Office could remain significant areas for improvement.
• SAP fails to deliver a true SaaS offering. SAP delivers an on Demand solution. Without true SaaS in a multi-tenant design, customers may pay more in the long run but retain some flexibility. SAP had a top secret project (originally code-named A1N) headed by Shai to build multi-tenant and for whatever reason abandoned the project in January of 2007. However, customers may trust the fact that SAP is delivering onDemand and will expect the reliability of a trusted utility.
• Focus on usability still falls short of industry efforts from Microsoft and Epicor. The vendor talks about breakthrough user experience. The reality: the current approach in the Business by Design product takes its WebDynpro UI to a new level of configuration and manipulation. Drag and drop features showcase better usability but the net result is still a distinct SAP experience, though it is much better than anything currently offered. In context of the market though, it falls short of the ground breaking work Microsoft Business Solutions has accomplished around roles and usability and the ease of use in process flexibility from Epicor. A move to adopt AJAX would certainly help a ton. (Editor's note: we're all tired of hitting F5)
• Early adopters are no different from other early "hosted" SMB adopters. SAP's beta customers share similar requirements of all rapidly growing SMBs. They are growing, need rapid deployment, and impressed by the ability to deploy quickly without being saddled by IT infrastructure costs. Spending operational expense instead of capital expense remains a big driver as well and at $149 per month per user, this is a good deal compared to the full SAP ECC 6.0 offering. Nothing was special about the customer references, in fact, many of them may have received discounts or paid minimal licensing.

The bottom line
SAP demonstrates a good understanding of its requirements for the SMB market and a "hosted" offering. SAP should be commended for delivering a significant improvement in comparison to existing SAP products. Company's who trust SAP to deliver core ERP may consider this solution. However, the lack of Web 2.0 features that include user experience, mash-up support, interoperability, and true multi-tenant solution may turn many prospects away. Also, the lack of an easy Microsoft Office integration may keep prospects and existing customers from turning to the numerous SMB competitors who offer .NET based offerings with Office integration. The jury is still out on whether Shai's original strategy would have been better or whether or not Zencke's offering may at least meet SAP's stated growth goals for the mid-market.

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2007 by R Wang. All rights reserved