Why SAP Business ByDesign Was Delayed

In the three months since I posted an initial Review of Business ByDesign in the OnDemand Beat, there has been a flurry of announcements and activity relating to the roll out date of the product.

Larry Dignan and Dennis Howlett broke the news the week before the annual SAP Sapphire event, that the planned 2009 rollout of Business ByDesign was to be delayed by up to 18 months.

Vinnie Mirchandani and a few of the other Enterprise Irregulars had a chance to meet with SAP Co-CEO’s Henning Kagermann and Leo Apotheker at Sapphire 08 and found out that there were a couple of key reasons why SAP pulled back on the original planned release date.

These are valid reasons indeed to delay Business ByDesign’s launch and might in this case actually help lead to a better product.

But in the meantime one can be certain that Netsuite (with its recent OneWorld release) and other OnDemand ERP competitors wont sit still during the next 18 months and SAP will have quite a bit more work to do to gain market share and partner acceptance of Business ByDesign once released.

1. Merchand Simon , May 8, 2008:

   SAP has added a lot of Spin to the reasons for the product delay. I wonder what the real reason behind the delay was?

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2. Patrick , May 8, 2008:

   SAP probaby discovered that architecting single (or multi tenant) Software As A Service ERP is not as easy as it looks and or sounds.

   There is a reason why Netsuite took a few years to get market share with its Saas ERP…it took that long to get a compelling product architected, developed, priced properly and marketed to the right audience.

   18 Months might give Netsuite too much of a headstart for SAP to catch up.

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3. Chistopher , May 8, 2008:

   $149 per month per user is probably too low of a price for SAP to support. Dont be surprised if SAP has multiple price points (Basic, Premier, Platinum etc)for BBD when and if it is launched

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4. Harry Milrose , May 8, 2008:

   Chistopher,

   $149 per user per month is too high in my opinion for the typical SMB in today’s economic climate

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5. Ameed Taylor , May 9, 2008:

   Patrick,

   You are right, SAP has discussed BBD being available as a single tenant solution. But in my experience as we are developing a multi-tenant architecture for Applation OnDemand and back when I worked for an ASP, it is just to expensive to maintain single tenant for large numbers of customers.

   SAP probably came to this realization with its current group of Beta BBD customers and this delay is good for them if they can find a middle ground between Single and Multi Tenant and still make a profit.

   Also BBD is different in that SAP has to have large enough margins to make a profit when you add resellers to the mix.

   As I mentioned, it took Netsuite a number of years to come up with a good business model and formula and to become profitable with its solutions and it will take SAP a while to get to that happy medium as well.

   Chistopher and Harry,

   $149 per user per month will indeed exclude a certain portion of potential customers but $149 per user per month is actually in line with what Netsuite and some of the other Tier 1 SaaS ERP providers charge for their solutions. But I am not sure that SAP makes any profit at $149 per month

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6. Dennis Howlett , May 12, 2008:

   To clear up the architecture discussion, SAP is going for a mega-tenant approach where each customer has their own ‘slice’ or DB instance inside the data center. SAP is working out how best to automate the upgrades and customizations that will be required by customers to bring its provisioning and servicing costs into line with its goal of 10x reduction. That’s the principle reason for not going to general availability right now.

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7. Ameed Taylor , May 12, 2008:

   Dennis,

   Thanks for stopping by

   SAP appears to be on the right path with the mega/multi-tenant architecture approach especially since BBD runs on the relatively inexpensive MaxDB.

   The key though to get that 10x reduction will be in how they handle customer initiated/requested customizations. If SAP charges a fee for BBD customizations they should be fine but if they include all the customizations you can eat in the $149 per user cost it may be tough.

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8. George , March 20, 2009:

   Everyone knows that the real investment in ERP is a) Consulting b) Organization involvement/ time of key personnel c) Life cycle costs of maintenance d) Infrastructure. License forms a small part of it. Providing a shared hosting model will reduce TCO over the life cycle by only a few percent. Multi-tenant models will suite very small companies and the price points have to be far lower (Salesforce.com may sell at 100$ per user per month but there are challengers like Zoho and K-Serve providing the same at 10-20$ per user per month). You can expect many more competitors like that appearing in this space forcing SAP to stay upmarket.

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