Last month, Germany Business Technology publication ITespresso.de published an in-depth interview with Rainer Zinow, exploring the changing face of SAP Business ByDesign. You can read the original in German here. However, we've arranged for an English translation, and I wanted to share it here.
SAP refines its strategy for Business ByDesign
SAP’s Rainer Zinow acknowledges that his company’s software-as-a-service ERP solution was “not good enough, and not fast enough.” SAP used to market the online solution exclusively to small businesses. But from 2007 forward, it has also appealed to larger clients. Now SAP intends to actively market to those larger businesses.
9. July 2013 by Manfred Kohlen
In response to market demands, SAP has expanded the marketing of its cloud-based enterprise resource planning system Business ByDesign beyond small and midsize companies. SAP now also plans to actively sell it to the large corporations that have traditionally been part of its customer base. The Walldorf-based company has improved the product, replacing Microsoft Silverlight with HTML 5 and using HANA, SAP’s state of the art in-memory computing engine..
Rainer Zinow, senior vice president of SAP’s cloud unit, says companies have taken to Business ByDesign despite some teething problems. “This is partly due to improvements in the product, but mainly because the cloud ERP market is only really getting off the ground now. To put it bluntly, in the early days Business ByDesign wasn’t good enough, and it wasn’t fast enough. We changed the user interface and replaced Microsoft Silverlight with HTML5, and to speed ad-hoc reporting we replacedthe SAP Business Information Warehouse with the in-memory database SAP HANA.”
Change of marketing strategy
Frank Niemann, an analyst at the consultancy PAC, says SAP has also changed its marketing strategy for Business ByDesign. “They’ve repositioned it, and it’s no longer solely serving small companies.” Zinow adds, “The market consists of three segments. There are small independent companies that can’t afford the high initial investment in an ERP system, so they use the cloud. There are subsidiaries of big international corporations. And, increasingly, big companies in the service sector are using Business ByDesign.”
Recent buyers of the product have included TUI and Lufthansa, whose subsidiaries use the cloud-based ERP solution. Another is the mechanical engineering company Hilti, whose Liechtenstein headquarters and eight factories use the Business Suite. The company is phasing in Business ByDesign in its fifty distribution centres, and plans another fifteen national rollouts this year.
Elsewhere, Roland Berger Strategy Consultants has chosen the product for its Munich headquarters and its subsidiaries. Zinow says that this is an example of one of two main types of organizations that use Business ByDesign. “The first consists of successful consultancies and engineering firms that buy the service industry-specific Cloud Business Suite. And the second are companies in a wide variety of sectors that need a robust ERP core from SAP, in other words the accounting, sales & distribution, and materials management applications.”
SAP is focusing on three main areas as it continues to develop Business ByDesign. It is expanding the Business Suite’s integration scenarios, making further improvements to the Software Development Kit, and working on enhancements suggested by users on its website Ideas Place. Enhancements include things like adding enhanced Outlook integration and the ability to use specific corporate colors.
Increased reliance on distributors
Zinow explains that SAP is changing not only its product, but also the way in which it deals with clients. “We’ll be using our distribution partners to talk to small independent businesses, and our own sales department will deal directly with big companies and their subsidiaries.”
PAC’s Frank Niemann says it remains to be seen whether the distributors will accept this division of labor. “From our point of view, the cloud-based solutions business model is often not nearly attractive enough for distributors whose origins are in consultancy and systems integration. There needs to be a change of emphasis. SAP should concentrate on creating basic functions, integration tools and the platform itself, while distributors should focus on widening the scope of the functions and developing expanded solutions for specific industries. If people could sell their own solutions based on this platform, the Business ByDesign model could be more attractive to distributors.”
Basically, the low-cost cloud model, which appealed mainly to smaller businesses, is giving way to the traditional SAP concept that makes money even for far-from-cheap SAP service providers. For IT service providers, there’s a chance that small business ERP users will no longer be given preferential treatment.
[Additional material by Martin Schindler, silicon.de]