Orlando – Business software vendor SAP AG (NYSE: SAP AG) used its annual Sapphire user conference on Monday to announce that Business ByDesign, its on-demand ERP offering for the mid-market, will be broadly commercially available in the U.S. and select other countries in July. Canadians will need to wait a little longer.
SAP’s on-demand solution for the key mid-market space has been in development for some time, and is currently in market with over 100 charter clients. The hosting model has been one factor limiting the roll-out, as SAP is currently hosting the application in its own data centres. There may be some flexibility coming on that front though, with SAP promising both multi-tenancy and single-tenancy models.
The vendor is also promising real-time analytics with bi-directional Microsoft Excel integration, support for mobile devices, an enhanced rich client UI built on Microsoft (Nasdaq: MSFT) Silverlight, and the opportunity for partners to build vertical specialization and customization around the solution.
Conrad Mandala, vice-president, SME with SAP Canada, said customer acceptance testing is currently underway for the Canadian localization of Business ByDesign, and go-live in Canada is slated for the first quarter of 2011. He added the hosting model has yet to be firmly decided and a number of models are being considered, including working with hosting partners.
There are a number of channel opportunities for channel partners with the on-demand ERP offering, he added.
“It could be a pure selling model where the partner is the front-end selling agent, getting a share of revenue with a transitional support agreement between the partner and SAP, or it could be a full VAR situation where they own the relationship and support,” said Mandala. “It’s going to depend a little bit on what our partners want to do and how much they want to invest in the infrastructure.”
The channel has been slow to get into the SaaS model and figure-out how to monetize on it, but Mandala said part of the reason has been that, until now, there hasn’t been a great SaaS ERP product for partners to embrace.
“It’s a complex piece, because the infrastructure and theory required to host all these customer instances is pretty expensive, so it will need a provider like SAP and our partner network to get the high-end partners, like telcos, to get that framework to build upon,” said Mandala.
The breadth of SAP’s portfolio will be an asset here too, said Mandala, with SAP able to offer customers on-premise and hosted options, including offerings for different-sized companies as they grow, so they’re not locking their business into one model in-perpetuity.
Kevin Gilroy, SAP’s North American channel chief, added there’s a strong channel play with Business ByDesign, but one that partners will have to wrap their head around the economics of.
“It’s a different cash flow and balance sheet play than traditional reselling with service drag,” said Gilroy. “But when you hit critical mass with that subscription-based business it’s extremely profitable. The phone is ringing off the hook with channel partners asking how do I get in this game. ByDesign is going to be a game-changer.”
Being able to offer customers flexibility in service and application delivery is important for Contax Inc., a Toronto-based SAP partner. Contax president Michael Pearson said partners need to be able to give customers options.
“We’ve got to be able to deliver our solutions in the ways people want to consume them, whether it be on-premise, on-demand, in the cloud or hosted, and those are options people need to have and our customers are already asking for,” said Pearson. “We have a variety of options we can offer customers already, and I think ByDesign really takes it up to the next level.”
Not every customer is going to want ERP through a SaaS model, but Pearson said if partners can’t have that arrow in their quiver, they’re going to start missing out on opportunities.
“I think we’ll see a gradual increase in the adoption of (on- demand ERP) but it won’t be 100 per cent of the market,” said Pearson. “In the SME maybe half will insist on it with the rest open to considering it.”
Less bullish on ByDesign is Markham, Ont.-based SAP partner Illumiti.
“We’re considering Business ByDesign,” said Illumiti CEO Nir Orbach. “Right now though we’re not convinced it’s a direction we want to move into.”
They’ve already moved toward a SaaS model, offering all their Business All in One clients the opportunity to have the infrastructure hosted by a hosting partner of Illumiti’s, with Illumiti handling the IT management and support so the customer gets all the benefits of the ERP without having to invest SAP expertise itself. The majority of their deals are now going this way, said Orbach, but it’s still short of a pure SaaS play as envisioned with ByDesign.
“We, haven’t figured out how to monetize all the benefits (of ByDesign) so we’re not quite there yet, but we’ll take a look at when its ready to launch in Canada and decide then if can see the benefit or not,” said Orbach.
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