Hans Peter Klaey, head of SAPs SME group outlined how the company plans to go to market with A1S, the much talked about but as yet unseen mid-market hosted solution. Rather than the traditional door knocking sales person approach, the company plans a comprehensive demand pull campaign. Dan Farber has the details.
Later Hasso Plattner, co-founder and SAPs chariman reiterated the ‘play before pay’ notion in a keynote where he described an engineering method for what he called the company’s ‘New Idea.’ To me it looked suspiciously like Salesforce.com’s platform play albeit dressed up in SAP-speak.
SAP is very coy about A1S which has now been in development for some 3 years. When talking privately about this, some SAP execs have expressed the belief that it will wow the market. If I’ve understood Hans-Peter and Hasso correctly, it will be a highly configurable on-demand offering addressing specific as yet unspecified segments of the manufacturing and distribution markets.
SAP has a declared intent to grow to 100,000 customers by 2010 and A1S is regarded as key to this. That will be the equivalent of about 5% of what SAP says is an addressable market of 1 million potential customers. Hans-Peter thinks this is a market SAP can readily address because it will be delivering a complete suite that compares favourably with best in class offerings by companies like CODA, Agresso, Microsoft Dynamics and Lawson. I think SAP will have an uphill struggle.
At present there are some 150 customers testing and validating the service. However, there’s a world of a difference between validating and paying for an on demand solution. Despite success at the very low end of the market by companies like Twinfield and Salesforce.com, SAP will have to put considerable resource into a business model with which it isn’t wholly familiar. It has already set aside $3-400 million for this effort.
Similarly, its try-before-you-buy approach sounds novel but what company is going to have the time and inclination to mess about with an alternative general ledger? It doesn’t happen and I see no reason for its target customers to do so. Those same prospects will still need to devote resource to making such a service work. Despite the SAP pitch, this ain’t your try and throw away consumer market. This is a cautious segment that doesn’t easily buy into technology and which has not shown special characteristics that make it an obvious target. Similarly, i’ve seen no demonstrable demand for an integrated suite play. RightNow competes in this space but to date has only managed a miserly $70 million in annual sales.
The only way I can see SAP making this offering stick is if it provides such a compelling offering as to dazzle potential customers. Does that sound feasible? The difficulty for commentators like myself is that SAP is holding the service back. Despite repeated requests, I can’t get anywhere near it so have no idea whether it is good, bad or indifferent. This is a tactic SAP successfully used in the mid-1990s when luring the boards of large companies to buy R/3. This time, they’ve scaled that teaser approach. But as all good investment advisers will tell you – past success in no guide to future performance.
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