SAPs A1S go to market strategy – potential hurdles

by admin on April 25, 2007

in Innovation

I have yet to see a demonstration of A1S – something that remains a personal frustration – so any remarks here should be regarded as speculative.

In my last post, I pointed to some of the practical considerations that might hinder SAPs progress in its target segment. But there are other hurdles. First a positive.

SAP is convinced this segment represents a gap that other vendors will struggle to fill. Scott Lutz mentioned Sage, Lawson and Microsoft Dynamix. In UK markets I would add CODA, Agresso, COA, Intentia and Infor. A fragmented market is good news for SAP because it can cover a lot of turf with its $400 million A1S war chest. Any vendor that ignores this does so at its peril.

SAP’s entry into the on-demand market is a validation of a market which, while enjoying plenty of air time, has yet to become established. Even so, other hurdles exist.

  • Incumbent players may appear vulnerable but all the companies I mention are doing well. They have established positions. Even a vendor as powerful as SAP will not find it easy to convince potential customers that it offers a better alternative.
  • I don’t know the extent to which SAP will offer ‘good enough’ end to end business processes. Scott countered by talking about its advanced pricing capability, something that’s not available elsewhere. One function will not sell a system and I need to see much more before commenting further.
  • While SAP is offering A1S as an on-demand play, pricing is not based on consumption but on a per user basis. Any company looking at A1S therefore has to consider it an entire suite offering that touches all potential users. That is very different to the no brainer on-demand sale offered by Salesforce.com which is on a roll right now. Dislodging a successful application that meets a particular need will not be easy and despite SAPs confidence will require more than a strong telemarketing or email campaign. It will, in many cases, be a strategic sale requiring careful consideration.
  • SAP’s try before you buy model is not a done deal. I could well be wrong but I find it hard to believe that companies in its target segment will seriously try strategically important software on that basis.
  • Bringing A1S to market has required that SAP create an entirely new business model that is not part of the company’s 35 year old DNA. No-one knows whether the A1S model will work alongside the existing although CEO Henning Kagermann appears confident.

The biggest hurdle however will be convincing potential customers that A1S represents a safe bet. It won’t be enough to demonstrate functionality. SAP recognises that buggy software will not be tolerated. At present it has 150 or so trialling customers. Their experience will be invaluable as SAP rolls out the solution. But with around 8 months before SAP goes to volume sales, there is precious little time in which to iron out all the wrinkles.

I have little doubt that a company as thorough in its thinking as SAP will already have considered these issues. It may not have all the answers.

This may surprise some, but I don’t think pricing will be a barrier. Although nothing has been announced and in time honoured fashion, SAP will neither confirm nor deny but I’m hearing a starting figure of $160/month per user.

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