SAP Business ByDesign – an update

Earlier this week I was in London for a customer update on SAP Business ByDesign (BYD). This was an analyst/media only event so we didn’t have the opportunity to sense test the messaging from potential customers. Nevertheless, those of us from the analyst brigade who were in the room have all been following the story for some time.

SAP wheeled out customers who are in the process of implementing BYD rather than those that have been running the whole suite live. That’s OK as it provides a different set of insights as to their experience. Nigel Montgomery, Gartner analyst asked the first question. He took the words out of my mouth asking about the buy process. It was noticeable that none of the customers, which also included two partners, had undertaken any formal due diligence process. One customer who is also a long term partner with SAP described the decision as a ‘no-brainer.’ Another said she had ‘Spoken with my mates.’ SAP admitted that none of its BYD sales to date have required a Request For Proposal, which is the usual way that vendors are selected for this style of application.

I suspect some of the analysts in the room will be worried since that also implies that none of the Big Boys, like Gartner, figure into the discussion. Gartner makes money from selling subscription and report services to both vendors and buyers so this absence of attention to other forms of influence beyond brand must be a worry to them and others.

What was telling is all the industry customers had either looked at or had used Salesforce.com and were either discarding or taking them off their shortlist. The irony of that setup was not lost on me. The message was clear: Salesforce.com does sales force automation, we do the end to end business process, ergo we have much more to offer for not much more in differential cost.

It was also interesting to hear the degree of trust that newly minted customers are putting into SAP. I asked why they chose SAP over say NetSuite for professional services when it is clear that at the moment, SAP is behind the functional curve. “We trust that SAP will get it right in the long haul and that we will be OK by the time we implement the whole solution.” That makes sense when you are implementing modules such as CRM and finance in pieces over time. It is an approach that is eminently do-able with BYD without losing the integrity of a fully integrated offering.

However, I was surprised that none of the customers appeared to understand the potential for transformational benefit coming from a SaaS offering. That is particularly telling when considering that at least half the customer panel are in services industries. Why? Services businesses do not require a physical infrastructure beyond a central office. Even then it is possible to envisage virtual offices but that may be some years away. In turn that means it is relatively easy to expand the business without making large capital investments. Taken one step further, that means the potential to create global services businesses based on the Internet is real. I know that to be true because over the last few years I have participated in a number of successful, project based virtual teams.

SAP is starting to get ByDesign ‘right.’ By that I mean that the degree to which it is functionally complete is sufficient for most SMEs to get going and run their whole business using (mostly) BYD. The roadmap is solid through 2012 and on the basis of the detail I have seen, I can understand customer confidence. The partner program is starting to come together albeit slowly and the go to market story, while still fragmented, is becoming a lot more cohesive and sensible than this time last year.

BYD has one thing going for it I believe is unique and which should receive far more attention. The solution configurator is an excellent way of not only selling the SAP solution set but also a way for buyers to think about how and when they will implement functionality. So for example I can say that I want to implement CRM now but leave out marketing until later. The marketing ‘piece’ can then have a note attached to it that could calendarise a revisit at some point in the future. Just as important – when configuring a system, buyers can see what pieces of functionality they need to review and the steps needed in order to get the system into go live status. As far as I am aware no other vendor can offer that functionality from inside its system. It is a huge time saver and should ensure much higher implementation success rates than are usual for this class of software.

I was particularly pleased to see that in the UK, SAP has made the right decision to bring in fresh blood to run the BYD unit rather than stick with internal promotion of seasoned SAPpers. Why? SAP’s culture does things to people. For example, if you’ve not been there 5 years then you’re considered wet behind the ears. If you’ve been there 1o years then you have started to earn credibility. 15 years and you’re considered someone who knows what they’re talking about. 20 years and you haven’t earned your exit but you are someone to be respected.

But that view of what it means to be a SAPper also means you end up doing two things: talking SAPenese – a language only people who work in the SAP world truly understand, second you tend to think long and hard about issues before making decisions. Even then it’s likely to have gone the rounds of various committees. That’s an over simplification but it is something I have consistently observed over the years of dealing with SAP. The flip side is that does not make for an agile business of the kind that modern software companies need to be. New blood means new thinking and a willingness to barge through SAP’s own flavour of red tape to get results.

Right now, SAP is looking for growth based businesses. The UK team believes that’s how they will achieve volume sales. I don’t entirely agree given SAP has said it would like to sell into the subsidiaries of its global 2000 customer list. I was less satisfied with their position on partners. It didn’t strike me that SAP UK has a fully worked out partner acquisition strategy. On the one hand it is saying that it will look for new types of consulting practice that ‘gets’ the new model of acting as a reseller for SaaS services. On the other hand, the two customers/partners on the panel were both existing partners that acknowledge a need for rethinking. I don’t doubt they will be successful but just how many of those resellers are there? Precious few. SAP needs to be careful it doesn’t waste marketing resource flogging a solution into channels that are not receptive or which don’t see a need for change. Having said that, I have fielded a number of inquiries from professional firms thinking about BYD as a solution they should consider offering.

Overall? I make no secret of the fact I believe SAP has potential to deliver the best set of integrated applications for the SaaS/cloud end to end business process market. The fact it has 1,800 developers on the project is something others can only dream about. Go to market has been an angst driven path to date but the lumps are being smoothed out and the message is much more encouraging and coherent. To its credit, SAP has made many adjustments in the last six months, ditching old ways for new and largely getting it right. Now is the time for them to accelerate customer acquisitions. 1,000 is the number CEO Bill McDermott told me he’d like to see by the end of the year with hopes SAP can get there by the end of September. That makes some execs wince but it is do-able.