At SAP's Sapphire conference this week in Orlando, Fla., a question posed by one of my colleagues concerns the status of Business ByDesign, an on-demand suite of applications that has been in development for about five years.
SAP co-CEO Leo Apotheker
(Credit: Dan Farber/CNET News.com)Last week, it was announced that the product would take 12 to 18 months longer than the original target of 2010 to reach $1 billion in revenue and touch 10,000 customers in the mid-market globally.
ZDNet's Larry Dignan reports on a conversation with SAP co-CEO Leo Apotheker, who explained that Business ByDesign was delayed because the company wasn't able to achieve the planned 10-times reduction in total cost of ownership.
Larry wrote:
That's a fancy way of saying SAP hasn't figured out how to make money at its $149-per-user, per-month price point. SAP confirmed that it was delaying Business ByDesign when it reported its first-quarter earnings. "We've announced a price point, and now we're working backwards," says Apotheker.
Apotheker is looking to "labor arbitrage" (cheaper programmers offshore) and the next release of SAP's NetWeaver middleware to help bring the costs in line. He contends that the delay won't give an advantage to competitors: "No one will be able to offer an end-to-end, comprehensive business suite."
Being bigger and more comprehensive may prove to lead to unwieldy, more costly, and less agile software development. Perhaps SAP will offer some demonstrations of Business ByDesign at this week's conference to prove that it will be worth waiting for the product to get into fiscal alignment.
SAP announced that its on demand enterprise suite Business ByDesign roll out is moving slower than previously expected.
The company said that it would take 12 to 18 months longer than the original target of 2010 to reach $1 billion in revenue and touch 10,000 customers in the mid-market globally. For 2008, SAP expects to have less than 1,000 customers across six countries.
SAP wants to make sure it doesn't flub Business ByDesign, which represents the future of the company. The company pioneered client/server ERP software, but has been slow to enter the rapidly growing on demand arena. SAP has said that it has deployed 2,500 engineers over the last four or five years to create Business ByDesign, which the company touts as the most complete on-demand suite across applications and industries.
(Credit:
SAP)
SAP's plan is to provide 2,100 service interfaces in Business ByDesign, which will mesh with each other but will not be customizable, according SAP founder Hasso Plattner.
NetSuite has been working on its on-demand suite for ten years, coming out with new versions yearly. And, salesforce.com is expanding its platform to include ERP capabilities, such as CODA's financial applications built on the Force.com platform.
Plattner differentiates Business ByDesign from salesforce.com by virtue of the completeness of the SAP suite. For SAP, software is about serving larger businesses with a complete, integrated suite of applications with "wall-to-wall functionality," Plattner said.
At a recent debate, salesforce.com CEO Marc Benioff challenged SAP founder Hasso Plattner.
Plattner was asked by Benioff if he would consider buying Salesforce.com. "It always makes sense to look into something. If the Apex platform (the Salesforce.com platform) is really as good a he thinks it is, we should look even more," he said.
Plattner also had some advice for Benioff. "We have many things in common. Let me give you some advice, but you might not take it because you are younger: don't overestimate your platform."
Perhaps SAP has been overestimating its ability to deliver an on-demand solution. JMP Securities analyst Patrick Walravens contends that Business ByDesign doesn't have a single data model, but instead different workstations in silos, and is now working to rectify that situation. So far, SAP isn't talking.
SAP has stumbled in earlier attempts to move its business applications online. The company's initial foray into hosted applications was marked by shifting product plans and murky delivery schedules. SAP eventually launched a hybrid approach with CRM, with a product designed to work the same, whether used on-demand or on-premise.
In the meantime, Microsoft, Salesforce.com and others have evolved their on demand applications. Salesforce, in particular, is moving ahead aggressively in the market with plans for an on demand platform service, in addition to expanding its business applications lineup.
See also:
Larry Dignan's coverage of SAP's quarterly results.
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