SAP in the mid market

People may have spotted that SAP has recently announced a new mid market offering called Business ByDesign. This is going to be a hosted, or Software as a Service SAAS, application. The product includes accounting, HR, order processing and CRM.  SAP has announced they will be investing c. 500m dollars in the product. Many will know that SAP is the largest business software vendor worldwide and has primarily focused on the corporate market.

So is this going to become the SME product of the future – gradually replacing the hundreds of different applications in place at the moment? Or will it be a dud?

SAP certainly has an impressive track record – but this has been at the high end of the market. Will mid market companies succumb?

The product will require people to adopt a hosted model. As they do not offer an onsite server solution this will put some off – certainly in the next year or two as resistance to the hosted model continues. Organisations like NetSuite have struggled with their application – partially for this reason.

SAP has little experience of the mid market. They have tried before to gain a foothold in this space but with limited success. I suspect part of the reason for this is that the culture and approach to selling ERP solutions is very different from working in the mid market. Less time is available for sales process and there is a lot of competition. There is the question of whether SAP really understands this arena.

As an example I have spoken to a couple of fairly senior people at SAP about the product over the last couple of weeks and have had different messages from around the organisation. One person claimed that the product could be a Sage killer. Another suggested initially that the product will be sold with a minimum of 25 user licences. The annual licence fee for this being c. £25,000 plus potential a one off cost of £40k upwards to implement. This is hardly the core Sage market. . This suggests perhaps that SAP do not understand this market.

So I think SAP is going to have a tough time in this space. The product could well sell into existing SAP corporate users for their smaller subsidiaries but the audience is definitely out on whether they will make it into mainstream SME’s. With $500m to spend one thing for sure – we will hear more about them over the coming months

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