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Business ByDesign gives SAP solution partners a small-business alternative

SAP execs said expanding the ranks of solution partners is key to the success of its new Business ByDesign SaaS product; partners will have a product to target SMB customers they couldn't reach before.

SAP AG's introduction yesterday of its small-business Software as a Service (SaaS) offering was as much a plea to SAP solution partners as it was a product introduction.

SAP executives said it would be as important to court new SAP solution partners as it would new customers for the SaaS product Business ByDesign -- formerly code-named SAP A1S.

"We are extending our ecosystem and indirect channel by touching partners we have not touched before," said Leo Apotheker, SAP's president of global customer solutions and operations. "Our ultimate model will be predominantly led by partners."

Apotheker said the company is validating its revenue model with about 20 SAP solution partners through this year and will significantly accelerate partner rollout in 2008. Without wide acceptance among solution partners, SAP won't be able to meet its goal of signing up 10,000 customers by 2010, he said.

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"This is a new market for the SAP ecosystem, so this lets us reach a market we have not tapped yet," said Steve Niesman, president and CEO of Westchester, III.-based Itelligence, an SAP solution partner that sells the Business All-In-One product.

Frequently, Niesman said, Itelligence reps will find a prospective customer for whom Business All-in-One just isn't appropriate. In many cases Business ByDesign will give them an alternative to propose, increasing the percentage of deals those reps can close and making the lead-generation process more efficient, he said.

While details of revenue potential and profit margins are still being hammered out, SAP solution partners will earn revenue from licensing agreements, renewals of subscriptions and providing services to customers.

Because it's aimed at small and medium-sized business (SMB) customers, Business ByDemand is significantly less expensive than other SAP products and comes with license packages that are even more flexible.

The starting price of $149 per user per month includes software, infrastructure services and support. But customers who use the system lightly or infrequently -- to enter time and expenses, but few higher-level functions -- will pay $54 per month for a set of five users.

"We had a lot of doors shut on us due to the fact that we did not have a hosted option," said Scott McMahon, partner with San Francisco-based BusinessOne SAP solutions partner Apollo Consulting LLC. "Now we can target those companies and go after them."

Billed as an on-demand, event-driven tool, the Business ByDemand SaaS product includes modules that can supply functions from customer relationship management, supply chain, sales, financial and human resources applications. SAP will initially host the software and plans to transfer that responsibility to partners in the future.

SAP executives said the target market for Business ByDemand is the approximately 600,000 small businesses in the U.S. that have between 100 and 500 employees. This represents a new market for SAP of $15 billion and rounds out SAP's midmarket and small-business offerings, which also include its All-In-One software solution for companies of 2,500 employees or fewer and its Business One product designed for companies with 100 employees or fewer.

To date SAP has 40 customers using the SaaS product and another 300 considering it, executives said.

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