SAP must do more than publish new software

SAP’s much-heralded Business by Design solution is important not because it is new or groundbreaking (it’s not), but because the largest software maker in the world is recognizing a fundamental shift in the market – though perhaps a little too late. It will be exceedingly difficult for a very large, rigid company like SAP to do what is needed to succeed in the SaaS environment.

The ‘S’ Stands for Service

The biggest challenge will be moving from a software company mentality to that of a service provider. SAP has gotten very used to the idea of receiving a big check and shipping a standard version of its software, then letting consultants deal with making it work for the customer. SAP’s huge partners, largely the SIs like Deloitte and Accenture have gotten very comfortable with this idea also.

Now the economics change dramatically. Marc Benioff has compared the relationship between the SaaS provider and its customer as a marriage. You are both in for the long term and are committed to making it work. SAP’s history on the other hand, says the colorful Benioff, is more like a series of one night stands.

Even if the software is simple to install, a big part of an implementation is helping the customer change. This can’t be overlooked in the SMB market. Who is going to work with the 250-person company? SAP? Accenture? EDS?

Who’s Going to Sell It?

As Larry Ellison points out, it is tough to sell to smaller companies. Oracle tries from time to time and has never found the formula. Small to medium businesses may be a $15billion market (according to SAP), but it will take a whole different sales mechanism.

BTW, The Other ‘S’ Stands for Software

More and more customers are buying software that fits their business rather than ‘generic’ software that requires many costly modifications. Business by Design is rather generalized at this point. It is meant to appeal to virtually any type of company. It’s as if small to medium businesses as a group were a vertical focus. Manufacturers, distributors, retailers, service firms and others have very, very different needs. How much commonality is there among those types of firms? I foresee another ‘all things to all people’ product that is a great fit for no one in particular.

The software is not true SaaS. The benefits of a hosted, multi-tenant solution are proven to be enormous. SAP seems to be stopping short. This will not take the cost, complexity and delay out of the software company-customer relationship that a true SaaS solution would.

Mark Symonds, CEO of Plexus Systems, Inc., is an operations expert with 25 years of experience. His blog is about the convergence of ERP and the on-demand (software as a service) delivery model, and its impact on manufacturers.