SAP SME Service Opportunities: Assessing the By Design, All-in-One, and Business One Markets

In their search for new revenue pastures, SAP services firms have asked me about the opportunities in All-in-One (Ai1), Business by Design (ByD) and Business One (B1). In reality, it’s not so simple to head down market. The supposed “green fields” of these new markets are more like bustling urban marketplaces, with competing vendors selling their wares as buyers search for deep discounts and haggle the price down.

Since most of these products are largely dependent on SAP partners for sales and implementation, there should be opportunities for well-positioned SAP service partners. But there are pitfalls as well.

1. SAP All-in-One
While SAP has smartly abandoned its grouping of SME products strictly according to revenue size, All-in-One is the package most like traditional SAP ERP and therefore the most likely to appeal to companies on the higher (and more complex) end of the midmarket.

Opportunity: Serving mid-tier companies whose ERP needs are too complex and broad to consider a SaaS-based solution. (Note: hosted All-in-One services are now available also, with subscription-based pricing that SAP does not offer directly, but does offer through its All-in-One hosting partners.

Advantage: Most like SAP R/3, easiest transitioning of consultants from a skills perspective.

Challenge: Shorter implementation cycles than SAP R/3 means less billable hours for consultants. All-in-One customers expect to pay no more than $1.50 in consulting costs for each $1 spent on the software, which is at least 80 percent less than what service providers are used to with larger SAP R/3 customers. Out-of-the-box, pre-configured templates mean that billable consultants who are used to spending their time configuring tables will not cut it as All-in-One consultants. Customers will want All-in-One consultants who can advise them on specific process questions and template selection. Generic configuration techniques will take a back seat to experience with All-in-One industry solutions. Firms with BusinessObjects expertise on Crystal Reports may also be well-positioned to approach the All-in-One market via BusinessObjects Edge, SAP’s midmarket BI solution.

2. Business by Design
Opportunity: SAP’s current lease of Business by Design (ByD) is running on 100 customer sites. The next release, ByD 2.5, targeted for mid-year 2010, will be the high impact ByD release, with multi-tenancy capabilities and powerful in-memory analytics (In 2.5, all transactional data, as well as the relevant meta data it draws upon, will be accessible via in-memory search). Perhaps the biggest partner opportunity will be the development of third party apps on the ByD platform, which is a Silverlight/Microsoft Visual Studio based development environment. The release of the ByD SDK for third party developers, targeted for the second part of 2010, will be a closely watched event that should expand partner opportunities in ByD significantly. This is also a move by SAP to fix one of the major gripes so far around ByD: its lackluster UI!

Advantage: Aspiring partners with internal experience in Visual Studio, Silverlight, and C# should have a leg up on third party ByD SDK work. Adobe LiveCycle Designer will also come into play for ByD forms. Firms that combine Microsoft and ABAP resources will be the best positioned. As SAP Mentor Anne Petteroe wrote in her latest blog post on ByD, “The standard development language is C#, which is then converted to ABAP at runtime. We ABAP’ers we have a new word to learn: ABAPsl = ABAP scripting language. ABAP syntax and keywords can be used in this version of Visual Studio.” Since SAP’s existing partners have no special advantage with it comes to ByD implementation, in theory, a new player that partners smartly with SAP by filling skills gaps or needed geographical coverage could make inroads.

Challenge: Timing the ByD services opportunity will not be easy. While some expect ByD to have little market impact in 2010, I wouldn’t be surprised to see some sales momentum by the fourth quarter. 2011 should be a terrific year for ByD if things go as SAP envisions. However, the trick for service partners will be to avoid losing capital by sinking money into ByD sales and consulting services too quickly. Also, SaaS-based implementation requires a different set of consulting skills. In a SaaS environment, SAP system administration (“Basis”) skills have less relevance and the functional configuration within ByD is different. A functional consultant won't be able to add as much value via on-site ByD configuration as they do with SAP ERP. Business by Design ships pre-configured, and any kind of serious customization would likely involve the use of third party components and add-ons rather than the base table configuration adjustments that keep consultants busy in SAP ERP.

Advice on ByD process optimization, template selection and architecture should be at a premium, but the skills transition from SAP consultant to ByD “advisor” will not a simple one. The range of companies interested in ByD is likely to span both small and large SME customers, so some market focus may be needed by implementation partners. It may make sense to choose between a focus on scaling fast ByD rampups for smaller companies or doing more complex ByD installs for bigger companies. The best early opportunities in ByD should be for firms that are ABAP and C# capable, and who are able to combine that technical know-how with the ability to tailor ByD to particular industries they are already well-positioned in.

3. Business One
Opportunity: The potential market base for Business One (B1) is sizeable, with thousands of small companies (think 100 employees or less) who are outgrowing their accounting-only packages and looking for a broader option like B1. Hosted, subscription-based versions of B1 are already available from SAP service partners. SAP Community Network has a forum for B1 SDK developers to share their lessons and tips, and with more than 70,000 searchable messages, there’s already a base of knowledge to work from.

Advantage: Those firms who already advise small businesses on software selection will not have to worry about the big systems integrators elbowing their way into this market; they won’t be able to scale down sufficiently. The supply of experienced B1 consultants is by definition lower, given that the thousands of SAP ERP consultants are, as a whole, not looking to move to the B1 space. B1 is also a much more established market than ByD, - there are more than 10,000 installations world wide and more than 550 add-on solutions to complement the B1 product.

Challenge: The rampup of Business by Design, and the overall impact of SaaS, may contribute to a more difficult B1 sales environment as companies look harder at the cost/benefits of on-premise versus on-demand. While SAP traditionally envisioned ByD as having a comfortable place in between the smaller companies serviced by B1 and the midsize companies served by All-in-One, many analysts, including myself, see the potential for ByD to eat into a large chunk of sales in both directions. Also: B1 implementation times are short (think weeks, not months), requiring limited consulting work. Firms must build their B1 operations on economies of scale, while simultaneously providing a personalized experience to customers at tighter margins than we see “up market.”

Conclusion
The best opportunities for SAP partners in the SME space will go to firms that are already well-positioned in a particular industry, geographic location or tools/skills focus (example: Visual Studio) and who extend their business model into the SAP SME market. Having seniority in SAP ERP service delivery will not be a major advantage except in the All-in-One space. New implementation skills and a volume delivery model that retains a personalized approach will be the key to creating customer value in the SAP SME space.

This should create an opening for firms with new service approaches and a creative use of SAP’s SDKs. It will not be easy to serve all three SAP SME products; newcomers are advised to hone in on the product that is best aligned with existing specialties. Given the impact of SaaS and its SDK possibilities, the By Design market is particularly attractive, but carries the greatest risks of entry due to the challenge of timing customer adoption.

I’d like to thank Jeff Stiles, Senior Vice President, SME Marketing, SAP AG for providing the background interview for this piece.