SAP’s Business ByDesign: A Riddle, Wrapped in a Mystery, Inside an Enigma

After nearly a week of all-things-SAP at the ERP giant’s annual Sapphire Show, customers, bloggers and curious enterprise-software watchers have all done their best to sort through the major issues raised during the Orlando get-together. Analysis has not been in short supply.

One topic, thoroughly poked and prodded at the show and afterward, has raised many more questions that have yet to be answered: the future of SAP’s fledgling on-demand ERP software product, Business ByDesign.

This was supposed to be a miracle cure for SAP with the mid-market, remember? This was supposed to let SAP tell NetSuite, Workday, Salesforce.com and the like what was what, remember?

You’re a little fuzzy? Well, in all fairness, it’s been a while.

Since being announced with much fanfare many moons ago, SAP has taken its foot off the BBD accelerator, capped the number of early customers, decreased the marketing message, confounded many partners, and, thus, lowered the expectations. The company’s publicly stated reasons: ironing out back-office tech issues and ensuring that operational costs will be manageable.

Throughout the entire saga, which began back in 2007, SAP execs extolled (in one form or another) their “commitment” to Business ByDesign.

But a reading of Business ByDesign (or BBD) headlines from the blogosphere post-Sapphire confirms that SAP might be waffling on that “commitment.” Or not.

Two articles, in particular, sum up the confusion best: Reuters’ “SAP’s Cloud Venture Fades as Rivals Gather Pace.” And Enterprise Matters’ “SAP’s Business ByDesign Lives (And Reuters Gets It Oh So Wrong).”

OK.

Indeed, uncertainty abounds for those outside the gates of SAP’s hauptquartier in Walldorf, Germany, and the cranium of newly christened CEO Leo Apotheker. We are left to speculation and the job of piecing together clues from vague quotes and slick demos at Sapphire.

But, to me, there’s a question that seems obvious and important: What if SAP actually succeeds with Business ByDesign—then what?

First, I suppose, we must define what “success” would mean to SAP—because it surely means something different to SAP and to its customers, who would love nothing more than an alternative way to use SAP’s ERP software, at a much lower cost.

BBD success for SAP, then, might mean a profitable SaaS product offering that would not—could not!—eat into SAP’s on-premise, high-margin, maintenance-fee business. Vinnie Mirchandani, an ERP guru and former Gartner analyst, writes that SAP’s strategy exec says the vendor views on-demand (SaaS) “as a very small part of their landscape.”

Dennis Howlett, an enterprise software blogger and SAP watcher, takes a deep dive into the economics of BBD and connects many dots raised by others (including Mirchandani) who have a keen interest in BBD. Howlett’s conclusion: We’re still searching for Business ByDesign, and he’s not optimistic that we’ll find it any time soon.

Maybe another possibly heretical question is this: Does SAP actually want to succeed with BBD?

Let’s say, for argument sake, that SAP is able to overcome the back-end technical stumbling blocks, determine a cost model that works for its CFO, its partners and customers. Then what would that prove?

In my mind, it would be a tacit admission that software-as-a-service and on-demand and cloud computing technologies are superior, are what many of its customers need right now, are the future—and, paradoxically, are the biggest threat to SAP’s very existence.

How much money will SAP invest in a technology platform that can destroy its balance sheet? (After all, there ain’t no 90 percent margins on SaaS.)

It seems that so many of these massive enterprise tech vendors plan for the future by planning on the status quo—by ignoring the likely potential for massive market disruption (by such forces as SaaS or open source) and bank on more of the same.

In that sense, SAP’s stumbling with BBD is wholly unsurprising. Take your time with Business ByDesign. Make sure it’s profitable. Keep milking the installed base.

More choice for the customer? Hmmm. How about another big announcement and demo at next year’s Sapphire? That sounds great!

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