Recently, I found a keynote from Dr. Jürgen Kreuziger (Senior Vice President, TIP Core Lifecycle Management) from SAP’s Virtualization and Cloud Week that describes SAP’s Cloud Strategy. There was a one slide in particular that caught my eye - it shows differences between SAP’s OnPremise and OnDemand offerings:
Something about the slide intrigued me. I couldn’t quite figure out what it was. I had heard about the new offering: Business One OnDemand but I hadn’t really thought about the impact on ByDesign.
In the past, ByDesign was often described as the Cloud option for all SME and mid-sized customers: “SAP positioned ByD as suitable for companies with 100 to 500 employees and 25 to 100 ERP users”. [SOURCE]. Initially, even fewer users were mentioned:
How low will Business ByDesign go?
SAP executives said the suite will support as few as 10 seats, down from 25 before. [SOURCE]
The recently announced Business One OnDemand meant that that a new OnDemand offering for this market segment was available and ByDesign was then reduced to the OnDemand offering for the mid-sized customer.
Blogger Cindy Jutras also noticed this shift:
Unlike SAP Business One, ByDesign is and has always been a SaaS only solution. Originally SAP segmented its SME portfolio only by company size, either by annual revenues or by number of employees. Today SAP uses a slightly different positioning scheme. Business One is still viewed as the most affordable and recommended for small and growing businesses whether these companies are seeking an on-premise or on-demand solution. Business ByDesign, offered exclusively in a SaaS environment, is positioned as the best solution for mid-size companies looking for SaaS ERP.
This change in itself not as a bad thing – rather it is a sign of the healthy evolution of SAP’s Cloud offerings.
I kept returning to Kreuziger’s slide and thought about what would happen to ByDesign if an OnDemand version of Business All-In-One ever emerged. “That is never going to happen” I thought but I was curious and started digging and found some material on hosting options for All-in-One – one that most interesting was the subscription-based hosting option:
The subscription-based hosting option – an extension of the SAP Business All-in-One fast-start program – allows your organization access to an SAP Business All-in-One solution that is hosted and managed by a select SAP partner. Because you pay only a flat monthly or quarterly subscription fee, you minimize up-front costs and ongoing in-house IT requirements.
- Inability or reluctance to absorb up-front capital expenditures for IT investments
- Restricted cash flow for software licenses and hardware acquisition
- Limited IT resources to manage software and IT infrastructure in-house
- Access to a hosted SAP Business All-in-One solution – Run your business without buying new hardware and software
- Application and infrastructure management services – Leverage IT management expertise delivered by SAP partners
- Maintenance and support – Take advantage of ongoing maintenance and support from SAP partners
- Minimize up-front capital costs associated with traditional software acquisition, including those for software licensing and hardware, by using a subscription-based payment model
- Avoid the need to hire IT staff to manage and support software and the underlying IT infrastructure
- Achieve flexibility to buy and deploy an SAP Business All-in-One solution based on your own financial and IT preferences because of a variety of licensing and deployment options [SOURCE]
I found the marketing material this fascinating, because, in some respects, it was similar to that of the marketing material provided for those interested in ByDesign.
Indeed, the imagery used by SAP to promote this hosting option for Business All-In-One also associates this option with the Cloud.
SAP partners for the SME market also describe this hosting option as being “OnDemand”.
The following table provides a quick comparison of the three solutions:
Business All-In-One: Subscription based hosting
Business One OnDemand
Purists might argue that this Business All-in-One solution really isn’t a SaaS – just an application being hosted in the cloud. I have no details on the technical architecture used – it might even be an example of “Single-tenant (or Multi-instance) SaaS” (as defined by blogger Cindy Jutras): Each company is given its own instance of the (hosted) software, but may share common services, such as an integration platform, and security [SOURCE]. This lack of multi-tenancy – as opposed to that present in Business One OnDemand – is presumably based on the use of OnPremise technology in the subscription-based hosting solution.
SAP is very careful to distinguish between Business All-In-One (OnPremise) and ByDesign (OnDemand) for the mid-sized market. An older comparison between the three environments is seen below.
The subscription-based model for Business-All-in-One hosting definitely muddies the water and threatens this clean distinction. I’m not saying that the functionality offered by both solutions is the same – for example, the user interface for Business-All-in-One is out-dated and based on the typical Business Suite UIs – I’m just suggesting that vague distinctions between OnPremise vs OnDemand models or between subscription-based vs. traditional-licensing models as the main differentiators aren’t valid.
It is wiser and more useful to use differentiators that reflect specific platform functionality (mobile support, integration into other SaaS platforms, etc) rather than painting with broad strokes in a manner that fits into SAP’s Cloud strategy but doesn’t provide customers with an accurate portrayal of their options. For example, I’d suggest using the distinction between “general industry functionality” and “deep industry-specific functionality” as a more appropriate sales device.
Other changes in this market sector may be coming based on the acquisition of SuccessFactors. A recent statement regarding SuccessFactors and ByDesign from 2012 1st Quarter Results suggests that the two are complementary without providing details
SuccessFactors’ solutions are highly complementary to SAP’s core HCM offerings as well as SAP’s strong cloud assets: SAP Business ByDesign for the suite cloud market and SAP’s line of business cloud offerings for large enterprises such as SAP Sales on Demand.
Although focused more on LE market, a quick comparison between the HCM functionality between ByDesign and SuccessFactors shows that SuccessFactors’ solution is more complete.
ByDesign is now being squeezed by various other OnDemand offerings. It has been squeezed out of the lower-end market by B1 OnDemand. In certain circumstances, it could be challenged in the midsize market by the Business All-in-One subscription-based offering and now SuccessFactors may also entering the field – though currently just in HR. The entrance of these intruders is not a bad thing – it forces SAP to describe the use cases that fit ByDesign in greater detail to distinguish it from these other offerings. This clarity benefits those individuals deciding which solutions best fit their business requirements – it allows them to make purchasing decisions on a solid foundation rather general marketing messages.