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SAP looks to Cloud for new growth

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11th Aug 2010
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In spite of growing its revenues by 12% in the second quarter of its latest financial year, German enterprise software giant SAP is trying to fend off analyst and user discontent by putting more emphasis on its web-based Business ByDesign application.

SAP’s Q2 revenues increased 12% to €2.9bn in the three months to 30 June. Software sales made up €637 of the total, while software-related services contributed €2.26bn. Profits jumped 15% to €491m for the quarter.  But analysts polled by Dow Jones expected profits more like €525 million on sales of €2.75bn, reported MyCustomer.com.

Taking into account its recently completed $5.8bn acquisition of Sybase, SAP anticipated software and software-related service revenue to increase by between 9% and 11% for the full year, the company said.

Following a survey of UK and Irish SAP customers, SAP user group chief executive Craig Dale commented that software as a service was becoming increasingly popular as an option. “Rightly or wrongly, SAP has been criticised for being slow to bring its SaaS offering to the market, but hopefully the result is a more robust and compelling offering,” he said.

Clearly indicating that the company is gearing up to drive its growth in the mid-market SAP has introduced a set of three Business ByDesign starter packs to cater for CRM and ERP requirements in small-to-medium size businesses and professional services firms.

The CRM pack has a fixed implementation fee of around €9,900, with each user subscription fee costing around €79. While handling salesforce automation, the pack can be upgraded to cover the entire order-to-cash process at a later date.

The ERP starter pack is aimed at organisations that have outgrown their accounting-only systems and are looking for integrated financials and analytics. The system takes about six weeks to deploy on a fixed implementation fee of €24,900 and an additional per user subscription fee of €133.

The Professional Service Provide bundle will take about eight weeks to install at a cost of €34,900 with an additional per user subscription fee of €133.

Tim Noble, managing director of SAP UK & Ireland, answered critics by claiming that it had used the extra development time for Business ByDesign to ensure it was robust and ready for volume business.  “Innovation is only innovation when it is also implemented at the customer and being used productively,” he said.

However, Zach Nelson, the CEO of rival Cloud ERP developer Netsuite, pointed out what he saw as the flaws of SAP’s new strategy: “It seems that SAP is bringing their old weaknesses - namely weak customisation and static locked down business processes - to the SMB market. It appears that they are delivering the worst of all worlds – a non-customisable solution with weak native verticalisation.  As a result, customers are forced to use what SAP defines as best practice, not the way the customer feels is best.”

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John Stokdyk, AccountingWEB head of insight
By John Stokdyk
16th Aug 2010 16:12

NetSuite's Zach Nelson breaks out the quarterly vitriol

Our sister site BusinessCloud9.com's report on NetSuite's Q2 results includes the now-traditional swipe from CEO Zach Nelson at SAP's efforts to launch its Cloud ERP suite.

Nelson quipped that Business ByDesign had  “perhaps the most stealth launch” in SAP's history. “They've made some weak announcements around Business ByDesign in so far as how to position a Cloud-based offering against the pre-Web offering that makes up the lion's share of the firm's business,” he said.
 
“They have been very vocal in scaling back expectations around BBD. One of their co-CEOs said that it will be some time before BBD will contribute significantly to revenues which is very different to what was said before. They're also cutting back on investment. Industry reports suggest a halving of development staff on the project, which is hardly the actions of a company that's supposed to be all into the Cloud.
 
“You know, if you're serious about a product launch, you don't do it in the dead of summer, in August. This is really BBD version 0.75. Even if they eventually do release a product that they think is sellable, it will still be a version one product in a market that we have been addressing for more than a decade. Beyond the product features, there's the question of the business model features. Maybe one day they'll figure out the product feature details, but then the biggeer issue is the business model which is very different.”

 

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