SAP Introduces Business by Design

[Sunite]

SAP Introduces Business by Design
By Aaron Ricadela
September 20, 2007 8:41AM

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SAP has been talking for years about the need to expand beyond its core of large corporate customers, but what makes SAP's Business By Design different is how it is delivered over the Web as a service paid for by fees, rather than as a package that gets installed on a fleet of computers and which is purchased through a licensing agreement.

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   After years of meticulous engineering, internal friction, and explanations to Wall Street about how it would justify the cost, German software giant SAP on Sept. 19 unveiled a product aimed at the smaller businesses it needs to attract for growth. SAP unveiled the software, called Business By Design, at a Sept. 19 press conference in New York featuring Chief Executive Henning Kagermann.

In an interview, Kagermann called the software "a fast and affordable solution" for small and mid-sized businesses. A company with 100 users could license it for less than $180,000 year, compared with project costs that can run into the millions of dollars for SAP's traditional software for managing companies' manufacturing and back-office operations.

A New Business Plan

SAP has been talking for years about the need to expand beyond its core of large corporate customers, but what makes Business By Design different is the delivery: over the Web as a service paid for by fees, rather than as a package that gets installed on a fleet of computers and which is purchased through a licensing agreement.

That's a critical distinction in a computer industry that's shifting quickly toward software delivered online. Even so, SAP plans to take a measured approach to sales, leaving analysts wondering whether the $10 billion-a-year company has the luxury of time.

With its cut-rate price, modern Web technology, and the untangling of SAP software's notorious complexity, Business By Design would seem the antidote for an ailing stock performance. SAP's traditional big-company manufacturing market is saturated, and Kagermann must look down-market and outside the developed world for growth. SAP's shares are up just 10% in 2007, while arch-rival Oracle's stock has jumped 21% on growth from a string of acquisitions.

And after the March departure of SAP's technology visionary and chief executive heir-apparent Shai Agassi, the new product launch is SAP's chance to show it has not been left behind by the movement of more software to the Web. "With Shai gone there's now more pressure on them to show they know what the future of software will be," says Bruce Richardson, chief research officer at AMR Research.

Targeting New Customers

But after committing hundreds of millions of dollars to its launch, ironing out an overlapping project once spearheaded by Agassi, and dipping into the relatively uncharted waters of running thousands of companies' business applications from within its own data centers, SAP is proceeding just a few markets at a time. (continued...)

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