SAP Rides the Cloud and Small Business Trend


SAP announced today the availability of Business One as an on-demand service.


Today (March 6, 2012) SAP announced big changes in their SMB ERP strategy. The cloud/on-demand offerings from SAP have been so successful that SAP is now extending their cloud offering to Business One, which was previously only available on premise. SAP announced today that Business One will be offered both on premise and on demand.

In the last few years SAP has learned many lessons about serving the small and midsize markets. How small is small for SAP? With Business One, SAP is targeting companies as small as two to five people. If you look at numbers of businesses by size , this ultra-small segment is the biggest population. But it is also, in many ways, the segment that faces the biggest challenges in getting it right.

The world of big enterprise and the world of SMB and ultra small enterprises could not be farther apart. Channels, budgets/pricing, packaging/customizability, user interface, platforms, training, and technology support are extremely different for large-enterprise versus the SMB. It is very rare that companies master both extremes profitably. Though we don’t have numbers on product profit, SAP did share end-user sales with us — Business One has over 34,000 customers.

We are most often asked how SAP positions their three SMB offerings: SAP All-in-One, SAP ByDesign and SAP Business One. According to SAP’s blog post, Some Answers about SAP’s Products for the SME Market, ByDesign (SaaS) and All-in-One (on premise) are more focused on midsize businesses, and Business One is for smaller enterprises.

Multi-Tenant, Full Functionality

SAP is providing complete Business One functionality in a multi-tenant architecture in its on-demand offering, a substantial investment indicating that SAP is quite serious about this cloud offering. SAP said they will maintain equivalent functionality between the two modes (on premise and on demand) going forward. They have a single roadmap with the same release dates that applies to both cloud and non-cloud. Their roadmap includes new capabilities such as support for mobile capabilities and in-memory functionality.1

Novel Channel/Hosting Arrangements

SaaS/on-demand software companies almost always outsource the cloud infrastructure hosting to a third-party service provider and manage that provider directly themselves. This is done in a way that is independent of which channel partner customers use to buy the service. SAP is taking a different approach: They let their channel partners select from a pool of SAP-certified hosting providers. Interestingly, SAP is allowing the hosting provider (typically a Telco) to potentially usurp the role of the channel/implementation partner and provide the entire end-to-end service, including implementation and support of Business One. This brings up the interesting dynamic of channel partners potentially competing with hosting providers. Of course, minimizing channel conflicts has always been necessary when you have multiple channel partners of any kind. So this is not necessarily a big deal, depending on how SAP handles these potential channel conflicts. In any case, SAP made the point that most hosting providers are good at hosting, billing, and infrastructure, but do not necessarily have a core competency in software implementation, customization, and user training and support. So the Telco/hosting provider will usually prefer to partner with existing Business One channel/implementation partners for those types of services.


There is a combination of several elements from SAP that has made this different, more distributed (i.e. many providers) cloud hosting model possible:

Cloud Hosting Provider Certification — SAP has a rigorous program for certifying hosting providers. They certify the providers’ operational capabilities and procedures, hardware, and security mechanisms to ensure the availability and security of the cloud services.

Remote Support Platform (RSP) — This allows Business One partners to provide remote application management support to their customers. Further, there are hundreds of ISVs (Independent Software Vendors) that provide localization and industry-specific extensions. They can create, add, and even manage these in the cloud.

Partner Initiated Lifecycle Management — From the start, SAP recognized that small businesses often have no IT department and it is critical to have a very low cost-of-ownership and near zero administrative burden. Since 2007, they have offered a mechanism for their Business One on-premise customers: They call it ‘silent install,’ which means that the customer’s system can be configured so that new versions are automatically downloaded and installed. In order to accomplish this without problems in the field, SAP does a substantial amount of QA and simulations, with a goal of zero downtime due to problems from the upgrade. This capability was an important piece enabling SAP to support large numbers of hosting partners in a similar manner.

Business One on-demand is already available in 18 countries and SAP will be adding more soon. With this new offering, SAP has made SaaS available to its smallest customers, which we think many of them will appreciate.


1 We will continue to discuss this in our ERP for the SMB 2012. You can read ERP for the SMB 2011. — Return to article text above

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