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SAP brings Business ByDesign to Canada

The software vendor is looking for a new breed of partners to bring its on-demand ERP to Canadian businesses

After a long wait, SAP AG (NYSE: SAP) is bringing its answer to the on-demand enterprise resource planning (ERP) market to Canada with the Canadian availability of Business ByDesign.

After several years on the drawing-board and in beta testing, SAP began to roll Business ByDesign out to select geographies last year. The cautious approach can be linked to earlier missteps as well as the current hosting model, which sees all users hosted in SAP’s data centre in Germany.

Chris Horak, global vice-president, head of platform marketing for SAP, said that hosting model will broaden and evolve as the numbers grow. Right now ByDesign boasts about 250 customers, and Horak as aiming for 1000 by the end of 2011. As more capabilities and countries come on board, Horak expects more customers and partners to follow.

Along with announcing Canadian availability this week, SAP also launched a number of enhancements to the ByDesign Platform. A new feature pack, 2.6, adds support for additional mobile devices, namely Apple iPads and Research in Motion BlackBerries.

Also new is a software development kit (SDK) for Business ByDesign Studio, which will allow partners to create complete add-ons. While SAP says about 80 per cent of project-specific adoptions, such as adjusting the user interface or building forms, can be done by customer users without programming. The SDK will allow partners to addresses the needs of the other 20 per cent with project-based add-ons.

“One of the most significant things with version 2.6 is it’s becoming a platform,” said Horak. “We’ve added an SDK because we know our go to market depends on partners, and we can’t develop all the functionality ourselves. The SDK is a great opportunity for our partners to extend Business ByDesign and add value.”

SAP currently has about 50 solution resellers and 40 solution partners for ByDesign. None of the partners or the existing customers are from Canada.

Horak said he sees ByDesign having a different go to market than SAP’s other mid-market offerings. The on-demand model will rely on a central infrastructure with a minimum of customization on premise. SAP sees it as more of life-time, service-based sale, and is focused on developing the ecosystem around vertical industry solution add-ons.

Rene Giguere, vice-president of small and medium-sized enterprise for SAP Canada, said that ecosystem will be important and will see SAP looking for a new kind of partner, and not the traditional system integrators SAP has worked with in the past.

“We want partners that can ramp-up volume with telemarketing organizations,” said Giguere. “It’s a different business model. Heavy on marketing and the web. We’re looking at different business models, and some will be new partners. It will be a different channel, but I won’t say there won’t be a few partners than can be on both sides.”

SAP is currently in discussions around the compensation model for the channel with ByDesign in Canada. Generally speaking, it’s expected to be a revenue sharing model with SAP negotiating with partners on volume incentives.

Nigel Wallis, research director for IDC Canada‘s enterprise software and application solutions research group, said while SAP has had a long road in bringing Business ByDesign to market, it enters an on-demand CRM and ERP market that is still an emerging opportunity. IDC Canada data shows less than five per cent of midmarket companies in Canada have adopted on-demand ERP, and 18 to 20 per cent have adopted on-demand CRM.

“It’s still an incredibly nascent market, and with SAP validating the market by bringing forward Business ByDesign it creates opportunity for everyone,” said Wallis.Unlike competitors such as Salesforce.com and NetSuite which just offer the hosted model, Wallis said SAP has some interesting challenges entering the market as an incumbent software vendor not wanting to cannibalize its on-premise license revenue.

Wallis sees several opportunities for SAP. There are the companies that have invested in building their own in-house systems that are ready to replace their legacy systems. There’s also customers who are running one of Oracle’s legacy acquisition systems ready to upgrade but tired of waiting for Fusion. And there are also new greenfield customers who can be attracted into the market by the quicker implementation and lower training costs of an on demand model.

The challenge for SAP, said Wallis, will be building the right partner channel. It does require a different model than the traditional project-based systems integrator. Partners are the trusted advisor for their customers though, so customers will be turning to them first.

The hosting model is also something SAP will have to address in the mid-term, said Wallis. With moving applications and data into the cloud already a hard sell, doing it transatlantically adds another wrinkle. As adoption grows, more data centres closer to home would probably make sense.

Follow Jeff Jedras on Twitter: @JeffJedrasCDN.