SAP faces channel challenges

ORLANDO – Some 15,000 SAP employees, partners, customers, press and industry analysts came here this week for the annual Sapphire conference. Kevin Hollis isn’t one of them.

His Concentrix Business Solutions of Markham, Ont., had been an SAP Business One partner, but in December the relationship disintegrated: Concentrix was about to merge with another southern Ontario solution provider, BAASS Business Solutions, and was told that changing the control of the company meant its contract with SAP was over. It could have reapplied for partnership, but the new owners decided it wasn’t worth it.

It’s not the only VAR that has re-evaluated its decision to carry the Windows-based Business One, SAP’s enterprise resource management product for small and medium companies, although other partners are delighted with the product and their relationship with SAP.

But it’s a sign that SAP faces challenges as it pushes two more experienced channel organizations, Sage Software and Microsoft, in the SMB space.

Over the next two days company executives are expected to outline SAP’s major strategic thrusts for the coming year, including some Business One initiatives, the next generation of the NetWeaver integration platform and plans for All-in-One, a tailored version of the full mySAP suite aimed at specific markets.

They will also continue to push customers and partners to go deeper with the services oriented architecture the company has been developing for its mySAP Business Suite, known as enterprise service architecture (ESA). Many infrastructure software companies, including Oracle and Microsoft, are rushing their own versions of services oriented architecture products to market for building software components.

In a speech here Tuesday, Leo Apotheker, president of SAP customer solutions and operations, noted some 300 companies have been early ESA adopters. “You can no longer afford to sit on the sidelines and observe,” he told the audience.

In his conference keynote his morning, SAP CEO Henning Kagermann, said mySAP 2007, which will have full ESA capabilities, will be delivered next year as promised. Also coming next year will be new versions of NetWeaver, which will become what the company calls a business process platform and a version of All-in-One on NetWeaver.

He also said the company will canvass reaction to a new rich client interface for mySAP it has been working on called Project Muse. Depending on the response it may replace the SAP client interface, he said.

Among other things, executives are expected to tout SAP’s healthy bottom line. Last month, for example, the German-based firm reported estimated software revenues had increased 22 per cent in the first quarter of the year over the same period in 2005 to 434 million euros, although taking into account currency fluctuations that dropped to 14 per cent.

But software revenues in the Americas soared 47 per cent (30 per cent adjusted for currencies) to 228 million euros.

According to Gartner analyst Yvonne Genovese, that’s “largely because Oracle’s messing things up so bad, not necessarily because SAP’s done anything great.”

Its plan to merge the ERP acquisitions of JD Edwards and PeopleSoft with Oracle E-Business Suite “will cause turmoil” with customers, she predicted, while SAP’s upgrade path for versions of its full enterprise suite is much smoother.

Most of SAP’s revenues come from mySAP, and to a lesser degree its sibling, All In One, which comes in packaged versions sold by partners aimed at verticals.

Business One revenues are increasing steadily, but she says aren’t near Microsoft’s Navision .

That tallies with estimates from IDC Canada, where analyst Joel Martin sees the leader in the small and mid-market ERP space as Sage Software, with is arsenal of MAS and Accpac applications, followed by Microsoft’s trio of Navision, Axapta and Great Plains (all of which have been renamed under the Dynamics brand). Business One follows in a group with offerings (including CRM and supply chain management applications) from Lawson Software, Intuit and Maximizer.

Since buying Business One from an Israeli company five years ago, SAP has been slowly rounding up partners, which it hopes will be encouraged with the creation last year of its first channel program, PartnerEdge.

However, that program hasn’t been rolled out fully yet in Canada, according to Michael Long, chief operating officer of Sylogist, a long-time Calgary-based SAP partner. It was listed as one of the first Business One VARs in the country but decided against carrying the product because of the effort it would take to train staff on a product different from the main SAP suite, on which it had expertise.

Concentrix, on the other hand, found working with SAP “wasn’t very positive,” recalls Hollis, now vice-president at BAASS Business Solutions.

“If there was a lack of (sales) performance they were very eager to terminate the relationship,” he said. While Business One “has some niceties, part of the challenge was the depth of the product compared to their other product offerings we had. It probably inhibited our sales efforts because we weren’t prepared to push it into environments we didn’t feel was the best fit.” A clash with their channel rep didn’t help.

When he told SAP Canada about the impending merger with BAASS, he felt it was used as an excuse to terminate the contract with Concentrix. The fact that SAP didn’t use the opportunity to discuss improving their relationship led to the new management’s decision not to pursue it.

Reached here this week at the Sapphire conference, SAP Canada spokesman Emile Lee said Concentrix was dropped as a partner because of performance matters, including failure to reach sales goals.

On the other hand, Peter van Leeuwen, vice-president of sales at Coastal Range Systems, a Business One systems integrator based in Burnaby, B.C. with offices in Alberta and Ontario, has nothing but praise for SAP.

“Our relationship with them since Day One has been fantastic,” he said in a pre-conference interview. “For me to pick up the phone and speak immediately with the vice-president of SAP Canada, that gave us confidence.”

After three years the company has 40 customers, he said, mostly fast-growing companies with multiple locations.

According to IDC Canada’s Joel Martin, SAP’s goal for Business One and All In One should be beefing up its channel. While smaller companies will look for “shrink-wrapped solutions, medium-sized firms want applications tailored to their industries.

“Their biggest challenge is developing a strong partner channel, mimicking what they do with large consultants. It comes down to industry expertise. As they go into smaller markets they have to identify partners that have industry and business expertise to implement Business One and All In One in a business process discussion with customers.”

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Jim Love, Chief Content Officer, IT World Canada

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Howard Solomon
Howard Solomon
Currently a freelance writer, I'm the former editor of ITWorldCanada.com and Computing Canada. An IT journalist since 1997, I've written for several of ITWC's sister publications including ITBusiness.ca and Computer Dealer News. Before that I was a staff reporter at the Calgary Herald and the Brampton (Ont.) Daily Times. I can be reached at hsolomon [@] soloreporter.com
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