Riding the Small and Midsize Business Wave

Feature Article | July 21, 2004 by admin

Most enterprise software vendors’ attempts to harvest the fruits of the more diverse small and midsize business (SMB) market have been futile. So it’s not surprising that casual observers might think that SAP—the king of enterprise software—would be doomed to failure as it takes a stab at this complex market.
However, when one examines SAP’s plans and execution closely, it appears that this vendor is tackling its SMB initiatives with the same type of meticulous attention to detail that has made it so successful in larger enterprises. SAP has not simply assumed that existing sales channels could sell to this vastly different market. Instead, it has carefully segmented the market and its products for targeting different SMB segments.

SAP Business One

For customers with under $50 million in annual revenues, and ten to several hundred employees, SAP offers SAP Business One, which it positions as business software for the “Fortune 500,000.” In this segment, SAP is targeting independent SMBs, subsidiaries of existing SAP customers, and external value chain constituents such as partners and suppliers. The solution provides small businesses with easy-to-use integrated financial and sales management capabilities.
True, SAP must go from zero to sixty in this market. But Business One gives customers a comprehensive out-of-the box solution, and developers can use the Business One SDK to develop tailored add-on applications for their customers that are essentially upgrade-proof.
This will enable partners to extend Business One to address industry-specific requirements. SAP has also embedded integration capabilities from Business One to mySAP Business Suite, to integrate data from Business One subsidiaries with corporate SAP entities. What’s more, SAP is off to a good start in building a quality cadre of business solutions integrators and resellers to give it a local “high-touch” SMB sales presence.

mySAP All-in-One

For SMBs with more complex business process needs—typically companies with more than $50 million in annual revenues—SAP offers mySAP All-in-One solutions. mySAP All-in-One provides turnkey versions of mySAP Business Suite, with built-in content, tools and methodologies for 18 industries and more than 80 micro-vertical markets.
Designed for rapid implementation, SAP has packaged mySAP All-in-One solutions as fixed-price, fixed-scope offerings. Industry-specific tailoring for mySAP All-in-One solutions is done without modifying source code, making it easier and cheaper for customers to maintain and upgrade them. Customers can buy mySAP All-in-One to install and manage internally, or through one of SAP’s hosting partners, who can run and manage it for them.
SAP is fairly well positioned in this segment right off the bat. The vendor’s approach of creating pre-configured, industry-specific solutions has already struck a positive chord in the mid-market, as evidenced by the over 4,000 existing mySAP All-in-One customers.
And, SAP continues to forge high value-add partnerships with ISVs and SIs. SAP is aiming for quality, rather than quantity, in its partner channel, and has created incentives for partners to build new vertical and micro-vertical products on top of its solutions.
SAP plans to use its strong position in large corporate accounts to drive sales into their small and midsize divisions and subsidiaries, and to suppliers and partners in these companies’ external value chains. SAP can integrate its enterprise products with its SMB offerings to streamline collaboration and business processes between headquarters and smaller corporate and external entities.

SAP strengths in the SMB market

Of course, SAP faces some significant challenges, particularly in the lower end of the SMB market. SMBs are likely to be unaware of, or be intimidated by, the vendor’s reputation as being an enterprise solutions provider, and assume that its products will be too costly, complex or cumbersome for them.
The vendor also faces serious competition, most notably from Microsoft but also from SMB mainstays ranging from Intuit to the Sage Group. Not to mention the swarm of smaller vendors that cater to SMBs, and to specific industry niches, and that have the advantage of a singular focus.
However, overall, we believe SAP’s strengths — particularly in the mid-market and in divisions and subsidiaries of its corporate enterprise customers — along with its capacity for focus and execution and its growing list of strong channel partners, put SAP on track to achieve its SMB market objectives.

Susan Twombly

Susan Twombly

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