SAP Business One has been on the market for approximately 18 months. Is it possible to assess its performance in the interim?
The demand for SAP Business One is extremely high. We are getting positive feedback from the market, in particular as regards usability, i.e. the ease of use, and fast access to data. SAP Business One allows the customer to gain an overview of the situation in his company very quickly and easily. At the same time he saves on costs and personnel to operate the system. The structure of the solution has been well received by customers. It is now possible for an SMB to access all data quickly thanks to the integration of business processes. A further benefit is the short implementation time. Installation can be completed in approximately ten to fourteen days. The length of the implementation time depends first of all on the extent of the legacy data that must be transferred. There have been cases of customers who were able to go live within four to eight hours.
So SAP Business One is a success, although initially only smaller markets were localized. Why weren’t versions for the large markets developed first?
Business One was first conceived by the Israeli company TopManage and was originally only localized for Israel, Cyprus, Poland and Panama. After TopManage was taken over by SAP, new country-specific versions were quickly added e.g. Germany, Switzerland, Austria, the Netherlands and the Nordic countries as our competitors have a very strong presence there. A version for the American market has also been available since April. Versions for Italy and Spain, both countries with a classic SMB culture, Portugal, France and Sweden will be localized at the end of this year. We have already had a lot of success in these countries with mySAP All-in-One. We have also been supplying the British market since the summer. So we really do cover the most important markets in Europe. A Chinese version of the software was also launched recently. By the end of the year, Australia and Canada will be added, meaning SAP Business One will be available in more than 22 countries by the end of 2003. Naturally there are still countries on the agenda for 2004. Russia is an important strategic market for example. And Japan, which is a classic SMB market, will be able to benefit from localized SAP Business One at the beginning of next year.
What criteria must be taken into account when localizing the software?
In the first stage, a country-specific version of SAP Business One must cover local tax and legal requirements. SAP delivers SAP Business One as the basic product, which meets the fundamental requirements of a particular country and market. We can’t and don’t want to develop in this product all the particular specifications that someone in this market wants. Developing configurations to meet the needs of an industry or customer is the role of our partners. The partners are local specialists who know what requirements SMBs need to satisfy in their relevant companies and sectors.
You’ve mentioned the importance of the partners. How many partners are currently selling SAP Business One?
The partner network is still under construction, but we will be working with more than 300 partners worldwide by the end of the year. We currently have 60 partners in Germany. When choosing partners, SAP places more value on quality rather than quantity. Only companies that fulfill a series of criteria laid down by us have a real chance of becoming a partner. A potential partner must have experience in business application marketing and project management. The partner will ideally have at least ten to fifteen employees in order to provide efficient customer support at all times. The partner also has to make an initial investment. He has to have SAP qualify and certify four employees trained in support/consulting, implementation and sales. The expertise acquired in this way is very important to guarantee top quality coupled with fast and efficient implementations. This is essential since SAP Business One is not an out-of-the-box product requiring no follow-up service after installation. Nowadays, even SMBs require customized processes.
But do many customers actually use SAP Business One without modifications or add-ons?
Experience has shown that initially two thirds of customers use the product in its standard configuration. This aspect also depends on the partners’ expertise. A partner may well sell the product to his first customer without any modifications. However, as he gradually builds up his expertise, the partner can combine his knowledge of the industry with the possibilities offered by SAP Business One and therefore verticalize the product in line with the customer’s requirements.
The partner network has a special role to play in terms of knowledge transfer. How is this partner network organized and how does this structure support information exchange between partners.
There is a clear model for the network, with SAP being at the top of the pyramid. Solution centers and service centers are one level lower in the organizational structure. By solution center, we mean a company that develops its own add-ons and offers these in combination with SAP Business One. Sometimes these solution centers have their own small network of sales and service partners. A service center provides advisors for smaller SSPs that do not have sufficient human resources. Service centers and solution centers support local SSPs, which are lower in the hierarchy and implement solutions for customers’ on the ground. Larger SSPs receive support directly from SAP. This hierarchical model has not yet been implemented in Germany, Switzerland or Austria, where the respective national organizations supervise the partners. However, service centers or solution centers are in the pipeline for Germany. In the USA, SAP works in close cooperation with American Express which is very active in IT there and acts as a solution center. The purpose of the partner network is to address customers correctly on the ground, to communicate with them and to ensure fast, friendly service delivery. On a global level, we have an independent software vendor management system that publishes partners’ solutions in the Solution Network of the Service Marketplace. The Solution Network gives an overview of the range of solutions at a glance, allowing a partner looking for a solution to find the relevant information himself. If there is interest in offering a solution in another country, the country’s ISV Manager and the Global Manager coordinate the information exchange and completion of the process between the partners.
To what extent are the partners involved in the development of SAP Business One?
As far as the country-specific basic functions are concerned, the product management team from SAP Business One has regular contact with the countries and – via these – with the partners. The partners’ requirements find their way into worldwide product management via the national organizations. The product management team is in contact with the countries and the partners and conducts discussions with customers in order to evaluate their needs and wishes. We are currently in the process of creating Partner Advisory Boards in the countries. This body will discuss both products and marketing issues so as to harmonize the partners’ needs and expectations with SAP’s interests.
And finally, how do your partners benefit financially from this cooperation?
Our goal is to establish the most profitable partner channel in the world. Naturally the margins for SAP Business One are not extremely high. Fast implementations and the simple usability of SAP Business One are pushing down the revenue from service provision. We expect a partner to sell at least ten licenses in the first year. Naturally his margin is also dependent on the number of contracts concluded each year. If only ten licenses are sold, then the first year is still an investment for the partner. A partner has to sell roughly between 15 and 18 SAP Business One licenses each year in order to break even. Therefore, the commitment only pays off for the partner when he sells in as large numbers as possible. This is why we have set a maximum number of partners for each country, who can provide customers with full support over the full territory. This reduces the level of competition between partners, meaning that all SAP partners will make profits in subsequent years. We won’t make the same mistake as our competitors, who had up to five partners in a region all fighting over the same customers. Admittedly it is the customer who benefits in this sort of situation, but as a result, the partners were achieving lower and lower margins, were no longer profitable and eventually had no motivation to sell the product.