SAP is “waiting for more guinea pigs” before releasing its SaaS-based ERP system, BusinessWeek reports and there is “still no ship date” for Business ByDesign, according to InformationWeek.

This is the same thing we’ve been hearing since SAP first announced its ambitious plans to develop and release an on-demand ERP system and have 10,000 customers by 2011. Those plans have since been scaled back significantly. SAP currently has 90 customers trying out the service. Two years ago it had 20 customers.

And while it’s important to hold software vendors to statements and promises they’ve made in the past, the fact that SAP underestimated the complexity of delivering a profitable on-demand ERP system has been well reported.

The fact that some customers can use Business ByDesign and it also needs work was reported on SearchSAP.com in July. The handful of beta testers we’ve heard from at SearchSAP.com (and those SAP has put us in touch with) have also had generally positive reviews of the product.

This is a similar sentiment to the a few nuggets of information from the event and subsequent reports.

As Managing Automation reports, “it’s two years later and SAP is still laboring over Business ByDesign,” yet some early customers are pleased. Dennis Howlett offers similar analysis that while the product is not generally available, and work remains to be done, there are users and the product is improving.

So, if there are positive reviews and SAP is making progress, is the company being particularly cautious with Business ByDesign? SAP certainly has had no problems releasing complex software in the past. The rapid pace of innovation in the SaaS market in particular in and competitive pressure in general would dictate sooner is better than later. SAP’s early estimates of 10,000 customers suggested that they had confidence in how quickly they could develop and sell the product.

So then, what is the wait?

ByDesign is already out on a trial basis, but it hasn’t picked up as much traction as expected. At Cebit, SAP revealed that ByDesign had 150 customers. By contrast, SaaS market leader Salesforce.com claims 41,000 customers.

An SAP developer speaking to Handelsblatt claimed (in German) that ByDesign was suffering from performance issues and bugs that would delay general availability until perhaps the end of 2009. That gives Salesforce.com, NetSuite, and other SaaS vendors another eighteen months to keep dominating a market that none of the majors (including SAP, Oracle, and Microsoft) have been able to crack.

Demir Barlas, Site Editor

In SAP’s earnings press conference today, the company put some numbers to the impact it expects Business ByDesign to have. CEO Henning Kagermann said SAP hopes to grow the Business ByDesign customer base from the current 150 to 1,000 by the end of 2008. Perhaps more surprising, he said that SAP sees 10,000 customers and $1 billion in “revenue potential” for the product by 2010.

Is this realistic? In SAP’s 2007 earnings filing, it reported $182 million in revenue from “subscription and other software related service revenue.” Even if all of that were attributable to Business ByDesign, which it is obviously not, it would represent a 75% compound annual growth rate (CAGR) for BBD revenues to reach $1 billion by the end of 2010.

SAP will be investing €175 – €225 towards the effort in 2008, so it is clear that the company is committed. But it also appears to have its work cut out for it.

SearchSAP.com editorial staff

SAP is betting the hard on the SMB market, but Microsoft certainly isn’t about to stand down. Indeed, Microsoft Business Solutions head Kirill Tatarinov recently told Reuters that he’s eager to meet SAP’s new Business ByDesign in the field.

“There are many organizations that may not use Dynamics just yet, but many are already using the infrastructure that Dynamics is built on,” Tatarinov said.

What makes this battle for the SMB space so interesting is the different strengths of the key players. Microsoft has a strong channel and beach heads everywhere, while SAP is (generally) technically solid. Oracle’s fierceness in and of itself goes a long way, and the smaller niche players have the advantage of specialization in their respective fields — which, in combination with their inherent nimbleness, may help keep the big bullies from stealing their lunch money. Here’s to an interesting 2008!

Matt Danielsson
Editor

CEO Henning Kagermann kicked off the much-anticipated, whirl-wind event with an almost-cameo 10-minute keynote.

“It is the most important announcement of my career I’m making today,” the not-usually-prone-to-hyperbole Kagermann announced to a packed Nokia Theatre in Manhattan.

Some details we’ve learned so far:

• Pricing will be $149 per user per month for a minimum of 25 users per company. A value pack-type option of a limited version will be offered at $54 for a set of five users.
• Designed to slot in between Business One and All-in-One in companies with 100-500 users.
• The product is currently in the pilot customer stage in the US.
• For more information, SAP set up a Website at www.sap.com/sme

Peter Zencke, an SAP board member kicked off his portion of the program by echoing the thoughts of many in the room: “Yes it was a journey.”

In fact, the real meat of the event should be Zencke’s keynote which promises to have “product demonstrations.” We brought our digital camera, so if lighting allows, we’ll have some screen shots.

Then it’s on to the customer panel, which is scheduled to run for all of 20 minutes before Léo Apotheker’s 10 minute keynote.

If no big news breaks, we’ll plan on posting later today with a wrap-up of the customer panel, Zenke and Apotheker’s thoughts, and said screen shots.

Jon Franke
News Editor