The Return of Business ByDesign and the Future of the On-Demand ERP Market

It’s tough being SAP’s forthcoming Business ByDesign in an unforgiving market. Having been launched and then pulled back, re-designed and then offered back to a market that is a little more jaded, a lot more cautious, and desperately trying to sort out what’s happening in this global recession, the ByD team is facing an almost unprecedented quantity of challenge, skepticism, and even ridicule.

The rumor mill has been most unkind of late: Rumors have been flying that ByD is going to miss its latest release date, that its marketing plans are DOA, and that SAP is on the verge of laying an egg of colossal size and impact.

The rancor surrounding the July 31 release date of the new ByD reflects a complex history inside SAP and the on-demand market that has clouded a lot of otherwise objective analysis about its prospects, and how important ByD’s success is not just for SAP and its customers, but for the on-demand market as a whole.

Let’s start with some rumor control. I spoke recently to Doug Merritt, the SAP EVP tasked with bringing ByD and the other on-demand products to market. Doug confirmed that ByD has slipped a whole two weeks in its release date, from mid-July to the end of July. And, while QA could still conceivably find something that would delay its release further, at this point that’s a pretty long shot. NBD.

As for the GTM strategy being DOA, it’s actually alive and well, and in a deliberate go-slow mode. Deliberate is the operative word: SAP is trying to do the ByD rollout slowly and carefully. And differently, as evidenced by this YouTube ad.

The ad is worth watching for two reasons. First, it’s really different than most of what you see SAP doing in the marketing of its products. Refreshingly different. And that includes taking a swipe at “heavy duty” ERP in the process, despite SAP’s deserved reputation as one of the major purveyors of  heavy duty ERP.

The second is that it’s amazingly effective: a posting on this video in the Enterprise Irregulars bloggers group created a thread that has been bouncing back and forth across ByD and related topics for two days. You might think the ad is silly, trivial, pitiful, refreshing, courageous, or clever, but it does get people thinking, even a group of professional skeptics and curmudgeons like EI.

The other point worth addressing about ByD is that its initial entrance to the market in 2007 came in the midst of a not-so-private battle between ByD’s main advocate, Peter Zencke, and fellow board member Shai Agassi, who wanted the concepts of ByD – model-driven, on-demand ERP – to be embodied in the main SAP suite instead of in a completely new, mid-market product. That battle at the top eventually led to Shai’s departure – Zencke left shortly thereafter – but it left a bad taste in many SAPers’ mouths for the product. The fact that it failed to be economically viable as an on-demand product in its initial release further fueled the ire of its detractors.

This internal “polemic”, to be polite about it, reminds me of what Microsoft has been going through in the years since Ray Ozzie first discussed Software + Services as the new direction for Microsoft. Even an outsider can imagine the screaming inside Microsoft about such a radical shift and what it would mean to the king of the desktops. The fact that Steve Ballmer felt compelled three years later to give his now-famous “We’re All In” speech is testimony to how hard it’s been internally for Microsoft to grapple with this paradigm shift.

And the fact that “We’re All In” has become a catch-phrase repeated, mantra-like, at every Microsoft event I’ve been to – it’s even a tag line on Microsoft email messages – speaks not just to the level of commitment at the top of Microsoft but to the acknowledgement that getting everyone singing from the same hymnal requires lots and lots of practice.

SAP is facing a similar dilemma with ByD. Everything about it – on-demand but not true multi-tenant, requires a major channel that doesn’t exist yet, the potential for cannibalization of other products, the sordid release history, the bad blood inside SAP – means that SAP has a similar requirement to make sure that everyone is walking the walk and talking the talk.

With so much at stake, it’s clear that ByD will be one of the great inflection points in the history of enterprise software, and in many ways its success or failure will define the future of on-demand enterprise software for some time. ByD isn’t just a gamble that SAP can create a product like ByD, it’s also a gamble that there is actually a market out there for what ByD represents. This fact is hardly a given: NetSuite’s struggles to meet its market potential has given many proponents of on-demand ERP pause, as has Workday’s slow slow progress towards a critical mass of customers.

Of course there is, among others, but I would argue SFDC really hasn’t succeeded in defining a major market opportunity outside of SFA, while everyone else is busy creating markets that aren’t necessarily of the size and scope that means on-demand ERP has really arrived.

If SAP can pull off ByD, that success will create a huge opportunity for others, including NetSuite, by legitimizing a market that to date doesn’t really exist as a billion-plus dollar opportunity. If SAP fails, I fear that this much-needed capability will languish on the sidelines another four or five years, and customers will be all the poorer, literally and figuratively, for that failure.

So, baring some unforeseen glitch, ByD re-enters the market in one short week. Its success or failure will hinge on a number of factors, most important of which will be the SDK that comes out at the end of the year. This is going to be one of the most closely watched software rollouts in a long time, with its repercussions felt across the industry for years to come.

Alea jacta est.

5 Responses

  1. […] Joshua Greenbaum with a follow-up on his ByDesign / SaaS related post from last week. Interestingly enough, he also sees the strong impetus the BYD SDK will have, although I miss the community aspect in all of the BYD posts I find. Also see my own post “ByDesign? ByCommunity!” on this. […]

  2. […] prospects for SAP’s prospects look good, starting with Business ByDesign: In addition to its standing as an ERP on-demand product for the mid-market and the subsidiaries of […]

  3. […] prospects for SAP’s prospects look good, starting with Business ByDesign: In addition to its standing as an ERP on-demand product for the mid-market and the subsidiaries of […]

  4. […] topics of note in a day crammed with noteworthy topics: Vishal also promised that Business ByDesign would eventually be running on Hana, as would SAP BusinessOne, though no precise timetable was […]

  5. […] On-demand applications: SAP is in the market today with its Business ByDesign SME suite, and a pending ByDesign SDK that will allow partners and customers to build unique […]

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