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Article
SAP's ERP SMB Story

SAP has many products that target small and mid-size businesses. Here's how to figure it out.


Full Article Below -
Untitled Document

The Journey to the Smallest Enterprises

Though not alone in this quest, SAP has been on a ‘stretch’ mission: On one hand, they handle ever more complex extended enterprises and are reaching mega-cloud status in supply chain. Yet on the other hand, they reach out to ever smaller enterprises in the SMB.1 Historically there have always been SMB enterprise solutions (ERP for the SMB’s). But with the Fortune 2000 market saturated, there is only one territory for SAP to conquer.

One note on the SMB market: ChainLink has attempted to further ‘fine grain’ the method we use to identify fit for the solutions providers. SMB is too big a category—even separating the small from the mid-sized is insufficient to help buyers gain the right perception. So in this series—ERP for the SMB 2012—we will provide further granularity. You will see this reflected in the charts below.

SAP for the SMB

Through both acquisition as well as adhering to SOA (service-oriented architecture), SAP has created several different product offerings for the market. Many of these leverage, through SAO extensibility, SAP’s ERP functionality. Some are more standalone packaged applications without extensibility. However, ERP is still not a fixed application, and requires some molding or customization and hand-held implementation. So part of SAP’s strategy is to enable and encourage a partner network to provide the attention units and regional and industry expertise required to successfully implement ERP in the SMB customer base. These partner-rich networks are the basic modus operandi in the SMB; other ERPs adopted that route from their early days.2

In 2012, SAP has made changes in the product offerings, how they are sold the market, how they are priced, what their delivery platform is (on premise, hosted, cloud), and who sells and implements the solution.

SAP Products

Below is an overview of the products by company size, business model, and activities. Figure 1 compares the products by company size and some business model attribute.

Companies change a lot as they grow and they seek the ability to have a solution grow with them, without the disruption of tearing out and replacing it with a new ERP. This is part of the key to growing businesses.3

  All-in-One Business One Business ByDesign SAP ERP 6.0

              Figure 1 SAP’s ERP for the SMB

In addition, the industry and process are also critical, i.e. professional service vs. manufacturing, for example. So today’s ERP companies often have separate products for these.

All-in-One

All-in-One is the most extensible solution for the mid-market. This solution takes advantage of SAP ERP modularity as well as being integrated to most of SAP’s other product lines for analytics, supply chain etc.

Solutions are specific for each industry such as Retail; Wholesale Distribution; Manufacturing (one oriented to process, the other to discrete); Professional Services; Financial Services; Public Sector; and Energy, with best practices embedded within these solutions. Partners are encouraged to add more to the SAP ‘family of capabilities.’ Today, SAP has 24 ‘preconfigured’ industry templates which also can be oriented by country-specific accounting practices.

Through Netweaver, All-in-One customers can access SAP or other solutions. All-in-One customers can add on BusinessObjects Edge, Hanna, StreamWork (social CRM), Sybase Mobile, SRM 7.0 products, and more. An existential question here is should you get All-in-One vs. SAP ERP? All-in-One is sold through partners, and ERP is sold direct. Pricing, of course is important. But for small businesses, the ease of implementation is also a big factor; therefore SAP has made a serious effort to create templates and configuring for easy on-boarding. That means that mid-market customers who, in days past, would have been confronted with an R3 option can now choose the easier to implement, and more attractively priced All-in-One.

Business One

Business One, an out-of-the-box approach, is available for the smallest enterprises (or subsidiaries of larger ones that need their own local accounting, etc.) Basic enterprise functions such as accounting, CRM, operations, sales, marketing, service, and warehousing are all included.

Localization is key with the ‘box-centric’ SMB ERPs like SAP, Syspro and Sage. SAP has over 40 local versions that reflect the accounting and regulatory standards required to operate in the customer’s country; yet they have a multi-currency capability. 

Here again, the partners play a major role with many prebuilt add-ons that meet SAP’s standards and can provide extensions. With them, even small businesses can have some customization without paying for and supporting custom code. Most small businesses wind up spending more than just the cost of software. The labor costs for implementation are anywhere from $10k to $200k, exclusive of ongoing maintenance, which is why they loathe upgrading, even as they fall farther behind the latest technologies. This is a perfect lead-in to why cloud has become so attractive to smaller businesses. Business One is delivered through partners. And SAP will host, reducing the issues associated with IT management for the small firm.

SAP has a partner finder on their web site for small businesses to find local partners to talk to.

Business by Design

Cloud-only solution. ByDesign is a real powerhouse competitor in the cloud market and an important part of SAP’s strategy to become a $5B cloud business. Here is the competitor to the cloud-only players such as NetSuite and Plex. Though a little ambiguous (there’s a lot of ‘we can configure it your way’), customers can have a basic ERP and capture the needed add-ons such as CRM, supply chain, advanced financial modeling, service management, or analytics, and just pay for what is needed. 

Years ago we talked about users wanting just the components of software they needed without paying for what they would not use. So here it is. Most of the configurable solutions providers now provide this. And this is part of the difference between cloud solutions and hosting. With hosting, you still own a package. In on demand, you are ‘renting’ what you need, with quiet, non-disruptive upgrades; however, you pay for usage. The perpetual payments of on premise and hosting also show up in the ongoing support costs, which are 18% to 26% of your purchase price. So when contemplating your ERP budget and looking at traded-offs, this needs to be considered. (You can read more about SaaS pricing in this issue of the brief.)

The Architecture

Today, major ERP firms conform to a stack that includes the base ERP solution, middleware, add-ons, and gateways out to the world (EDI, MFT, cloud network/trading partner solutions). 

               

Figure 2: SAP’s ERP stacks

A fundamental choice in ERP is its delivery method. Then the stack often becomes optional. The larger enterprise solutions offer more choice and more complexity than the out-of-the-box approach.

Though Business ByDesign is the only explicit cloud-only solution, the on-premise option can always be hosted. Most SAP partners do have hosting services for their customers. Thus One, or All-in-One can be hosted.

Pricing

If you want to contemplate where things have come in the last few years, think about the million- to billion-dollar budgets of ERP implementations of the past, and compare that to SAP’s website with pricing for their SMB. Modular pricing and per month options can keep the ERP software under a $1k per month price tag or even lower—$89 per month module price. Of course there are limitations on usage, so large firms will not be able to skinny down and fit in, much the same as Cinderella’s stepsisters could not squeeze into her dainty shoe.

But these solutions do put SAP squarely in the middle of the hotly contested SMB market—with a way to succeed.

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1 Statistically there are greater numbers of small and mid-size firms than those categorized as ‘large enterprise.’ -- Return to article text above
2 Examples are Epicor’s product family, Syspro, SAGE, Microsoft and Infor’s product family. -- Return to article text above
3 You can hear the story from these SMBs on this webinar:  (with a high tech manufacturer and small retailer), and at YouTube’s DiscounTechnlogy, as well as Emerge Medical (requires login) -- Return to article text above


To view other articles from this issue of the brief, click here.




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