At the National Manufacturing Week (NMW) event, held February 23-26, 2004 in Chicago, Illinois (US), SAP AG (NYSE: SAP), the leading provider of enterprise applications, announced the availability of new industry-specific solutions for small and midsize manufacturing companies, with the aim of extending its leadership as a provider of solutions for an even broader range of companies from small enterprises via the mid-market to the world's industry leaders.
Part One and Part Two of this note details the announcements.
The fact that the lower-end of the enterprise applications market is the next frontier and a promised land for all small, medium, and large enterprise vendors alike, has long not been news. During economic slowdowns, the larger corporations will likely curb their IT spending to a degree, whereas their smaller counterparts will all but completely recoil from any spending. However, with a recovery in the offing, one should expect a built-up need for enterprise systems from these companies that will have weathered the storm and that now need to bolster their competitiveness and agility in the market. Still, the willingness of smaller enterprises, which as a rule lag behind their larger brethren in technology innovation, to go for more sophisticated technology that is beyond the rapidly outmoded two-tier client/server architectures in the best case scenario, or, in the worse case scenario, beyond the all-too-common dispersed islands of information on Microsoft Excel or other spreadsheets, Access-based reports and queries, or managers' notepads and "post-it" notes, does not guarantee any vendor an easy ride. For a detailed discussion see Cookie-Cutter Solutions Won't Cut It with the Mid-Market.
For that reason, SAP has responded by acquiring a more suitable, genuine product for the segment, while it is not unlikely to see the other ERP giants follow suit in the future. This latest SAP announcements should be regarded as sensible moves, although somewhat belated. Nonetheless, these moves should confirm SAP's commitment to smaller customers through the unrelenting focus and repeated attempts of delivering better-attuned offerings. A less known fact might be that almost two-third of all SAP's installations are enterprises with less than $500 million (USD) in revenues. Given SAP's predictions of a healthy revenue streams from all the sectors including SAP's sweet spot of large corporations, we tend to believe that SAP SMB drive is a well thought-out, proactive drive into a new market rather than a knee-jerk reaction to a slumping stronghold market. Over last year or so, SAP has not only formed a division dedicated to SMB, but has also created the analyst relationship and public relations team that focuses only on informing the industry influencers about SAP's relevant initiatives in the segment. During the same time period, the marketing budget for the segment has increased tremendously, which also vouches for a long-term endeavor.
Also, having resorted to an acquisition, which has not been a common SAP practice in the past, may mean the admission of failing to first successfully capture the global SMB market , SAP will have "killed two birds with one stone" with SAP Business One. First, an acquisition typically shortens the time-to-market, as proven by a number of functional scope enhancements in a short time frame, and second, SAP will have tackled the small business market with a product designed specifically for that market instead of repeating its previous attempts of fitting a "square peg into a round hole," with functionally-depleted versions of mySAP Business Suite or by even using the older R/3 suite or their pre-configured templates.
Furthermore, SAP Business One provides a simple product that can be more easily sold and supported by SAP's channel partners, particularly by being technologically advanced from the ground up and unburdened by the need for migration paths from its former incarnations. Before SAP Business One, there had hardly been a differentiating product among the likes of Microsoft Business Solutions (MBS) Great Plains, MBS Navision, Best Software's MAS 200 or Exact Macola, to name a few. While the advantage of these products is their longevity in the market and large install bases, the liability are their numerous little idiosyncrasies, which make it more difficult to bring the technology forward for these vendors, users and resellers alike. Further, SAP channel partners will also benefit from touting SAP's leadership position, brand recognition, and viability, albeit this will become more handy when competing with other mid-market incumbents other than MBS and Sage/Best, whose viability and recognition remain spotless.
However, where SAP will challenge or at least make things more interesting for these SMB juggernauts is their vulnerability in terms of integrating disparate product lines (i.e., general ledgers) on disparate technologies. Neither of these solutions is functionally complete enough at this stage, and the customized code for extension is often not owned by the vendor but rather by the partner, which SAP tends to avoid with the more complete, from the ground up designed SAP Business One solution. Microsoft will additionally have to deal with users' wariness of the technology lock-up bundled with ongoing security issues andd unresolved licensing and upgrades issues, which may eventually decide to diversify their product portfolios.
Further, as a new paradigm shift, SAP Business One software features natively the SAP Enterprise Portal's drag and relate capabilities obtained in its acquisition of TopTier in 2001 (see SAP Acquires TopTier To Further Broaden Its Horizons). A user is, for example, able to add a data field to an invoice, and then drag and drop the newly created data field into another part of the system, which should be able to produce new reports based on the data field. Another example would be selecting an available item from the inventory list, and then dragging and dropping, for example, its description field to the "Accounts Payable Invoices" function within the "Purchase" module. The resulting new pop-up window will list every invoice from every supplier of the item so far. These examples of instant analysis and reporting, easy access to real time business data and proactive business management are a quantum leap compared to the above traditional accounting solutions that have been written for accountants by accountants, and where other "non-bean-counting" staff members have a hard time discerning useful information without a serious training and familiarity with pesky reporting facilities, or, worse, needing to export inordinate amounts of data to Excel, and trying to make sense out of tweaking it.
The product also features embedded business process management or improvement (BPM/BPI) integration to mySAP Business Suite products (e.g. BI, Portals, Exchange Integration), and an SDK facilitating integration of third party software and services with SAP Business One, since it utilizes SAP Business One business logic and has the ability to read and write to and from each object in the system, and a simpler development and maintenance of integrated processes. It also provides analytical tools to gain insight into an organization's operations, online alerts for collaborative event tracking and problem solving (via a "management by exception" approach that relies on predefined business rules, and which monitors data for certain conditions, such as, a minimal allowed profit margin for a sales quote), and customizable reports that give companies the information they need in a format that allows them to brand their business. These reports solve the drag and relate queries' shortcomings of not being able to be saved and reused later, instead serving as a good starting point for more detailed reports.
Therefore, the solution is not a reconfigured or "watered-down" version of its larger sibling mySAP Business Suite, but rather it is based on TopManage, a product developed and marketed by the former Israeli software company TopManage Financial Solutions LTD, which SAP acquired in March 2002 and integrated into its business unit for the SMB market. At the time of its acquisition in 2002, TopManage had nearly 800 customers in Europe, and it offered financials, distribution, and CRM functionality and supported English, Spanish, and Hebrew versions, along with the updated pertinent figures for the SAP Business One successor that were mentioned earlier. The still newcomer product in the US has for some time been successfully sold in the lower-end of the European market, since it provides small and medium businesses with an integrated family of enterprise applications tailored to the specific needs of sales-driven companies, while the manufacturing prospects will be addressed through the SoftBrands' alliance. For details on this alliance, see Part One of this note.
Part One and Part Two of this note details the announcements.
The fact that the lower-end of the enterprise applications market is the next frontier and a promised land for all small, medium, and large enterprise vendors alike, has long not been news. During economic slowdowns, the larger corporations will likely curb their IT spending to a degree, whereas their smaller counterparts will all but completely recoil from any spending. However, with a recovery in the offing, one should expect a built-up need for enterprise systems from these companies that will have weathered the storm and that now need to bolster their competitiveness and agility in the market. Still, the willingness of smaller enterprises, which as a rule lag behind their larger brethren in technology innovation, to go for more sophisticated technology that is beyond the rapidly outmoded two-tier client/server architectures in the best case scenario, or, in the worse case scenario, beyond the all-too-common dispersed islands of information on Microsoft Excel or other spreadsheets, Access-based reports and queries, or managers' notepads and "post-it" notes, does not guarantee any vendor an easy ride. For a detailed discussion see Cookie-Cutter Solutions Won't Cut It with the Mid-Market.
For that reason, SAP has responded by acquiring a more suitable, genuine product for the segment, while it is not unlikely to see the other ERP giants follow suit in the future. This latest SAP announcements should be regarded as sensible moves, although somewhat belated. Nonetheless, these moves should confirm SAP's commitment to smaller customers through the unrelenting focus and repeated attempts of delivering better-attuned offerings. A less known fact might be that almost two-third of all SAP's installations are enterprises with less than $500 million (USD) in revenues. Given SAP's predictions of a healthy revenue streams from all the sectors including SAP's sweet spot of large corporations, we tend to believe that SAP SMB drive is a well thought-out, proactive drive into a new market rather than a knee-jerk reaction to a slumping stronghold market. Over last year or so, SAP has not only formed a division dedicated to SMB, but has also created the analyst relationship and public relations team that focuses only on informing the industry influencers about SAP's relevant initiatives in the segment. During the same time period, the marketing budget for the segment has increased tremendously, which also vouches for a long-term endeavor.
Also, having resorted to an acquisition, which has not been a common SAP practice in the past, may mean the admission of failing to first successfully capture the global SMB market , SAP will have "killed two birds with one stone" with SAP Business One. First, an acquisition typically shortens the time-to-market, as proven by a number of functional scope enhancements in a short time frame, and second, SAP will have tackled the small business market with a product designed specifically for that market instead of repeating its previous attempts of fitting a "square peg into a round hole," with functionally-depleted versions of mySAP Business Suite or by even using the older R/3 suite or their pre-configured templates.
Furthermore, SAP Business One provides a simple product that can be more easily sold and supported by SAP's channel partners, particularly by being technologically advanced from the ground up and unburdened by the need for migration paths from its former incarnations. Before SAP Business One, there had hardly been a differentiating product among the likes of Microsoft Business Solutions (MBS) Great Plains, MBS Navision, Best Software's MAS 200 or Exact Macola, to name a few. While the advantage of these products is their longevity in the market and large install bases, the liability are their numerous little idiosyncrasies, which make it more difficult to bring the technology forward for these vendors, users and resellers alike. Further, SAP channel partners will also benefit from touting SAP's leadership position, brand recognition, and viability, albeit this will become more handy when competing with other mid-market incumbents other than MBS and Sage/Best, whose viability and recognition remain spotless.
However, where SAP will challenge or at least make things more interesting for these SMB juggernauts is their vulnerability in terms of integrating disparate product lines (i.e., general ledgers) on disparate technologies. Neither of these solutions is functionally complete enough at this stage, and the customized code for extension is often not owned by the vendor but rather by the partner, which SAP tends to avoid with the more complete, from the ground up designed SAP Business One solution. Microsoft will additionally have to deal with users' wariness of the technology lock-up bundled with ongoing security issues andd unresolved licensing and upgrades issues, which may eventually decide to diversify their product portfolios.
Further, as a new paradigm shift, SAP Business One software features natively the SAP Enterprise Portal's drag and relate capabilities obtained in its acquisition of TopTier in 2001 (see SAP Acquires TopTier To Further Broaden Its Horizons). A user is, for example, able to add a data field to an invoice, and then drag and drop the newly created data field into another part of the system, which should be able to produce new reports based on the data field. Another example would be selecting an available item from the inventory list, and then dragging and dropping, for example, its description field to the "Accounts Payable Invoices" function within the "Purchase" module. The resulting new pop-up window will list every invoice from every supplier of the item so far. These examples of instant analysis and reporting, easy access to real time business data and proactive business management are a quantum leap compared to the above traditional accounting solutions that have been written for accountants by accountants, and where other "non-bean-counting" staff members have a hard time discerning useful information without a serious training and familiarity with pesky reporting facilities, or, worse, needing to export inordinate amounts of data to Excel, and trying to make sense out of tweaking it.
The product also features embedded business process management or improvement (BPM/BPI) integration to mySAP Business Suite products (e.g. BI, Portals, Exchange Integration), and an SDK facilitating integration of third party software and services with SAP Business One, since it utilizes SAP Business One business logic and has the ability to read and write to and from each object in the system, and a simpler development and maintenance of integrated processes. It also provides analytical tools to gain insight into an organization's operations, online alerts for collaborative event tracking and problem solving (via a "management by exception" approach that relies on predefined business rules, and which monitors data for certain conditions, such as, a minimal allowed profit margin for a sales quote), and customizable reports that give companies the information they need in a format that allows them to brand their business. These reports solve the drag and relate queries' shortcomings of not being able to be saved and reused later, instead serving as a good starting point for more detailed reports.
Therefore, the solution is not a reconfigured or "watered-down" version of its larger sibling mySAP Business Suite, but rather it is based on TopManage, a product developed and marketed by the former Israeli software company TopManage Financial Solutions LTD, which SAP acquired in March 2002 and integrated into its business unit for the SMB market. At the time of its acquisition in 2002, TopManage had nearly 800 customers in Europe, and it offered financials, distribution, and CRM functionality and supported English, Spanish, and Hebrew versions, along with the updated pertinent figures for the SAP Business One successor that were mentioned earlier. The still newcomer product in the US has for some time been successfully sold in the lower-end of the European market, since it provides small and medium businesses with an integrated family of enterprise applications tailored to the specific needs of sales-driven companies, while the manufacturing prospects will be addressed through the SoftBrands' alliance. For details on this alliance, see Part One of this note.
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