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SAP Business ByDesign promising but needs work, analysts say

SAP Business ByDesign beats existing on-premise vendors, but to win against true SaaS providers it needs usability and pricing improvements, analysts say.

SAP's newly unveiled Business ByDesign is impressive for a company that specializes in on-premise software, but...

it still needs work to compete with other Software as a Service (SaaS) offerings, according to analysts.

Business ByDesign is the most comprehensive SaaS ERP offering on the market, according to Paul Hamerman, business process and applications vice president for Cambridge, Mass.-based Forrester Research Inc. But to be a market success, improvements are still needed in areas like usability and pricing.

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SAP released details about Business ByDesign at an event at Broadway's Nokia Theater in New York on Wednesday. The long-awaited product, formerly codenamed A1S, is SAP's first foray into on-demand ERP for the midmarket. It is scheduled for wider release in the first quarter of 2008 and currently has 20 live customers.

Business ByDesign shows a good understanding of the requirements of the small and medium-sized business (SMB) market and is a significant improvement on existing SAP products, according to Ray Wang, a principal analyst for Forrester. But its usability trails the offerings of vendors such as Netsuite, Workday and Salesforce.com, which built their products as SaaS from the get-go.

"It's above the existing on-premise vendor competition," Wang said. "But compared to other competitors that started from scratch -- some of the pure SaaS competitors -- SAP might have that level of functionality, but not the usability."

While SAP focused on usability in the development of Business ByDesign, and its user interface is a great improvement for SAP, it is still a "distinctly SAP experience," according to Wang.

"In context of the market, though, it falls short of the groundbreaking work Microsoft Business Solutions has accomplished around roles and usability," he said, "and the ease of use in process flexibility from Epicor."

An area for improvement, according to Wang, is Microsoft Office integration.

"Microsoft Office integration has to be intuitive, especially in this market," he said. "SMBs revolve a lot around Microsoft Office."

SAP could integrate with Google Applications as an alternative, but Business OnDemand needs easy integration with an office productivity tool that will help people communicate, according to Wang, who also thought the product could benefit from other Web 2.0 features such as mash-up support.

"Usability still has to get much better," he said. "For an SAP user, [Business ByDesign] has great usability. For an SMB used to Web applications and Microsoft? No."

Pricing

SAP set pricing of Business ByDesign at $149 per user per month, with a minimum of 25 seats. The company will also offer a package that provides limited access to functions like expenses and timesheets priced at $54 per month for five users.

"What early customers told us is that the benefit is to have an end-to-end solution," Hans-Peter Klaey, SAP's SMB president, told SearchSAP.com in a recent interview. "And that is a very attractive price point for what you get."

SAP currently has 20 live customers, and at least one agreed with Klaey.

"We wanted an integrated solution," said Harry Hirsch, SAP practice director for West Conshohocken, Pa.'s Judge Consulting Group. "From a pricing perspective … if we would piece together a solution, it would cost us a lot more than $149."

The $149 standard pricing seemed a bit high to Hamerman, who also thought more role-based pricing options would be helpful. While SAP's strategy is to keep pricing simple, that approach could limit adoption to core users.

A better approach, according to Hamerman, could be to provide lower price points by role to get more users on the system and give customers more options and flexibility.

For example, he said, in addition to the $149 per user per month price for the product, SAP could also offer a $50 option for CRM, a $75 option for finance, and so on. The company could also offer discounts for combinations -- finance and HR for $100, for example.

"Even though the system is designed to be role-based, the pricing is not role-based (except for limited self-service users)," Hamerman said. "More refinement in matching pricing to roles is needed -- the pricing should reflect customer value as well as intensity of use."

Next Steps

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