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SAP to revamp midmarket strategy

SAP is rethinking its small and midmarket strategy in 2006, with plans to launch a new selling model for its partners, implement new pricing and focus on microvertical industries.

LAS VEGAS -- SAP is signaling a major shift in its small and midmarket strategy, planning to institute a new pricing and selling model for its channel partners and a push for a stronger focus on microvertical industries.

Simpler products can be achieved with a simple way to ramp up into the products.
Shai Agassi,
president, product and technology groupSAP AG

The move steers SAP slightly away from Microsoft, by placing emphasis on the European and Asian markets and focusing on developing software for specific industries. Speaking to industry analysts at a summit held here last week, Donna Troy, who serves as senior vice president of SAP's global small and midsized business (SMB) initiatives, said the changes will be implemented to produce rapid growth and target untapped areas of the market.

"Time and again the microverticals are where we see success in the market," Troy said.

Troy, who was hired last year to oversee SAP's push into the SMB market, has fallen short of her goal to double the number of SMB customers in 2005. SAP's latest figures show an increase of its SMB customer base by about 50%.

Related information:

Microsoft's strong midmarket channel thwarts Oracle, SAP

Small businesses mull SAP Business One, All-in-One choice

SAP launches midmarket push against Microsoft, Oracle


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SAP plans to move from a traditional model with user-based pricing and a direct sales approach to one that Troy calls a hybrid model-based on sales volume and new pricing. Territory sales representatives will oversee a mixture of direct and indirect sales, and reconfigured compensation plans will foster new rules of engagement for partners, Troy said.

The changes could also give channel partners a greater role with SAP's All-in-One software, which is geared toward the upper end of the SMB market.

"We're making it easier and simpler for our partners to buy and configure our products and move along our [Enterprise Services Architecture] roadmap," Troy said.

SAP also found that it needs to break up its strategy for selling to SMBs with different plans to address each end of the market. Part of the change is the result of the success SAP is seeing in China with its launch of Business One on Linux.

Development plans include retooling SAP's Business One software to make it even easier to install, operate and create an on-demand model around the software, according to Shai Agassi, a member of SAP's executive board, who serves as president of SAP's product and technology group.

"Buying trends are extremely different among those in the small market and those in the midmarket," Agassi said. "Simpler products can be achieved with a simple way to ramp up into the products."

Troy said SAP is also rolling out what she called a solution factory concept, which could make it easier for independent software vendors to buy and configure All-in-One, aimed at midsized businesses.

"We need a lot more microvertical presence, so we're trying to compress cycles for our partners to speed their ROI and create more customization," Troy said.

Meanwhile, SAP and Oracle Corp. have been trying to steadily increase their presence in the midmarket by building a channel network of resellers. Microsoft has built a strong network, by acquiring well-established channels through mergers with Great Plains, Solomon, Navision and Axapta business applications.

SAP and Microsoft have been cautious to avoid major confrontations in the midmarket. Don Nelson, who runs Microsoft's sales, readiness, competitive strategy and channel development team, downplayed SAP's presence in the midmarket.

"To the extent that we can, we want to support and drive SAP in their pursuit of enterprise clients with their business applications," he told SearchSAP.com in an interview last month. "In small and medium spaces, we find ourselves competing, but there will be competition in any market that exists, and the market for enterprise versus small and medium business apps are two different markets."

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