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SAP's A1S, All-in-One or Business One; what are midmarket firms to choose?

With SAP set to introduce A1S in 2008, speculation continues as to whether it will compete with the company's other midmarket offerings.

SAP has been judicious in doling out information on its midmarket Software as a Service (SaaS) product A1S since...

first announcing plans for it early this year. That has left press, analysts and customers wondering just how SAP plans to serve the midmarket.

A1S, with its SaaS model, joins Business One and All-in-One in SAP's small and midsized business (SMB) portfolio. Business One, designed for the lower end of the midmarket, and All-in-One, aimed at the upper end, are both on-premise products.

There even appeared to be some confusion within SAP.

In a speech given late last month, SAP chairman Hasso Plattner said the on-demand model of software delivery "will compete with our current model, and 99% of our installations are on site." Many who follow SAP took that to mean that A1S would probably compete with SAP's other on-premise, midmarket products, specifically All-in-One and Business One.

Plattner and other SAP executives were quick to clarify the remarks, saying that the chairman was not alluding to A1S and that it would not compete with existing SAP products or business models.

"It's pretty clear that [A1S is] not intended to and is not fit to [compete with SAP's other midmarket products]," Jeff Stiles, SAP's senior vice president of solution marketing, said in an interview with

Despite SAP's attempts to differentiate its SMB products, some customers will be eager to try A1S when it becomes available, even if they have another SAP midmarket product installed.

San Francisco's Pooch Inc. is currently a happy SAP Business One customer, but Marjorie Scholtz, founder and CEO, was curious to know whether companies could migrate out of existing SAP SMB products onto A1S after the release date.

"If there was a hosted, Web-based system, we would absolutely use that," Scholtz said.

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A1S is targeted at companies in the lower end of the midmarket that don't have deep vertical needs, Stiles explained. Midmarket customers that need industry-specific functionality and a high degree of customizability are best served with an on-premise application like All-in-One.

"The point initially is that there's less focus on deep industry functionality [in A1S] and more of a focus on serving needs across industries," Stiles said. "And there's the notion of configurability [in SaaS] vs. customization or extension that you can do with on-premise."

SAP announced its intention to develop A1S in early 2007, and despite the company's claims to the contrary, some think that A1S is likely to poach some business from Business One and All-in-One.

"I would say A1S will compete on the lower end with some of SAP's small and midsized offerings," said Robert DeSisto, a vice president at Stamford, Conn.-based Gartner Inc.

"Q1 2008 is the next stage of volume readiness," Stiles explained. "I'm not going to say that it's necessarily the date to open the door to a million users to be working with the system live every day. We have to phase that according to our ability to scale the business."

That seems to leave some wiggle room as to what that next stage is, but some are still skeptical about the anticipated wide release in Q1 2008.

"A1S will not be an option for mainstream clients until at least mid-2008," Yvonne Genovese, vice president and distinguished analyst at Gartner, said in an email. "Early adopters willing to take a risk on a new product will likely be able to get the product in Q1 2008."

In a report titled "SAP strategy changes with A1S," Gartner recommended that companies considering Business One or All-in-One, or even prospective users of SAP Business Suite, should investigate A1S if they are willing to sacrifice customizability for lower cost and are amenable to a hosted solution. Users should not expect too much guidance from SAP as to whether to wait for A1S, according to Genovese.

"SAP is not going to give guidance... except buy the current products available now, which generates revenue now," she said.

Gartner recommends that current SAP users closely monitor the success and roadmap of A1S because it will likely affect SAP's roadmap beyond 2010.

A new direction?

SAP already offers an on-demand CRM product, but it is still relatively new to the SaaS market. Combine that with the underwhelming reception SAP CRM on-demand received in some quarters, and the company still has to prove its SaaS mettle, according to DeSisto. Prior to its CRM on-demand launch, SAP had been less than enthusiastic about an on-demand model for the midmarket.

"SAP has to show they can get to market with this thing," he said. "They obviously have had a lot of pre-discussion in the press, and even demonstrated it to the analyst community."

DeSisto cited some quality issues with the initial release of SAP's CRM on-demand product -- resulting in part from the company's eagerness to get it to market to compete with -- and noted the importance of getting SaaS right the first time.

"The thing with SaaS, when a company using it doesn't like it, they get out," he said. "This is not the on-premise world, and SAP needs to change their mindset if they're going to play in this market."

Stiles said SAP understands the complexities involved in SaaS and is being deliberate with scaling the product up to wide release.

"We're being very careful about this because as you move to volume you need to be able to scale all the processes involved in working with customers and effectively providing service and support to them," Stiles said, adding that there are several stages of "volume readiness," including the ramping up of related sales and marketing activities.

And those sales and marketing activities could prove costly, according to DeSisto.

"[SaaS is] a different game on how the software is provisioned, how it's paid for, how you develop, how you deliver," the analyst said. "That to me is going to be one of the biggest challenges for SAP, the cultural change of trying to raise this model."

SAP's Stiles indicated that A1S is currently in the early stages of customer validation with customers and partners, with SAP continuing to tweak it based on feedback.

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