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SAP targets the enterprise with Business ByDesign and two-tier ERP

Initially aimed at small and medium sized businesses, SAP's Business ByDesign SaaS ERP suite is now seeing some adoption by enterprises interested in two-tier ERP.

ORLANDO, Fla. -- After fits and starts extending its on-demand ERP suite to small businesses, SAP is now pushing Business ByDesign toward its sweet spot – the enterprise.

Yesterday at its Sapphire NOW conference here, SAP said customers like Dow Chemical and Nokia have deployed the software at their subsidiaries.

SAP released version 2.6 of Business ByDesign in February and that release included a pre-configured financial integration scenario that allows parent and subsidiary companies to communicate along global financial reporting standards. Yesterday it touted the first enterprise customers to run Business ByDesign in divisions or subsidiaries.

"Our experience working with SAP and SAP Services on installing and implementing SAP Business ByDesign within six weeks was quite satisfying," Dennis Strahl, financial systems architect, at The Dow Chemical Company, said in a statement. "The solution is one we feel we can successfully deploy to other future subsidiary businesses."

The next release, feature pack 3.0, will include ERP integration scenarios for logistics, according to SAP.

SAP shops are showing increased interest in two-tier ERP, the practice of running a large SAP instance at headquarters and a smaller system at a subsidiary, plant or regional office. A recent survey by San Mateo, Calif.-based Constellation Research found that nearly half of the 348 companies it surveyed were considering a two-tier ERP approach, up from about 20% in 2009.

SAP has also seen significant interest in Business ByDesign from divestitures, said Claus Gruenewald, senior director of sales for SAP Business ByDesign. For example, a company may spin off a subsidiary and tell them they have six months before they're off the parent ERP system. However, the biggest interest has been in regional sales or project offices, he added.

During yesterday's keynote, co-CEO Jim McDermott announced SAP has signed up 500 Business ByDesign customers, halfway to its stated goal of 1,000 by the end of the year. Yet, that's a far cry from SAP's initial lofty goal of 10,000 customers by the end of 2010, which the company set for itself two years ago. Architectural design and making the economics of software as a service work caused SAP to throttle back on Business ByDesign.

SAP's initial efforts to target Business ByDesign at SMBs got in the way of his sales efforts in reaching out to enterprise customers, who considered it for small businesses only, Gruenewald said. That's begun to change.

"Since we positioned to large enterprises now I'm only talking to headquarters," Gruenewald said.

SAP still faces competition for two-tier ERP deployments in its own customer base. NetSuite has already targeted SAP with its own on-demand ERP system, offering discounts on its SaaS ERP for R/3 customers as well as a two tier ERP kit.

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