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Sap Business Bydesign: The Untold Autopsy

Maybe it was a brazen effort to irritate Larry Ellison and Netsuite (Larry’s middle-market flagship software); an effort that backfired in the face of SAP AG. Less than 5 years after its launch and after 3 billion Euros of investment, SAP SE decided to scale out on SAP Business ByDesign and channel its resources to more profitable niches. The decision to move SAP Business ByDesign to the SAP HANA cloud had been forecasted by many industry observers. So why did the fancy business software suite prove to be such a colossal financial failure?

What SAP Business ByDesign Was Meant To Be

At its formal launch in 2010, SAP Business ByDesign was unveiled as the ERP solution to enable SAP SE to serve middle-market companies. For a long time, these companies were underserved by SAP SE as they would not afford the cost of adopting mainstream SAP ERP systems. At the launch, SAP SE’s executives projected that the 4 billion dollar software suite would generate annual revenues of 1 billion dollars. 3 years down the line, SAP SE puts the annual revenues from SAP Business ByDesign at 25 million dollars; a paltry sum compared to the projected 1 billion dollars. Let us have a look at what SAP Business ByDesign really is.

The Software That Was Not Meant To Be

SAP Business ByDesign is a cloud-based ERP system designed and optimized for the Small and Medium Sized Entities (SMEs) as well as subsidiaries of large enterprises in a two-tier ERP scenario. Components offered in the system are similar to the traditional SAP ERP systems. They include: financials, human resources, manufacturing, sales, marketing and supply chain. The system is delivered online as a software as a service (SaaS) offering. Billing under the system is based on a pricing model: a fixed fee for installation and an additional fee per user charged on a monthly basis to cover for service, support, maintenance and hosting. So why did SAP Business By Design fail so miserably?

Why SAP Business ByDesign Continues To Flounder

The main reason SAP Business ByDesign did not live up to its expectations and is still struggling in the market is that SAP SE failed to understand the needs of the clients it targeted. SAP AG unveiled SAP Business ByDesign to target small and medium sized enterprises. While these customers are largely price-sensitive, they are also not willing to adopt complex critical business applications delivered online. That is exactly what SAP Business ByDesign was trying to do- sell complex products to customers who didn’t want anything to do with them. Companies such as Netsuite that succeed at SaaS offerings know exactly what their customers want and deliver to them. These companies offer simpler applications and point products such as customer relationship management via SaaS which are ultimately adopted by their target customers.

What Is The Future Of SAP Business ByDesign?

As it is, the future looks bleak for SAP Business ByDesign. With a change of strategy however, SAP AG can tune the tides to their favour. SAP AG should consider partnering with smaller ERP providers that offer simple solutions to the SME market segment among other solutions.