Through the fog... SAP for SMEs

SAP is one of an elite band of enterprise software vendors, famous for making big money by selling bi systems to big companies. So should we take its small business push seriously? After some initial scepticism, Quocirca analyst Dale Vile reckons we'd be wise to.

As a director of an SME, I am frequently asking for information from our accounts department to help me understand how the business is performing. Recently, however, my request coincided with one of the regular bean counting rituals that take place at the end of every month and quarter. I was therefore politely told to either wait or do it myself.

I needed the information so decided it was about time I got to grips with our Sage system, something I had been putting off for a long time. All I needed was to run off a couple of custom reports, which I figured couldn’t be that hard using the market leading small business accounting package.

How wrong I was.

The software looked like it had been written for accountants by accountants. Being a mere mortal I found it completely impenetrable. I was therefore forced to admit defeat and crawl back to Accounts to get what I wanted through a combination of flattery and bribery.

A couple of weeks later, I was sitting in a briefing in SAP’s UK headquarters. The topic was the new SAP offering for SMEs known as SAP Business One. The room was full of industry analysts from around Europe and many of us had heard the story before of how SAP is increasing its penetration of the SME space. There was understandably a certain air of scepticism about the place. Could big bad SAP really deliver something usable by a small business?

As soon as SAP Business One was demonstrated, my own scepticism began to dissolve. As the demonstrator highlighted the importance of business visibility and started to show drag and relate report writing, I nudged my colleague sitting next to me and said: “That’s it. That’s exactly what I was trying to do in Sage. So it really can be that easy.”

The SAP spokesperson openly admitted that there are still a few gaps that will affect some types of company but, being an SME businessperson, with my recent experience it 'felt' like something I could work with as a user.

So great first impression but the key question remained as to whether the gorilla of the Large Enterprise Application market could be successful as the new kid on the block in the SME space.

When we consider this question, it is clear SAP Business One is a good start. Vendors that have previously tried to take 'big iron' applications into the lower parts of the market have met with limited success, despite creative repackaging and hosting. SAP’s solution, however, is derived from its acquisition last year of TopManage Financial Solutions, an Israeli company who specialised in small footprint business systems. SAP Business One is therefore not a derivative of the traditional R/3 product line. It was specifically designed from the outset with small business use in mind.

Furthermore, in common with its big stepbrother, it is put together in the spirit of a total business solution rather than an accounting package that has sprouted other modules. From a product perspective, SAP therefore has the right approach.

But it takes more than a good product to be successful in the SME space. It requires a serious amount of investment in creating, motivating and supporting the resellers who service smaller businesses. There are then the influencers - people like accounting firms who make recommendations to their client base on which packages to look at. Incumbents like Sage have spent years cultivating awareness, comfort and acceptance in this community and it is not possible to achieve the same overnight, no matter how deep your pockets.

The question of SAP’s motivation and staying power is therefore extremely important. We have seen a number of enterprise vendors dabble in the SME space recently as the corporate market has become more difficult. The naivety and lack of commitment is sometimes all too obvious with these players and we know they will drop the SME business like a hot stone as soon as the corporate market picks up again.

Yet SAP’s enterprise business is in pretty good shape. In a Quocirca research study completed this month, involving the interview of over 100 European corporate SAP accounts, 50% said they will maintain their spending levels on SAP licences over the next two years and a further 39 per cent said they will increase their spend. Only six per cent of SAP users said their licence spend would decrease. This supports SAP’s insistence that its move into SME represents a long-term proactive drive into a new market segment rather than a knee jerk defensive response to a declining core market.

Indeed, the SAP strategy for bridging the market from the high end to the low end has a degree of credibility. At the top, there is the mySAP Business Suite for large enterprises. In the mid-market, SAP has a very partner-centric programme known as All-in-One, in which value added resellers (VARs) pre-build specific 'micro-vertical' solutions around a core mySAP system. Architecture-wise, the solutions at these two levels are the same. There is then the SAP Business One solution for the low end as discussed.

The thread that runs through all of these is interoperability, the idea being that any SAP system can easily exchange transactions and data with any other, big or small. And that's useful for subsidiaries and close supply chain partners.

Even with this comprehensive grand plan though, SAP is coming from behind and needs to work hard on the simple problem of making people aware of its presence in SME. Everyone knows SAP in the corporate sector but few would even think of it elsewhere. Again, the company openly acknowledges this, but it knows what it needs to do and appears determined to pull it off.

In the meantime, there is probably some low hanging fruit SAP can go after. In the above-mentioned Quocirca study, 32 per cent of Enterprise SAP customers said they had looked at SAP Business One. Of these, 85 per cent said they could see a place for it in their smaller subsidiaries. This is a sizeable market in its own right.

The bottom line is that when people look at SAP Business One, they seem to like it. Provided SAP continues to regard its race into SME as a marathon and not a sprint, there is therefore every chance that it will make an impact.