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SAP Primes SaaS Reseller Pump

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Posted October 29, 2007 By Larry Barrett     Feedback

Faced with the daunting challenge of building a channel from scratch for its first SaaS product, SAP names 13 North American reseller partners.

SAP finally built it. Now it's time to find out if customers will come for Business ByDesign.

The enterprise software firm on Monday took what it hopes will be a step in the right direction when it announced 13 of its North American resellers will begin pushing its Business ByDesign product to the much-coveted small- and mid-sized business (SMB) market.

Business ByDesign, which SAP unveiled last month, is the German firm's first software-as-a-service (SaaS)  offering.So far, SAP has invested more than $500 million to launch this direct challenge to , the clear leader in the hosted, on-demand business application market."We are proud to introduce our early partners today as allies who will play a significant role in our go-forward strategy for SAP Business ByDesign," Michael Sotnick, senior vice president for SAP's small- and mid-sized enterprise unit, said in a statement. "We will continue to work closely with these SAP resellers to jointly shape our future channel model…"

Apollo Consulting, Guidemark Systems, Omega Group and Vision33 are among the initial group of 13 resellers who will be sending consultants to deployment training sessions for Business ByDesign, joining another nine German resellers who are already on board. SAP said this initial group will be working alongside SAP's internal consultants on early customer projects in the U.S. and Germany.

At the time of its introduction, SAP said only about 20 pilot customers were using Business ByDesign, including STEMME AG, a utility and sports aircraft manufacturer, and Compass Pharma Services LLC.

For now, SAP plans to charge $149 a month for each user with what it called "lower price points for efficiency users," meaning small companies with fiver or fewer users will have access to a handful of key applications for about $54 a month.

Typically, companies have to carefully handle new efforts that offer cheaper or stripped-down product to target a lower-priced market -- lest a vendor cut into sales of its higher-end wares. Industry watchers remain undecided on whether SAP will be able to pull it off successfully.

"There probably won't be a lot of threat to their core business from this offering since it is designed specifically for SMB," Richard Ptak, an analyst at Ptak, Noel & Associates, said in an e-mail to "Usually there is always potential for channel conflict when you are launching a program. I think the risk is minimal here. I think the overhaul of the code base that SAP is currently doing has the potential to be more problematic -- especially since it is way overdue."

However, other analysts and competitors have wondered aloud how SAP and its resellers will be able to articulate the virtues and value of this SaaS offering without cannibalizing sales of ERP 6.0 its flagship, on-premise software suite.

"The biggest problem SAP is going to have is with the channel," said Gartner's Dan Sholler at the time Business ByDesign was announced. "They need to build a new channel for a new customer they've never reached before. It's a tall order and this channel development is going to be the real key."

If SAP can pull it off, it might have a fighting chance of reaching its internal goal of expanding its worldwide customer base from roughly 43,000 to 100,000 by the close of 2010.

In March, Gartner reported worldwide SaaS sales surged to more than $6.3 billion in 2006 and predicts the market will blossom to more than $19.3 billion by 2011.

"The big question is, 'Who can reach this audience?'" Sholler said. "Part of the reason this market is underserved is because it's underserved. There's not an existing group of people out there who are established and understand how you get to these small- and mid-sized companies. That's the whole thing."

Business ByDesign, originally known by its codename A1S, had been delayed twice since SAP began touting the service in December 2006.

Read more about SAP ERP here.

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