From the IDC Analyst Blog on Henning and our SAP strategy in the SMB market…
http://blogs.idc.com/ie/?p=100
Two years ago, SAP’s CEO Henning Kagermann told me that he did not foresee any major shift in the company’s large business vs. SMB revenue mix: “We have today a 70%/30% revenue mix. Next year, it might be 68%/32% – that is not a revolution.”
His rationale was that the large enterprise business was such a big focus for SAP – and would continue to account for so much of the business – that any SMB progress would seem marginal, relative to SAP’s overall growth. As it turns out, he was right: in the subsequent two years, the mix didn’t change that much; at this year’s SAPPHIRE, Hans-Peter Klaey, the president of SAP’s new SMB line-of-business, said that today’s SMB share of SAP business is around 30%.
But, as we anticipated last year, things have clearly changed at SAP – in the priority that management is putting on the SMB market, and in terms of what SAP is prepared to do to compete successfully. SAP has a high-priority, well-funded push down into the SMB Long Tail. Based on SAP’s behavior in the past six months – punctuated by last week’s SAPPHIRE customer event – Kagermann and team seem to have a revolution of sorts in mind, revolving around a high-priority, well-funded push down into the SMB Long Tail, defined in part by three key elements:
- New SaaS-optimized SMB Offering: As we predicted six months ago, SAP is developing a brand new application suite for the midmarket, dubbed “A1S” – that will initially be available only as an on-demand (SaaS) offering. Featuring usage-based pricing, and online delivery, this offering should be considerably better positioned for midmarket adoption than SAP’s current A1 (on-premise only) application suite.
- New SMB Go-to-Market approaches: The biggest changes, and challenges, of A1S will be in the go-to-market model. The new offering will require new marketing messages and approaches; new pricing models; the introduction of more high-volume, transactional sales processes; the expansion and education of the SMB channel and partner ecosystem; and a refresh of the rules of engagement between SAP and its channel partners. SAP has earmarked 300-400 million euros of investment around the A1S launch, of which SAP has only spent around 10% or less thus far; my guess is that the go-to-market overhaul will take the lion’s share of this investment and the lion’s share of the launch timeline. The need to develop new go-to-market approaches for the SMB sector was, no doubt, a key factor in SAP’s creation of a new, globally integrated SMB Line-of-Business last November.
- Ambitious SMB Revenue Goals: Betting in large part on the success of the A1S offering – which will be announced in the Fall, but probably not widely available until 2008 – SAP has predicted that software sales to SMBs will jump from less than one billion euros in 2006 to two billion euros in 2010. By my estimate, that means SAP will need to generate about three times the SMB sales for each of the next four years, on average, than they did in the last two years – a pretty tall order.
…click on the link to continue
