Tucked away in the fourth page of a press release distributed during the SAP Summit held in Mumbai recently, the company announced that Business ByDesign will be available in India. Keeping in line with its quarterly announcement in April this year that it would work with a few select partners and customers to fine tune the Business ByDesign offering, SAP made it available in the India market.
There was immense excitement when SAP unveiled Business ByDesign in September last year as it was the company’s first on-demand offering. More importantly, this was the company’s ace to penetrate the SMB market, a shift that was strategic to the company’s continued growth.However, the initiative received a setback when the company announced in April that it was going slow in its rollout plans, including a cut of €100 million investment in Business ByDesign.
Expectedly the blogosphere was rife with opinions on the implications of this announcement. Reasons included SAP’s need to address problems related to scalability and a desire to incorporate more functionality into the product before making a more aggressive launch sometime during 2009. A more plausible explanation however is a need to please Wall Street sentiments as the company witnessed an 18% fall in operating income during the first quarter compared to the same quarter last year.
By shaving off €100 million investment in the product, the company expects to boost its operating margins in 2008. The move also underlines a fear that software license revenues could be cannibalized as customers and prospects gravitate towards a subscription model. Ironically, SAP focused on short term market sentiments and sacrificed the product that was envisioned to accelerate growth after an initial blip.
Despite these set backs, Business ByDesign is still core to SAP’s product portfolio. India and China are the two early markets in Asia Pacific that currently have this offering. Since the China roll-out happened in the beginning of last quarter, it already has a few partners and customers. The endeavor in India will also be to build its eco-system of partners and work with a few customers to get feedback which will be incorporated into the product.
SAP has positioned Business ByDesign as an application for sophisticated SMB users and Business One for those that have more limited functionality requirements. My reading is that Business ByDesign is likely to find good traction in the Indian market given that the hosted model of Business One has found many takers, that too when the company is not facilitating hosting provisions. Customers who have businesses in different geographic locations have contracted hosting providers and organized their own requirements.
However, pricing could be a tricky issue and SAP will have to tread carefully in that territory as both India and China are extremely price sensitive markets and $149/user/month may not appeal to the target segment. Although SAP is reluctant to reveal too much at the moment, that’s a call the company says it will take after its initial roll-out.
By Balaka Baruah Aggarwal
Add your comment to this post