SAP has christened its suite of hosted ERP software for the midmarket SAP Business ByDesign and said it will be available initially in the U.S. and Germany, with the U.K., France and Australia to follow soon after.
Pricing for the service in the U.S. starts at US$149 per user per month for a minimum of 25 users, including services and support, SAP said. Customers also pay US$54 per month for each group of five "efficiency users," or casual users who access the software only to fill out expense reports and purchase confirmations, for example.
SAP CEO Henning Kagermann presented the first demonstration of the product, formerly known by its code name A1S, at an event in New York Wednesday morning, calling it "the most important announcement I have made in my career."
SAP has said it will invest Euro 300 million to Euro 400 million (about US$400 million to US$550 million) by the end of 2008 to support the introduction of the service, including a consumer marketing campaign on the Web to alter the perception of SAP as a provider of software for big businesses.
SAP Business ByDesign aims to offer the gamut of ERP (enterprise resource planning) capabilities in a service affordable and simple enough for use by businesses with 100 employees to 500 employees, Kagermann said. The capabilities include manufacturing, purchasing, accounting, sales and marketing and human resources.
The software is live today at 20 customers in Germany and the U.S., including a small aircraft manufacturer, a manufacturer of air fresheners, a technology consulting company and a company that offers packaging and distribution services to pharmaceutical companies.
It still wasn't entirely clear from SAP's statement when the average business will be able to sign up for the service, but a safe bet for most countries appears to be 2008.
SAP is "currently engaging with pilot customers" in the U.S. and Germany and "validating" the product with customers in the U.K., France and China, it said. Next year it will offer the service in additional markets including Australia and India in the Asia-Pacific; Italy, the Netherlands, the Nordic region and Spain in Europe; Canada and Mexico in the Americas; and South Africa. Other countries will follow in 2009.
SAP has said it hopes to open a new market for ERP among companies that rely today on spreadsheets and other individual programs to run their businesses, and were put off ERP by its price and complexity. Analysts say the challenge will be to offer a product that's easy for companies to configure but which meets the needs of their individual business.
Rivals in the market include NetSuite, which is majority-owned by Oracle CEO Larry Ellison; Microsoft, which is in the process of rolling out a hosted version of its Dynamics CRM software, and many smaller companies operating in local markets.
Businesses' two main concerns about hosted services are the security of their data and the reliability of the service, or put another way the ability to access their data at all times, said Bo Lykkegaard, a research manager with IDC in Denmark.
Those concerns are lessening, however, and hosted services for two areas of ERP, customer relationship management and human resources management, will soon be "mainstream," Lykkegaard said. IDC expects revenue from hosted applications services to increase by a compound annual rate of 32 percent over the next five years, he said.
Hosted complete ERP systems have been slower to develop because regulatory and end-user requirements vary so much between individual customers and countries.
SAP showed Wednesday how companies will be able to try out Business ByDesign on the Web before they make a purchase, by selecting their industry and loading some of their own data for a "live" test. They choose an industry and the types of business processes they want to include in the test, and the software offers different user interfaces based on their choices.
While the product was built from scratch, SAP said the system is based on its Netweaver middleware and an SOA (software oriented architecture) design.
Customers in Europe appear to pay more for the service, at Euro 133 per user per month, or US$184 at current exchange rates, according to a FAQ on SAP's Web site.
SAP Deputy CEO Leo Apotheker said their will be some "upsell potential" for SAP by offering additional packages for warehouse management, manufacturing management and services management.
SAP is positioning the service between its software products SAP Business One, for companies with up to 100 employees, and SAP All in One, for midsize companies with up to 2,500 employees. It will not offer a way for existing customers to migrate from its software to the hosted service, saying the service is "not intended to replace any other SAP solution."
While the minimum subscription is for 25 users, there is no maximum, SAP said in its FAQ. So although the service is aimed at customers with 100 to 500 employees, it may allow some bigger midsized companies to sign up for it.