I wanted to refrain a little while from commenting on SAP’s announcement of the long-awaited (and oft-maligned) Business ByDesign on-demand product (as an aside, is it just me who feels a little finny calling a SAP product SaaS?). Zoli has covered the launch previously, but I wanted to return and reflect on what it all means – and how it changes the competitive landscape. After the announcement at SAP’s Sapphire event, which I missed due to my attending Google IO, pretty much every ERP commentator weighed in with a perspective – I wanted to talk to a few different people before I gave my two pesetas.
So there’s a myriad of issues here, and it’s hard not to be clouded by the on-again, off-again history that ByD has been plagued with – having said that we need to look at ByD afresh to gain some kind of insight. I spoke with both NetSuite (see disclosure statement) and SAP recently to get their reaction (and counter reaction) to the launch. NetSuite, in echoes of a feisty Marc Benioff in the early days of salesforce, came out with the following deck that articulates some of the weaknesses they perceive in ByD:
View more presentations from Ben Kepes.
Now it has to be said that many of their points relate to issues with the newness of ByD – and an obvious retort is that just because a product is new doesn’t mean it’s a weak offering. Their point about the strength of their own developer community is a valid one, and ByD is starting of from ground zero in relation to this. However on the flip-side, SAP itself has a developer community an order of magnitude bigger than NetSuite’s and they will no doubt be encouraging these developers to add some value to the product – the big disclaimer in all this is that we have no real idea of what the ByD development platform will actually look like – one would be more than surprised if SAP hadn’t learnt from previous mistakes and had created in this version the ability for third parties to build specific offering on top of ByD – but at this stage it’s a little bit unknown.
Moving on to their next point, that of the functional shootout held during the Sapience conference last year, this is a little bit of a red herring. Firstly the product tested at Sapience is different from what is out in the wild today, while secondly there have been some questions raised about the fairness or otherwise of what occurred there – I don’t want to go into that issue but suffice it to say I’d take the Sapience result with a bit of a grain of salt.
In terms of the last slide in the deck – this is all a bit disingenuous – Business ByDesign is for all intents and purposes a brand new product so of course it’s history starts today. That said, SAP is plagued by the fact that multi-tenancy seems to be only a very recent thought for them – it does raise some questions around a fundamental understanding of on-demand software and economies of scale – multi tenancy is one of the cornerstones and it’s hard to see how SAP could have got this so wrong until now.
Moving on to price, Dennis Howlett comments on ByD’s pricing saying:
SAP has a reputation for being expensive. Even at $149/user/month for a minimum of 25 users Business ByDesign still weighs in at $44,700 per annum… That still sounds like a lot until you hear that SAP is prepared to go down to 10 users. At this level, we’re looking at $17,800
That’s a significant margin on top of NetSuite’s pricing (it’s not completely apples with apples, but even discounting the price differential, ByD at 50% is a significant step up in terms of price). I asked NetSuite to clarify their pricing and they came back to me with the following:
Our standard pricing is $99 per user per month, and a $499 base fee per month. We also have a lower per user pricing tier for employee center users (i.e. users who’ll be using NetSuite just for time & expense management).
Beyond all of this though, and what interests me more, is how SAP is going to message this product. let’s face it – they’re the big guys, used to big ticket sales to large enterprises – moving down market where agility, price and a message that resonates with customers are the critical factors – is a hard ask. It’s very much like the salesforce and Siebel battle all over again, NetSuite gets to play the feisty young startup, defining a new industry. To that end, and as something of an aside, I’d expect to see NetSuite CEO Zach Nelson become much more aggressive in his media relations – while NetSuite were the only game in town, Nelson could remain a little quiet and concentrate on executing. With ByD in the wild I’d expect to see many more Benioff-esque moments – we’ve already seen a few with Nelson calling out SAP in recent earnings calls, and NetSuite using guerilla marketing tactics at SAP events – expect that sort of behavior to increase. As Howlett points out:
NetSuite’s bigger problem is brand recognition.For all its years in the market, it hasn’t really managed to take the SaaS/cloud high ground for integrated applications. SAP can bulldozer over it (and pretty much anyone else with the exception of Salesforce.com) anytime it chooses.
Which speaks to a much more energized Zach Nelson raising his head over the parapets in the weeks and months to come.
@ben: the pricing you’re looking at for NetSuite is the starting price. Even then I suggest you check the math: $499 + ($99×10) = $1489 which is within $10 of SAP BYD pricing at 10 users. That difference widens in NS favor at 25 users = $750/mth.
NS work on a per module basis. I think you’ll find that once you make a ‘sort of’ apples to apples’ comparison then NS starts to look more expensive or at least comparable. But even then that’s not really the right sort of comparison.
When NS was shooting at SAP it was going after the R/3 4.6 EOL base. That’s a very different animal to BYD so NS had a good target. That’s changed a little with BYD.
To argue BYD is ‘fresh’ from now when it is at version 2.5 is a bit daft. 2.5 was largely a technical upgrade. More to come in 2.6 on functions – due end of year.
You can exclude at least 90% of the current developer community from the discussion. It’s a different sales beast.
Did you miss the VisualStudio.net reference in my posts? That’s the dev platform.
All that stuff about multi-tenancy is a sideshow. The original design (which goes back about 5 years) was fundamentally wrong at many levels but should not be a surprise. The bigger surprise is that the penny dropped re: the issues about a year ago. They threw engineering resource to solve the technical problem. Job done but with a nice twist for those that want blade separation.
Reality check: only geeks care about that stuff. End users don’t care until there is a cost implication. Which they’ve addressed, hence the ability to take down to 10 users plus resolve provisioning issues etc. Story now dead. Moving on.
Hi Dennis – thanks for your comments.
Re pricing – agreed it’s not completely apples with apples – I guess until we have real product out in the wild it’s hard to know how this will shake down. Point taken though
Re visualstudio.net development. I think there is a bit of a difference between a PaaS offering built right on top of the core offering and a true PaaS. As an analogy, there is a significant difference between force.com, a rich PaaS, and, for example, the ability to build something in .NET on Azure. Again it’s apples with apples and a true PaaS makes things a lot easier for development
Multi-tenency – Agreed that giving customers choice is the best approach. In fact if geeks DO care it’s because they want to be able to give their CIOs physical data separation ByD’s options do this so agree it’s a nice twist
@ben: duh? As far as ‘true’ this or that is concerned – nobody cares…all that matters is whether customers easily derive value. All that matters here is access to sufficient devs to makes BYD a runner. With 700K MSFT VS.net devs (as at end last year) to choose from, SAP has made a reasonable commercial choice.