Top SMB Takeaways: SAP Sapphire 2013

sapphireA couple of weeks ago, I had the opportunity to attend Sapphire 2013, SAP’s annual user conference. As is the norm for these events, SAP opened the fire hose to reveal new directions, product and solution announcements, and partner and customer wins through a myriad of meetings and sessions.

Rather than attempt to drench you with the full blast, I’ll focus this post on what I see as most relevant for SAP’s direction in the small and medium business (SMB) space.

HANA for All

SAP HANASAP is betting big on its HANA platform, which began life in 2010 as an in-memory database and has quickly evolved to become SAP’s “development platform for innovation,” for both SAP and third-party developers.

At Sapphire, SAP underscored that HANA isn’t just for big business. The vendor discussed several initiatives to bring the benefits of HANA’s data-crunching power to SMB analytics and online transaction processing (OLTP) requirements. For instance:

  • SAP Business One on HANA. Business One is SAP’s ERP solution for small businesses and for departments in larger companies. The solution integrates core business functions, including financials, sales, customer relationship management, inventory, and operations, and includes embedded analytics and reporting capabilities. SAP offers Business One both as an on-premises offering or via a cloud-based subscription model. In September 2012, SAP announced SAP Business One analytics, powered by SAP HANA. This solution provides a Linux-based HANA analytics appliance for companies running SAP Business One on a Windows server with Microsoft’s SQL database. At Sapphire, SAP introduced a new offering, Business One, version for HANA,  slated for availability later this year. This version runs directly on HANA, enabling both the transactional (ERP) and analytical applications to run on the same Linux-based server. By running both ERP transactions and analytics on a single platform, Business One version for HANA speeds access to information for analytics, reporting and search, without slowing down transactional processing.
  • SAP Startup Focus Program, which enables startups to build solutions for small businesses. SAP has engaged over 430 startups to use HANA as a platform to develop user-friendly real-time analytics and advanced predictive solutions. For instance, Vish Cancron, CEO of Liquid Analytics, talked about his company’s cloud-based, mobile analytics applications for iPhone, iPad, Blackberry and Android users.  As Vish explained to me in this video discussion at a prior event, Liquid Analytics uses gamification and predictive analytics to help make it easier, quicker and more fun for wholesale industry sales reps to place orders and set and meet sales goals.
  • SAP HANA One. SAP has partnered with Amazon’s Web Services Cloud to offer a pay-as-you model for trying and using HANA. SAP claims that users can import data and get up and running with HANA cloud in as few as 5 minutes. HANA One is designed for analytics professionals, SIs and ISVs, supports up to a 30 GB compressed data set, and is priced at one dollar per hour per user. While most SMBs don’t have analytics professionals, HANA One gives SIs and developers an accessible, affordable mechanism to develop and test new HANA apps for SMB customers. SAP has also created an online and community support network to help SMBs get started and navigate their way through a HANA One instance.

Cloud Front and Center

sap cloudSAP’s journey to the cloud has been underway for several years. Though the company has seen a few setbacks, almost all of SAP’s solutions are now available in the cloud, including:

  • Home-brewed SAP ERP solutions such as Business One, Business All-in-One, Business Suite  and of course, cloud-only Business ByDesign.
  • Acquired cloud solutions such SuccessFactors and Ariba.
  • Afaria, SAP’s mobile management platform, which SAP announced at the event is now available as a cloud-based service, branded as Afaria in the Cloud.
  • SAP HANA One Premium, an advanced version of SAP HANA One with the same data compression rate but with greater accessibility to SAP source data, all SAP backend systems, data integrators and full SAP Support.

SAP also offers customers a choice of running some of its ERP solutions in either a public or private cloud environment, and a choice of cloud providers as well. For instance, customers can choose to run Business One in Amazon’s AWS, or in SAP’s HANA cloud center, an SAP partner’s cloud, or in a private on-premises cloud.

Notably, SAP revealed that it’s own HANA Cloud Center has the capacity to accommodate all of its current installed base customers. This gives existing customers a convenient on ramp both to move ERP solutions to the cloud and gain the power of HANA in one fell swoop–and underscores just how important the cloud is to enable SAP’s HANA strategy.

Upgrading the User Experience

sap uiLet’s face it, SAP is not known for user-friendly software or contracts. But the company is on a quest to improve customer experience by making its solutions more accessible and user-friendly. SAP is also expanding its portfolio of rapid deployment solutions (RDS), which offer fixed cost, fixed scope preconfigured software, best practices and implementation services that give customers everything they need to get up and running on midmarket solutions such as Business All-in-One in just a few weeks. SAP currently offers over 900 rapid-deployment solutions across its product lines. In addition to developing more appealing and streamlined user interfaces, SAP is trying to simplify pricing and contracts.

When it comes to new solutions, SAP is aiming to get accessibility and ease of use right from the get go. For instance, SAP’s newly minted Afaria for the Cloud solution for mobile management sports a streamlined user interface and is priced at 1 Euro per user per month. At that price, the solution should be attractive for even very small businesses that need to manage mobile devices get an affordable solution. It also opens the door for SAP to prove its worth, develop a relationship, and sell other solutions to new small business customers.

Shining the Spotlight on Ariba

aribaAttracting new customers, growing revenues, and increasing profitability are perennial challenges for all SMBs. As revealed in SMB Group’s 2012 SMB Routes to Market Study, about one-quarter of SMBs sell goods and services to large enterprises. These B2B SMBs want a bigger share of the billions of dollars that large businesses spend annually on goods and services. SAP is shining the spotlight on its Ariba business commerce network as a means to help them reach this end. SAP provides all of its Business One customers with a free connection into the Ariba network, and any company, whether an SAP customer or not, can enroll as a Supplier on the cloud-based Ariba Network. Once enrolled, SMBs can connect and collaborate customers, partners, peers, and prospects. Ariba gives SMBs another way to provide more value to its existing SMB customers, and an additional entry point to bring non-SAP SMBs into the SAP fold.

Perspective

We’ve all seen how quickly innovative, fast-growth start-ups can become marquee brands. SAP understands that the creation-destruction cycle for businesses in hyper-drive, as underscored by the story of Under Armour, a featured customer and keynote panelist at Sapphire. Kevin Planck, Under Armour CEO, discussed how he founded the company in his basement in 1996 to design T-shirts that would wick moisture to help athletes stay cool and dry. He also talked about how Under Armour has evolved and grown, and how SAP has helped the company achieve twelve consecutive quarters of 20%+ growth.

SAP is betting big on becoming the leading IT solutions provider for these high-growth SMBs, which SMB Group call Progressive SMBs. Progressive SMBs are growth driven, and more likely to invest in and use technology to gain market and competitive advantage than other SMBs. Our data shows that Progressive SMBs are also much more likely to anticipate revenue gains than peers whose tech investments are flat or declining. SAP’s strategy to target  Progressive SMBs with leading edge technologies that provide clear business benefit should help it to tap in more deeply to this segment.

As important, SAP seems to be making an authentic effort to consumerize the SAP experience by reducing friction in choosing, buying and using SAP solutions. In our 2012 SMB Routes to Market Study, 42% of small businesses rate “solution is easy to use” as the top reason to put solutions on their short lists. SAP is addressing this challenge with a commitment to the cloud, tight integration to HANA within business applications, and focus on bringing new, easy to buy and use applications to market.

Although SAP isn’t likely to become the volume leader, the company is charting a leadership course to engage fast-growth SMBs–who also have the potential to become high-value SAP customers–with a differentiated and compelling story.

SAP Shines the Spotlight on Small and Medium Businesses

SAP SME SummitSAP’s stellar success in building its blue-chip large enterprise business has often overshadowed its considerable but quieter achievements in small and medium business (SMBs) markets. But SAP is not a household name in the SMB community. Even technology insiders are often surprised to learn that SMBs (or as SAP refers them, small and medium enterprises, or SMEs) account for the majority of SAP’s 197,000 customer base.

But at SAP’s first small and medium-sized enterprise (SME) summit, hosted at the company’s New York offices in late November, co-CEO Bill McDermott and other key SAP execs made it clear that SAP is intensifying its aspirations and endeavors with new programs and initiatives that reach well beyond its conventional solutions.

From SME Solutions to an SME Ecosystem

Over the last few years, SAP has steadily grown its SME business with its traditional solution offerings. For instance, year-over-year revenues have grown 20% for SAP Business One, SAP’s flagship ERP offering for small businesses. As discussed in The Progressive SMB: Customer Stories are Worth 1,000 Analyst Words, SAP has been particularly attractive to Progressive SMBs, who realize the increasingly direct connection between strategic IT investments and successful business outcomes.

The steady growth of SAP solutions has been admirable, but, as we learned at the SME Summit, SAP is casting a much wider net through a series of different initiatives that bring SAP’s big data, mobile and cloud capabilities to smaller organizations in a more accessible manner. Together, these are starting to take the shape of a growing SAP SME ecosystem. For instance, SAP is:

  • Growing and enabling the traditional partner channel. SAP channel partners currently account for one-third of SAP SME sales. SAP intends to raise this to 40% by 2015. To help accomplish this, SAP is enabling more of its traditional partners (VARs, SIs, MSPs, etc.) with Rapid Deployment Solutions (RDS).  Currently, SAP offers 150 RDS solutions, which provide businesses with fixed cost, fixed scope preconfigured software, best practices and implementation services that give customers everything they need to get up and running in just a few weeks. RDS has proven to be very instrumental in driving SAP’s growth in the SME sector. In the past year, RDS deployments in SME have outpaced the 500%+ overall RDS growth rate over the prior year. The importance of building and enabling the channel cannot be underestimated: according to SMB Group’s 2012 SMB Routes to Market Study, over half of SMBs purchase business applications through indirect channels.
  • Recruiting partners to build micro-vertical solutions on Business One. The small business market is actually very fragmented. While all small businesses share some common needs, each micro-vertical has unique requirements and needs specific capabilities when it comes to business software. SAP is building a development-focused partner channel to zero in on the needs of each micro-vertical. For instance, SAP partner Orchestra is building specialized solutions on Business One for small businesses in the fuel, beer and food industries. OrchestraBeer was showcased at the Summit. In this video interview, Ryan Hilliard, CEO of Hilliard’s Beer, a small startup with less than 10 employees, explains to me why he selected OrchestraBeer. Ryan plans to grow his business, and wanted a solution that would grow with him, and one over the lifetime of his business. But he also needed a turnkey solution geared to his business, and able to track specific metrics–such as batches and barrels of beer for visibility into his supply chain and production.
  • Empowering startups with SAP HANA. At the Summit, SAP announced that it has powered over 150 startups in Silicon Valley with SAP HANA. These startups are using HANA as a development platform to provide SMBs with a new, user-friendly generation of real-time analytics and advanced predictive solutions. For instance, Vish Canaran, CEO of Liquid Analytics, talked about his company’s cloud-based, mobile analytics applications for iPhone, iPad, Blackberry and Android users.  As Vish explained to me in this video discussion, Liquid Analytics starts with the user experience to help optimize productivity. Liquid Analytics apps use gamification and predictive analytics to help make it easier, quicker and more fun for wholesale industry sales reps to place orders and set and meet sales goals. As noted in SMB Group’s 2012 SMB Routes to Market Study, the data fire hose is running at full blast and shows little signs of abating. But, the big gap in big data is painfully evident for small businesses: Just 18% have purchased/upgraded a business intelligence solution in the past 24 months, and only 17% plan to do so in the next 12 months. Solutions such as Liquid Analytics show promise to offer small businesses an accessible, user-friendly ways to harness big data for business good.
  • Extending the Ariba network effect. As part of SAP’s recent Ariba acquisition, every SAP customer gets a free connection into the Ariba network (and any company, whether an SAP customer or not, can enroll as a Supplier on the Ariba Network). As revealed in our 2012 SMB Routes to Market Study, about one-quarter of SMBs sell goods and services to large enterprises. Since attracting new customers, growing revenues, and increasing profitability are perennial SMB challenges, we expect that SMB interest and involvement in big company supplier networks to heat up in 2013. As discussed in SMB Group’s Top 10 SMB Technology Predictions for 2013, access to the Ariba network is one opportunity that SMBs can leverage to compete for their share of the $300 billion dollars that large businesses spend annually on goods and services.

Looking Beyond Technology

SAP is also expanding its engagements with influencers, venture capitalists, governmental agencies and other vital SME catalysts. The Summit’s “Power of Small” panel featured speakers with wide-ranging perspectives and influence in the SME market, and underscored that SAP’s focus will go well beyond technology to include initiatives focused on policy, people, capital to help create an environment in which SMEs can thrive.

For example, Linda Rottenberg of Endeavor, who pioneered the examination of how high-growth business can transform economies, discussed the necessity of “mentor capital” for SME success. At the event, Bill McDermott announced that SAP has committed to help Endeavor select, mentor, and accelerate high-impact entrepreneurs on a global scale. Sunil Hirani of trueEX examined the effect of immigration policies on entrepreneurship in the U.S., and the importance of aligning governmental policies to help SMEs prosper.

Perspective

With these initiatives, SAP is tapping into a very important trend. As discussed in SMB Group’s Top 10 SMB Technology Predictions for 2013, Progressive SMBs, who invest more in technology and use technology for competitive advantage are also much more likely to anticipate revenue gains than peers whose tech investments are flat or declining. We also see this gap widening year over year, and expect that it will continue to do so.

Although not everyone at SAP may yet “get” small business, it was clear from the event that Co-CEO Bill McDermott does understand them, and also values the increasingly make or break role that technology plays for SMEs. SAP’s commitment to enabling partners to expose it technology in a relevant way, and its investment in the broader SME community were on display at this high-profile event, making it clear that McDermott wants to make SAP a household name among SMEs.  A lofty goal, to be sure, but one that SAP is very committed to aspiring to.

Key Themes from SAP TechEd 2011–How Do They Relate to SMBs?

As the name implies, SAP TechEd offers technical education, such as hands-on workshops, deep-dive lectures and sessions with SAP technical experts about all things SAP. That said, TechEd isn’t for everyone, and it’s no wonder that most of the 6,500+ attendees at SAP TechEd 2011, held the week of September 12 in Las Vegas, were SAP partners and technology specialists from the vendor’s large enterprise accounts.

However, despite the technical focus of the event, there were several key themes that have important implications for non-techies and small and medium businesses (or as SAP calls them–small and medium enterprises or SMEs). This makes sense, as SAP’s SME ambitions are core to the company’s growth strategy. Many of the partners I spoke to at the event provide sales, service and third-party development for SAP’s portfolio of SMB-centered applications, including Business One, Business by Design, Business All-in-One and Business Objects Edge. Undoubtedley not by accident, as SMB customers rely on these partners to translate the technology and solution innovations below into practical business results.

  • HANA everywhere. As noted in fellow analyst Cindy Jutras’ post, HANA was by far the lead theme at TechEd–just take a look at the tweet stream at #sapteched. HANA is SAP’s innovative column-based, in-memory database, which enables applications to zip through calculations for millions of records in just fractions of a second. While this is relevant for large companies, why should SMBs care? According to SAP, HANA will be part of every solution that SAP offers. SAP applications, from Business One through the Business Suite, will be “powered by HANA,” providing these applications with a big performance boost. The good news here for SMBs is that while SAP Business Suite customers will pay extra for high-test HANA performance, customers using SAP’s SMB-centric solutions will get at least some of this added horsepower as part of the normal upgrade cycle, at no additional charge. However, at this stage, it’s still fuzzy as to exactly how SAP will embed and deliver HANA in its SMB portfolio, what will be included, and what will be priced separately.
  • SAP Business by Design (ByD) as a platform. ByD will continue to fill the role of a cloud-based ERP suite, but ByD is evolving to become a cloud platform as well. SAP is providing partners and customers with an integrated SDK to build applications on top of the ByD platform, and plans to debut a ByD app store ala Salesforce.com AppExchange, where customers can buy, download and deploy both SAP and partner ByD apps. The ByD cloud platform should make it easier for partners to build their own applications and IP on top of ByD and expand their market opportunity. Partner-developed ByD services will be layered on the ByD foundation to deliver the common elements of ByD.  Providing and enhancing the partner opportunity is essential for SAP to groe its SMB footprint in the cloud space, especially as it plays catch up against early birds such as NetSuite and Salesforce.com. Partner applications and services will be essential to provide the diverse SMB market with the choice and richness in solutions they require.
  • Mobile as the design center for solution development and delivery. Aided and abetted by its Sybase acquisition, SAP is putting the mobile experience front and center for application design and development. This means that SAP’s design point for new applications starts with the mobile device experience. Existing apps will get a mobile makeover–providing users with the mobile interfaces they are increasingly clamoring for and turning to over traditional desktop devices. For instance, SAP Business One presented Version 1.3.1 of it mobile app, which enables users to use Business One on an iPhone or iPad. The app provides things such as alerts and approvals, reports and interactive dashboards, and inventory management, and looks very easy to use and streamlined for the mobile experience that more and more SMBs are using in addition to or as a replacement for traditional desktop interfaces.
  • Making business applications more engaging. Mary Poppins told us long ago that “For every job that must be done there is an element of fun, find the fun and snap, the job’s a game.” Jane McGonigal, SAP TechEd’s guest keynote speaker, presented the modern-day version of this with her talk on “gamification.” In a nutshell, gamification is making a non-game application more engaging by making it game-like. While I talked to several skeptics (or Puritans?) who don’t get the connection between work and games, I’ve always bought into the Mary Poppins philosophy. To me, it’s intuitive that people doing more fun and interesting work are naturally more engaged and productive. SAP put this theory into action at TechEd with Knowledge Quest, which attendees could play and earn points by answering questions, completing interactive challenges, acquiring codes, and taking on head-to-head challenges with other players. Players with the most points were awarded prizes such as iPads, Nintendo 3DS, and headphones. I don’t know how many people played, but the Knowledge Quest booth was pretty packed whenever I went by. Now this is a very big if, but if SAP successfully tackles the gamification challenge (maybe with a game?!) it can gain a big advantage. SMBs using SAP solutions will also come out ahead–via a more productive and engaged workforce–especially as more businesses are started and run by younger entrepreneurs and employees that have been raised in a video-gaming culture.

The bottom line is that while TechEd isn’t for everyone, SAP’s key themes are as relevant to business decision-makers as they are to technology decision-makers and solution builders.

However, SAP is competing against some great marketers–most notably Marc Benioff of Salesforce.com–who bring their own appetite for and vision of business software innovation to the market. In contrast, SAP, for all of its technical strengths, has not been a marketing powerhouse. While SAP has committed to making its technology innovations digestible for SMB customers, can it do the same with it’s marketing and messaging? Creating clear, crisp and compelling marketing for its diverse portfolio of solutions and its new technology directions may prove to be SAP’s toughest innovation challenge.

SAP Business One: Big Business Capabilities on a Small Business Budget

SAP has forged its corporate identity in the large enterprise space, serving the likes of Coca Cola and Dow Chemical. But, while attending SAP’s Sapphire user event last week, I had the opportunity to meet with Andreas Wolfinger, Global Head of Solution Management and Product Management for SAP Business One, and Jennifer Schulze, Director SME Solutions Marketing (who I interviewed in this SMB Spotlight video) and get an update on SAP Business One –which may be SAP’s best kept secret.

In a nutshell, SAP Business One is designed from the ground up to meet the needs of small businesses and departments and divisions of large businesses. Geared to organizations with limited or no IT resources, SAP Business One offers a unified business management solution that integrates core business functions, including financials, sales, customer relationship management, inventory, and operations. Also included are embedded analytics, ad hoc queries, and standard reports, and integration with SAP Crystal Reports software. Because SAP Business One is built as a unified solution, it can help small businesses get the synergy they need across different business functions, streamline processes, and cut down on redundant data entry and errors.

SAP offers the solution in 40 countries and 25 languages—providing coverage that few other small business ERP vendors can rival. SAP Business One also boasts about 550 add-on solutions, many of which provide industry-specific functionality.

Business One is a packaged solution that customers can run on-premise, but is also available in hosted and hosted subscription offerings. It has a very small footprint, which enables smaller companies to run the solution on a laptop instead of a server. Business One customers are typically up and running in 2 to 8 weeks. Available via SAP Business One partners, pricing (including software license and implementation) typically starts at about $20,000 for five users.

To expand awareness and extend its market reach, SAP introduced the SAP Business One Starter Package in May. The starter package offers a fast, affordable, low-risk on ramp even for very small businesses. It includes pre-configured administration, financials, sales, purchasing, and inventory processes and implementation services for up to 5 users. Pricing starts at under $2,000 U.S., and companies go live in 3 to 10 days. When and if you need to add more users or functionality, you can upgrade to the standard edition of SAP Business One, without having to migrate data, learn a new application or re-train users.

Despite its small size, SAP Business One can also take advantage of sophisticated technology that can provide businesses with a competitive edge. For instance, I was surprised to learn that SAP has Business One running directly on HANA, SAP’s column-based, in-memory database, in its labs. HANA enables applications to zip through calculations for millions of records in just fractions of a second. According to SAP, this is valuable even for companies that don’t have to crunch through huge volumes of data. For example, in-memory technology will also improve the performance of the application. Though not yet ready for prime time, SAP plans to introduce Business One In-Memory Database with the release of the 9.x family, slated for early 2012.

Small businesses have very diverse needs and constraints, and Business One won’t fit the bill for every small business. However, small businesses that want a flexible, capable integrated, on-premise business suite may be pleasantly surprised to learn about–and investigate–what SAP Business One has to offer.

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