Taking the Plunge: Triggers for Small Businesses to Move to SAP Business One

SAP logoWhen it comes to business management and  enterprise resource planning (ERP) solutions, SAP often isn’t on the radar for small and medium businesses (SMBs). But, while the ERP giant is best known for its large enterprise solutions, SAP Business One is aimed squarely at providing small businesses with a unified business management solution.

In this three-part series, I interview Luis Murguia, who was recently appointed Senior VP and general manager for SAP Business One to discuss how the solution fits into SAP’s strategy, what makes it a good fit for SMBs, and how the vendor plans to move Business One from being one of SAP’s best kept secret onto SMB short lists for ERP solutions.

In this second post, we talk about the triggers that motivate small businesses to move from entry-level accounting to SAP Business One, and how SAP and its partners help them take the leap.

Laurie: So, SAP Business One provides small businesses with more of their industry-specific needs already configured right out of the gate, and getting it in a cloud model means they don’t have to worry about installing hardware and software. But just the thought of moving from an entry-level or lower end accounting to a more robust ERP system can be very intimidating for smaller companies. So what triggers do you see motivating them to finally take the plunge and move up?


bandaidLuis:
I think a lot of us in most aspects of life; we tend to keep putting Band-Aids on pain. But finally someone says I can’t keep putting on the Band-Aids on this, I need something more comprehensive to manage my business with? I remember the story of the largest manufacturer of white boxes, white label PCs in Brazil. They were very successful in selling to schools, and any place that needed a large number of PCs because they were very price competitive. What triggered ERP adoption for them was the day they delivered the wrong PC configuration to a big customer. They lost a fortune scrambling to produce another batch, and they also realized that they almost lost one of their most important customers because of contractual requirements and remedial penalties.

Laurie: Ouch.

Luis: They were trying to do all this with manual processes and Excel files. But when you are using a lot of Excel files that need to be aligned and synchronized. In this case, they only needed one disconnect to get massive mistakes with the customer’s configuration. So they realized they had to bite the bullet and get their house in order to be much more operationally efficient.

Laurie: Okay, so how do SAP and its partners help small businesses avoid pitfalls when they’re ready to take this leap and implement Business One?

Luis: Well, some of our most successful US partners insist new customers pass a week of product training before they implement Business Because when end-users feel comfortable with the application, this helps guide the implementation and ensures users get value from it right away. So attention to end-user training is really making the difference when it comes to successful implementation.

This post is the second of a three-part series. In the third, we’ll explore SAP’s Business One strategy and goals for the future. 

Yes, Virginia, SAP Does Have a Real Small Business ERP Solution

SAP logoWhen it comes to business management and  enterprise resource planning (ERP) solutions, SAP often isn’t on the radar for small and medium businesses (SMBs). But, while the ERP giant is best known for its large enterprise solutions, SAP Business One is aimed squarely at providing small businesses with a unified business management solution.

In this three-part series, I interview Luis Murguia, who was recently appointed Senior VP and general manager for SAP Business One to discuss how the solution fits into SAP’s strategy, what makes it a good fit for SMBs, and how the vendor plans to move Business One from being one of SAP’s best kept secret onto SMB short lists for ERP solutions.

In this first post, we discuss Luis’ background, Business One history, and some of the key differentiators it has in the SMB ERP market.

Laurie:  Hi this is Laurie McCabe from SMB Group and today I’m talking to Luis Murguia, Senior VP and general manager for SAP Business One. Business One is SAP’s flagship ERP solution for small and medium businesses. So Luis you’re relatively new in this role, can you tell us a little bit about where you come from, and why you decided to become part of the Business One team at SAP.

luisLuis: Thank you Laurie, and great to catch up. I’ve been with SAP for 9 years, in the enterprise division as well as the partner organization. For the past 6 years, I ran SAP’s European partner organization. Throughout my career I have been involved with the ERP market. I started my career in providing ERP solutions for small wholesale food distributors, working with solutions like Peachtree, QuickBooks. Then I moved into selling HP3000 servers pre-loaded with business management software. So I’ve been involved in helping small business find new ways better ways to run the business and be more successful throughout my career.

Laurie: It sounds like you have a well-rounded history and in terms of small business solutions, which brings me to my next question. Many people think of SAP primarily as a big company a big company that sells sophisticated, high-end business solutions to other big companies. So what’s SAP’s role in small business?

Luis: Great question. Ben Horowitz, a venture capitalist that I admire a lot, was also a CEO of a start-up that became very successful in the dot-com crisis. He describes innovation as a really good idea that initially looks like a bad idea. This because any good idea that looks good off the bat is probably not innovative, as it s likely that many people are already doing it. For example manufacturing a car is a good idea because people need cars, but everybody knows it.

Laurie: So unless you’re like Tesla it’s not necessarily a new idea.

Luis:  Exactly. 10 years ago people thought the idea of making a high performance car that runs 100% on electricity was such bad idea was no one was doing it. But then Tesla did it. Likewise, Business One, which is designed for small businesses, doesn’t appear to be a fit for SAP. But actually, we can leverage many SAP strengths, including industry knowledge and best practices, such as order to cash, and package it for small business. That’s what makes Business One such a novel and successful product. We instill and capture expertise from SAP’s big business ERP to help our smaller business customers be more competitive.

Laurie: Ok, explain a bit of the Business One history for us.

Luis: Business One has about 50,000 customers. The solution has been available for the last 15 years, and we are accelerating growth, adding close to 1500 new customers every quarter. Every day, about 15 new companies in the world choose Business One to manage the business.

Laurie: Why do you think growth is accelerating now?

diversityLuis: I’ve been with Business One for just about four months, and I see two great takeaways to date. Number one is that Business One can be run in the customer’s own facilities, as well as in the cloud. Businesses like having this choice. The second reason, and perhaps more important, it is that more customers are choosing Business One because of the in-depth industry functionality that has been developed by our partner ecosystem.

Laurie: So is the focus for Business One to differentiate with industry specific versions or customizations?

Luis: That is 100% correct. And let’s talk a little bit about customer size segmentation too. We divide the Business One market into three distinct segments: companies with less than 50 employees, those with between 50-200 employees, and ones with 200 to 1,000 employees. The first, businesses with less than 50 employees will usually be running QuickBooks, as a standard off the shelf solution. In the 50 to 200 employee category, companies are probably using Microsoft Dynamics, Sage or another solution that they’ve customized to some extent, but they don’t have the critical mass to afford systems integrators to meet all of their requirements. Business One really fits the bill here, because we have over 600 micro-vertical customizations.

Laurie: So Business One has become a software development platform?

Luis: Yes, standard accounting, standard invoicing, management, sales, taxes, and other functionality is in there, and the ISV can build specific micro-vertical functionality on top of it–say for photo copier dealers or microbreweries, which have very different requirements. And in that 50-200 employee segment, that’s exactly what they need, a full solution to manage unique requirements, off the shelf. They can derive more value from a complete micro-vertical solution with Business One as the foundation.

Laurie: And having it available in the cloud probably helps a lot too.

Luis: Yes, in the US, over 85% of all new Business One customers are choosing cloud deployments. Many sign a contract a perpetual license from SAP for financial reasons, because most will stick with an ERP solution for a long time. It is much better, just like its better to own the house than renting the house–the math says you should buy not rent. But they are having partners run and manage Business One for them in the cloud. Say you are a microbrewery in Chicago. You don’t worry about servers, disasters or backups; you eliminate the traditional headaches associated with IT infrastructure. So even though many buy a perpetual license, all the infrastructure and management is in the cloud.

This post is the first of a three-part series. In the second, we’ll examine key triggers and requirements that drive small businesses to move from entry-level accounting solutions to SAP Business One. In the third, we’ll explore SAP’s Business One strategy and goals for the future. 

My Top 10 Posts from 2014

december-2014-calendarWow, December really came quickly this year! So I figured that I would post my most popular blogs from 2014 now, before people are devoting all of their online time to holiday shopping!

 

Cloud Is The New Normal for SMBs—But Integration Isn’t
SMB Group Top 10 SMB Technology Trends For 2014
Nine Signs Michael Dell Will Be the Comeback Kid
IBM Reimagines the Email Story With IBM Verse
Six Technology Resolutions for a Happier and Healthier SMB New Year
SMB Technology: Mind, Matter, Money–and the Cloud
A New Cloud Formation: Dell Cloud Marketplace
Microsoft Lumia 1520: A Millennial Perspective
ReachLocal: One Stop Digital Shop for Local Small Business
Five Things SAP Needs To Do To Make “Simple” Real

Five Things SAP Needs To Do To Make “Simple” Real

SAPPHIRE_NOW_Orlando_2014_004_t-e-JPG@900x598There’s probably nothing harder for a business to accomplish than these two things: 1) make the complex simple; and 2) change market perceptions. But, at SAP’s recent SAPPHIRE NOW 2014 user event, SAP CEO Bill McDermott and other SAP executives ambitiously outlined SAP’s strategy accomplish both of these challenging goals simultaneously.

On the first count, SAP discussed how it will make its notoriously complex software easier to use so that customers can reap more value and streamline their own operations. On the second count, SAP is striving to shift the market’s view of SAP from that of a behemoth that is tough to business with to a kinder, gentler SAP that is much easier for customers and partners to work with.

At the event, SAP outlined many of the investments it is making to help it meet these goals. These ranged from Fiori, SAP’s new (and now free) roles-based user experience for SAP solutions, to its cloud first, mobile first development mandate. SAP founder Hasso Plattner discussed how SAP must redesign what it does with data, independent of what it has done in past 50 years. Plattner emphasized that SAP is moving from delivering monolithic business applications to a “minimalist,” modular approach, with HANA as an underlying and unifying platform. Bill McDermott also discussed the steps SAP is taking and plans to take to reduce internal complexity and management layers at SAP, and get closer to customers and prospects.

In all, SAP made 70+ announcements at Sapphire to back up its newfound direction for “simple.” I’m not going to cover them here, because many of my analyst and press colleagues have already done so in ample detail and with great acumen. However, I will share my suggestions on higher-level approaches SAP needs to incorporate to succeed in its goal of making simple real.

  1. Make SAP events more interactive and engaging.

    After business hours concerts, buffets and have become table stakes at tech industry events. The new bar is to make the entire event more interactive and engaging. Innovative vendors are engaging attendees with interactive, visceral experiences during working hours to help drive home key messages and insights. For instance, SAP could have given attendees a Fitbit or similar device, and set up stations where we could track, visualize, display, query the data collected using HANA and other SAP tools? Providing engaging, hands-on evidence that lets people experience the change would drive home the simplicity message much more convincingly.

  2. SAPPHIRE_NOW_Orlando_2014_011_t-e-JPG@900x600Mix up the executive ranks to get a broader range of perspectives.

    Panelists on stage at the SAP press conference with the Global Managing board consisted of 8 white males and 1 white female, many of who were German. For all I know, these may be the most competent people on the planet! But too much homogeneity can sometimes blind you to opportunities and issues. If SAP wants to become more relevant to a wider range of business decision-makers, I think it will need to foster more diversity within its own senior management and executive ranks. Not only in terms of gender and ethnicity, but also in terms of adding people from more diverse industries, company sizes and types of businesses into the inner circle.

  3. Use social media more effectively.

    SAP has expanded its social media presence over the last few years, but to me, it seems like it spends more time using social to trumpet the SAP message, and not enough time interacting with relevant constituents in meaningful 2-way conversations. For instance, a couple of SAP product groups just started to follow me on Twitter at SAPPHIRE. Not a big deal—except that I’ve been tracking and writing about their stuff for years. If SAP really wants to get closer to customers and engage with more prospects, executives and employees should use social media to prove that it is a company that is accessible and easy to do business with. Why not put HANA horsepower to the test to track, engage, assimilate and evolve based on ongoing conversations across the social media universe?

  4. cloudStop saying SAP is “the” cloud company.

    Unfortunately, this is a statement SAP executives made numerous times at the event, which, as I tweeted, probably caused heads to explode at the likes of Salesforce and NetSuite! While SAP is aggressively moving to the cloud, it is getting there much later than these pure-play, born on the cloud companies. In addition, what’s the upside of even trying to stake this claim this late in the game? Though the puck is certainly moving to the cloud, survey after survey suggests that a hybrid IT environment will be the norm for most companies for a good long while. Positioning its ability to give customers choice is a much more believable and viable path for SAP.

  5. Invest more in small and medium businesses (SMBs). 

Newer solutions such HANA are key to SAP growing wallet share in its flagship large enterprise accounts. But to really boost growth, SAP must become more relevant to more SMBs. While SAP claims that 207,000 small and medium enterprises (SMEs) use SAP solutions, let’s put that in context. First, SAP defines SME as companies with up to $1 billion in revenues—a much higher upper end than most tech vendor’s use. Second, SMB Group defines the broader SMB market to include companies with 1 to 999 employees. Given this definition, we estimate there are roughly 278 million SMBs worldwide. Although SAP Business One has done an admirable job of growing its SMB base and relevance, as a corporation, SAP has a long way to go to make real headway with SMBs—who use price and ease of use (aka simplicity) as key benchmarks when it comes to selecting IT solutions. In other words, SMBs are the litmus test SAP should use to determine if it is making progress with its goal of being simple to use and work with.

I have no doubt SAP is sincere in its quest to simplify its solutions and become an easier vendor for customers to work with. After all, it must achieve these goals to thrive, because simplicity increasingly beats complexity. However, SAP is only at the starting gate. How well it runs the race depends on how quickly it can move beyond using simple as a marketing slogan to truly instill simple into its solutions and its corporate culture.

SAP’s Big Bet on SMBs—With a Fast Growth, Millenial Twist

sapEarlier this week, I had the opportunity to meet with Kevin Gilroy, SAP’s Senior VP and GM for Global Small and Midsize Enterprise Segment & Indirect Channels to hear about SAP’s plans to go big in the small and medium business market, which SAP refers to as small and medium enterprises (SMEs). In a nutshell, the vendor is dramatically ramping up market, channel and solution initiatives to boost its profile and market share in SME.

These initiatives come with an interesting twist. Much of what SAP intends to do in the SME space will focus on recruiting partners—from both developer and VAR ranks—who can provide start-up millennial businesses with next generation solutions to help them grow at lightening speed.

The company claims that it is coming at this from a position of strength, with 80% of its 253,000 customers coming from the  SME ranks. But, SAP’s defines SMEs, as companies with revenues under $1 billion, which skews larger than how most vendors and analysts define it. So what shape will SAP’s new SME initiatives take?

Sharpening the SME Lens

telescopeTo put things in context, SAP’s courtship of SME isn’t new. As I discussed in Top SMB Takeaways: SAP Sapphire 2013, SAP has been sharpening its SME lens for a while. Last year, the vendor announced several new programs to bring the benefits of HANA’s data-crunching power to SMEs,  provide customers with the choice of running its solutions in public, private or hybrid cloud environments, and to make its solutions easier to buy and use.

As I noted in that post, SAP was focusing these initiatives not at the SME masses, but on high-growth SMEs, 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.

Now, SAP is further sharpening the lens to zero in on millennials that are starting, running and making decisions in SME companies. According to Gilroy, millenials have a different view on technology than older counterparts. They are more comfortable with technology, and more likely to view it as a growth engine, instead of as a cost-cutter.

With a broad portfolio of cloud, mobile, analytics, ecommerce, talent management and ERP solutions, SAP offers many entry points for  these SMEs. The vendor has made some key acquisitions, including Ariba for ecommerce, and Success Factors for talent management, that broaden its footprint in the born on the cloud solution space. SAP has also introduced cloud-based options for many of its traditional on-premises solutions, such as SAP Business One. SMEs often prefer cloud solutions because they can usually be deployed faster, with less technical expertise and without big upfront capital expenditures, paving they way for SAP and its partners to expand their addressable market.

Furthermore, SAP is infusing HANA into its SME offerings, announcing general availability of the 9.0 version of the SAP® Business One application, version for SAP HANA. This is the first business management solution for SMEs running on SAP’s in-memory HANA computing platform. It enables SMEs to analyze structured and unstructured information within seconds instead of days, and use predictive analytics to gain new insights into data and optimize business decision-making.

Powering Up Partner Programs

1-hands-holding-jigsawSAP is powering up partner recruitment to fuel SME expansion. The vendor recruited 500 partners in 2013, growing the partner base to more than 11,500 worldwide, with about 1,000 in the U.S. Gilroy indicated that SAP is planning for double-digit channel growth, but will take a selective recruiting tack. In addition to looking for partners with a next-generation development vision, such as Liquid Analytics, SAP wants partners that are ready to scale their businesses to keep pace with SAP’s double-digit growth in SME.

The vendor has introduced and refreshed several programs to help partners go to market more effectively, including:

  • SAP Marketing University, a free, foundational marketing program to empower partners with the marketing skills they need to grow their businesses. SAP indicates the program has already led to over $1 billion in lead generation activities. Once partners have gone through the program, SAP provides them with the same marketing assets that are available to its internal marketing and sales teams.
  • Partner involvement in SAP’s Run Like Never Before ad campaign, launched in October of 2013. To data, more than 200 partners have taken executed campaigns as part of this program, which is 100% MDF reimbursable.
  • New “buy now, pay later” SME financing options that give SMEs zero-percent financing for up to 24 months for the purchase of any SAP product on the reseller price list.

Perspective

We’ve all seen how quickly innovative, fast-growth SMEs can become marquee brands, from tech sector stars such as LinkedIn to consumer brands such as Green Mountain coffee . SAP sees this too—and that technology is putting the creation-destruction cycle for businesses in hyper-drive.

So SAP’s big bet on becoming the leading IT solutions provider for these high-growth SMEs makes sense. As important, SAP is making an authentic effort to consumerize the SAP experience by reducing friction in choosing, buying and using SAP solutions.

But in this noisy SME space, crowded with competitors coveting the same high-growth SMEs, SAP still needs to do more to dispel the long-standing myth that SAP is only a big business brand. Although SAP solutions may be a good fit for high-growth SMEs, the vendor isn’t a household name with them or the millenials that its is seeking out.

SAP will also need to be cautious not to overplay the millennial hand. While millenials are likely to be more digitally savvy than older generations, the U.S. Small Business Administration says that self-employment among younger age groups has actually been dropping. From 2005 to 2010, self-employment among indi­viduals age 25 and under decreased 19 percent, compared to a 7 percent drop in the overall population. In reality, self-employment rates increase with age. For example, they were 2 percent for those 25 and under and 23 percent for those 65 and over in 2010. Simply stated, while millenials may prove to apply technology in business in more innovative ways, they are a relatively small part of the entrepreneurial population.

However, SAP is moving in the right direction. As it increases its investment to understand and engage with SMEs, SAP can continue to fine-tune its SMB story, and widen the circle of high-growth SMEs that will hear it and relate to it.

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.

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