What is the future partner business model of SAP Business ByDesign?

SAP Business ByDesign (ByD) hasn’t been launched in the Netherlands yet. Although ByD has been presented by SAP during the most recent Dutch SUG (SAP User Group) VNSG conference in April 2012, to my knowledge ByD is not officially available with a Dutch user interface and it is not listed in the Dutch SAP price list. My peers at SAP stated that ByD will be launched in the Netherlands in Autumn this year (2012).

I see already a lot of opportunities for ByD in the Netherlands, both in the SME (Small and Medium Enterprises) and the Enterprise market segments. As I stated before in a Tweet: I forecast a prosperous life of ByD in the Netherlands. I have 3 main arguments to support this forecast:

  1. CFO’s, in general a dominant group of decision makers for ERP investments, will be attracted by the financial benefits of an ERP solution delivered from the Cloud. They will like the opportunity to obtain an ERP solution that will offer a “pay for use” charging model that will enable them to convert CAPEX (Capital Expenditure) for such ERP solutions into OPEX (Operational Expenditure). This financial advantage is increasing in importance in this era in which investments are hard to finance. After the Credit Crunch late 2007 and “Double Dip” monetary developments in the EU, investment money, like Bonds, is expensive for corporations and even more hard to obtain.
  2. Dutch Enterprise grade companies, running on SAP’s enterprise solutions such as R/3, Business Suite 7 and/or ECC6, are currently already running projects that could be described as “process harmonization and system rationalization” projects. The decision makers at these companies don’t believe anymore that they can realize a positive business case by implementing their own variants of generic (secondary) business processes such as finance, supply chain management, logistics and human resource management. Neither they recognize that they will be able to realize a competitive advantage by maintaining there own implementations of these business processes. The costs to implement and maintain these specific business processes are to high in comparison with the tangible business benefits that these specific business process implementations will bring. That’s why these decision makers all starting projects to re-implement there ERP system with business processes based on best practices implemented by vendors such as SAP and system integrators like Capgemini. ByD is to be regarded as a natural development of this trend.
  3. Cloud and SaaS  (Software as a Service) solutions are already being used in corporations. Examples are Ariba, Capgemini IBX, Hubwoo, SuccessFactors, SalesForce.Com and others. I expect that corporations will eventually move other business processes to the Cloud when they gain confidence in the SaaS based delivery model.

To my opinion it is only a matter of time before almost all decision makers in SME and Enterprise grade corporations will come to the same 3 conclusions.

So the future is to ERP from the Cloud on basis of a SaaS delivery model. I forecast that in the next era, 2020 and beyond, ERP from the Cloud will be “business as usual” and the dominant ERP solution for SME and Enterprise grade corporations. Anybody who is defending another view on this matter, because of reasons such as security or resilience and risks for business continuity, I would like to present them a mirror from the past: These arguments were also used last Century when enterprises were using mainframe based systems running ERP like functionality. In 2012 hardly anybody is discussing generic ERP solutions, client/server and Internet based architectures and so on as a thread to their business continuity or risk. Time has proven that the arguments of the defenders of the mainframe based architectures in those days are not valid any more. History will repeat itself: The same will be applicable for Cloud and SaaS based ERP solutions such as SAP ByD.

So will SAP ByD be the “Holy Grail” ERP solution for every enterprise? Currently I must admit that this is not the case. Why? ByD does not offer yet a solution yet for all business processes, especially primary business processes. I will give you 2 examples:

  1. The business of a, in terms of annual revenues, major Dutch company is based upon large service contracts with their clients. The management and fulfillment of these contracts is one of the most important business processes within this company. They won’t be able to manage these contracts in ByD. Either ByD has to be extended in functionality or they should integrate a third party solution if they decide to base there next generation ERP on ByD.
  2. Another company is using specific equipment in order to fulfill their services at their clients. Management of this equipment is to be considered as a critical success factor for their business. At least their profitability is related to equipment management. They cannot manage their equipment with ByD. ByD doesn’t offer the required functionality.

So there’s room for improvement. In other words: ByD can be extended in order to fulfill the functional requirements of these companies. But who will extend ByD? SAP and/or SAP’s business partners such as system integrators like Capgemini? What will be SAP’s strategy and business model for such extensions and enhancements?

SAP’s current SME ERP solution is Business All-in-One. This ERP solution is based upon SAP’s enterprise ERP flagship R/3 / Business Suite 7 / ECC6 technology but with another license model which enables system integrators to resell this ERP solution together with industry or market segment specific enhancements. To my knowledge such partnership business model does not exist yet for ByD. Mind you, I am not referring to standard FIRE/RICEF (Forms, Interfaces, Reports, Enhancements) customizations that will be company/client specific. In this context I am referring to large functional enhancements that should be considered as IP (Intellectual Property) of the implementing ByD partner that can be reused and sold to other organizations in a specific market segment. Organizations that develop such IP and solutions do want to realize a ROI (Return On Investment). But how do these organizations will be enabled to charge their clients in order to realize their ROI?

  • Will these organizations/ByD partners charge their clients on basis of a traditional model e.g. an one time license fee and additionally a maintenance contract for their solutions? This model undermines the benefits of converting CAPEX into OPEX and will result into a barrier for the success of ByD and industry/market segment specific enhancements.
  • Will SAP start a ByD pricelist in which ByD partner specific solutions will be sold and charged by SAP within their ByD license payment scheme with kickback revenues towards the originating ByD partner? In other words: will SAP introduce a pricelist for such solutions like currently exists for OpenText technology that is an integral part of SAP’s Invoice Management solution for ECC6 but than based on a “pay per use” charging scheme? But partners will want to realize their ROI and a positive Business Case for their investments as soon as possible. Time is a critical factor within a Business Case. Are the partners willing to wait for their revenues as a result of a “pay for use” payment scheme? Or will SAP act like a investment bank and pay the ByD partner in advanced for their IP?
  • Will SAP enable ByD partners/resellers to charge their clients directly, including the SAP ByD license fee and a license fee for their own IP including kickback revenues to SAP?
  • Running additional software from ByD partners will require extra computing power. In the current ECC6 ERP world the addition of extra software will require extra “SAPS”, storage space, the lot. The ByD computing power is delivered by SAP. How will SAP charge the additional costs for extra computing power and the necessary maintenance to their clients and/or partners?
  • Will SAP introduce a ByD enabled PaaS (Platform as a Service) solution in order to enable ByD partners to develop, test, run, maintain and resell their enhancements without any architectural boundaries for their ByD partners and clients?
  • Last but not least a question related to the architecture of ByD: Is SAP running/maintaining a separate system instance for every ByD client that will enable ByD partners to load extra functionality e.g. software within the client’s specific ByD system instance? Or is SAP running some form of a single instance for all their ByD clients that prohibits client specific enhancements? I couldn’t find any SAP ByD documentation yet how to customize implemented business processes within ByD like we are used to customize business processes in ECC6 modules such as MM (Material Management) beyond the previously mentioned FIRE customizations. The lack of customization possibilities of implemented ByD processes could explain that SAP is doing the latter: running and maintaining a single system instance for all their ByD clients. In that case: will SAP run a certain type of “Apps Store” with pre-loaded and pre-configured ByD partner enhancements that will be available to all ByD clients on basis of a certain Cloud based “Switch” architecture like currently is implemented in ECC6 for on-premise SAP ERP systems?

Do you have the answers on these questions or a vision regarding this subject matter? Please let me know.

Luc Bartkowski

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Working in ICT since the 90's in multiple domains including network infrastructures and protocols, software application development, office automation, enterprise resource planning / business process automation and cloud solutions. Current professional focus: Big data and machine learning. Personal interest: global economics.

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Posted in ERP market developments

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