SAP SME Summit Report

1. VENDOR NOTE
.
SAP MEANS BUSINESS WITH SMES
(THIS TIME FOR REAL)
By P.J. Jakovljevic, TEC Principal Analyst
February 2015
www.technologyevaluation.com
Technology
Evaluation Centers

2. SAP Means Business with SMEs, This Time for Real
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SAP Means Business with SMEs, This Time for Real
SAP recently held the global SAP SME Summit in its New York offices, the fourth
SME Summit hosted by the giant in the past three years, which should indicate
how much importance it gives to small and midsize enterprises (SMEs)/small to
medium businesses (SMBs) within its long-term strategy and goals. Many might
be unaware of the fact that the majority of new SAP customers come from the
SME segment—at the end of the third quarter of 2014, SAP reportedly had more
than 263,000 customers, of which more than 80 percent, or 212,500, were SMEs
or companies with fewer than 1,000 employees. The market opportunity is
seemingly large, given that most of the global GDP growth comes from small
businesses and with the total addressable SMB market expected to grow to $244
billion (USD) by 2018, according to Gartner.
Moreover, Bill McDermott, CEO of SAP, spent the earliest days of his career as a
small business owner and he understands firsthand how vital small companies are
to economic growth. Rodolpho Cardenuto, president, global partner operations
and Latin America region at SAP, also pointed out in his quick opening remarks
that in its large enterprise space stronghold, SAP can at best hope to increase the
customers’ share of wallet, whereas in the SME space we are talking about true
organic growth. Projections indicate that the SME market is set to represent 52
percent of IT spending by 2015, with small enterprises being one of the largest
segments.
SAP Cool Enough for Millennials
The major part of the SME Summit was a roundtable of panelists discussing
“What does the workforce in 2020 mean for next-generation SME businesses
today?” The panel, moderated by Karie Willyerd, VP learning and social adoption
at SuccessFactors, an SAP company (herself a former entrepreneur that founded
Jambok, now the SAP Jam social platform), included external topic matter experts,
customers, entrepreneurs, millennials, and McDermott. Those millennial
entrepreneurs were from companies using SAP SME solutions, such as Emprego
Ligado, Loomia, Golden Road Brewing, and Lynch Fluid Controls (see Figure 1).
They all concurred that, looking ahead to 2020, a radical set of changes are
coming in how people work, how leaders lead, and how companies are structured
and run.

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Figure 1. SAP SME Summit panel
Millennials, who are set to make up 75 percent of the workforce by 2025, are the
“impatient generation” that believes everything should be available at their
fingertips. They are driven by social commerce, user-generated experiences for
purchase decisions, and are used to getting the information they need anytime,
anywhere. The roundtable panelists discussed the ways for SMEs to prepare for
the workforce of 2020. To be successful, SMEs must address millennials as
employees, employers, peers, and as consumers. Cloud, mobile, social, and big
data technologies are fundamentally changing how we work and communicate
with each other. The aforementioned forward-thinking SME leaders understand
that they must leverage a combination of these technologies to take their growth
to the next level. To that end, the main SAP SME Summit message was that SAP is
simple and trendy enough for millennial entrepreneurs to use it. Simple business-
to-consumer (B2C) user experiences are increasingly being expected in business-
to-business (B2B) transactions as well.

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SAP SME ERP Portfolio
SAP solutions for SMEs are offered in the areas of enterprise resource planning
(ERP), analytics, database, mobility, cloud, and business networks. Going from the
lower-end of the market upward, the SAP SME ERP solutions include the SAP
Business One application, the SAP Business ByDesign cloud solution, and the SAP
Business All-in-One solution (see Figure 2). SAP made a point that all of these
solutions have recently been ported and are available on the SAP HANA in-
memory platform, and can be deployed both on-premise and in the cloud.
Figure 2. SAP SME ERP portfolio
SAP Business One is a single integrated solution for managing small businesses
and subsidiaries of large enterprises, available both on-premise and in the cloud.
It supports 27 languages and has been localized for more than 41 countries via its
partners and resellers. The solution has more than 46,000 customers in 150
countries (being in fact the best-selling SAP ERP product overall), growing by
approximately 5,000 customers per year. Over 2,300 of SAP’s large enterprise
customers’ affiliates and divisions are running SAP Business One.

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SAP Business ByDesign on the Mend
For its part, the SAP Business ByDesign cloud suite is a broad, integrated, and
adaptable on-demand solution for subsidiaries of large enterprises, upper mid-
market, and service organizations. The product is localized for more than 50
countries (19 country versions coming straight from SAP, the rest from regional
partners) and has over 1,000 active customers. The offering has had some
unfortunate turns of events since being unveiled in 2007 as SAP’s “next big thing,”
but has been on a comeback trail of sorts after being sent back to the drawing
board a few years ago.
The original product’s architecture, which has had performance and scalability
issues, has meanwhile been replaced by SAP’s HANA cloud platform. As of
February 2014 all new customers are on the HANA platform, while existing
customers are being migrated to new infrastructure in batches (racks of 50 or so
tenants) unbeknownst to them. The client technology is still Microsoft Silverlight
(which Microsoft will reportedly support until 2022), but SAP will gradually
introduce HTML5 screens, starting with an SAP Fiori cockpit screen that is already
available. Figure 3 displays the current product’s look and feel.
Figure 3. SAP Business ByDesign look and feel
It is SAP’s goal to make SAP Business ByDesign the market leading cloud ERP
solution for upper mid-market companies and subsidiaries of large enterprises. To
accomplish this lofty goal, SAP has been investing in architecture, horizontal
business capabilities, and vertical industry specific capabilities that enable
partners to add their vertical expertise (e.g. adding temperature and density for
product volume calculations enable Accenture to build the oil industry specific
add-ons). The vendor is further intensifying its effort to enable partners to deliver
country versions (e.g., NEC and NTT DATA offering country versions for emerging
South East Asian markets, Seidor for Latin America localizations, ERP Logic in India,
etc.)

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While SAP Business ByDesign has been optimized for professional services
companies, further business capabilities have been added for distribution
scenarios as required in the wholesale distribution, consumer products, and high-
tech industries. The cloud solution contains a broad ERP kernel, covering 35 end-
to-end business processes spanning financials, human resource (HR) management,
supplier relationship management (SRM), customer relationship management
(CRM), warehousing, supply chain management (SCM), and more. The product is
certainly functional, but it has a long row to hoe to catch up with NetSuite’s
recent runaway success with over 20,000 cloud ERP customers.
FinancialForce.com and Acumatica might also have something to say about
targeting this same market.
SAP Business All-in-One on HANA
While SAP Business One is the same product for both the cloud and on-premise
deployments in the lower-end of the market, SAP Business ByDesign’s on-premise
counterpart in the mid-market is SAP Business All-in-One, which is a customizable
and extensible solution for midsize companies with deep industry best practices
(and templates) built in. In other words, SAP Business All-in-One is basically the
flagship SAP ERP Central Component (SAP ECC) and other parts of SAP Business
Suite that are used for large enterprises, but with preconfigured functionality.
SAP’s Rapid Deployment Solutions (SAP RDS) are used for getting started and
adopting new innovations down the track as customers require.
SAP Business All-in-One is available on-premise and in a partner managed cloud. It
has been localized for more than 50 countries, and is currently at 25,000
customers, growing approximately 1,500 new customers per year, competing
fiercely with Epicor, Oracle JD Edwards, Microsoft Dynamics, Infor, and other mid-
market incumbents. While the SME segment is supposed to be fully sold to via
partners, given larger company sizes here, SAP sells the product directly as well.
But about half of the sales of SAP Business All-in-One powered by SAP HANA
come from about 1,200 resellers. Of those, more than 780 partners are currently
authorized resellers for Systems on HANA (SoH), which translates to over 8,600
trained SoH sales and pre-sales partner resources. There are also over 40 HANA
Enterprise Cloud (HEC) and HANA Operations Certified Partners for private cloud
hosting.
Given that the product is on HANA, customers can automatically benefit from SAP
Fiori role-based screens, SAP Lumira visualization, SAP HANA Live real-time
reporting, and other inherent platform features. In the future and as required,
customers can benefit from the upcoming so-called upcoming S4 HANA strategy
(formerly referred to as “S” innovations) in the cloud and on-premise, such as SAP
Simple Finance, SAP Simple Logistics, etc. These rewrites of SAP Business Suite
modules will have the same HANA data model as HANA editions of SAP Business
All-in-One and SAP Business Suite, which will make integration (cloud to cloud, or
cloud to on-premise) fairly straightforward.

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Other SAP SME Offerings
In addition to the aforementioned three ERP products, SAP also offers to SMEs
the Edge business intelligence (BI) solutions by SAP BusinessObjects, SAP Lumira
visualization software, the Ariba Network from Ariba (an SAP company), and the
SAP HANA in-memory platform and cloud solutions. SuccessFactors for talent
management and Concur for expense management certainly have products that
are amenable to SMEs as well. The vendor is making it even easier for SMEs to
leverage the benefits of its solutions through the following enhancements:
 With the latest release of SAP HANA Service Pack 9, the solution is now
more accessible than ever to customers of all sizes, including SMEs. SAP
HANA can now be run in production environments on hardware
solutions that are significantly more affordably priced than previous
special hardware offerings. Customers can take advantage of multi-
tenancy capabilities and run multiple applications on the same server, for
example, SAP HANA, the SAP Business Warehouse application, BI
solutions, and SAP Business Suite software. They are provided the
flexibility to move their on-premise based landscape to the cloud
relatively quickly and easily.
 SMEs can also connect to Ariba Network free of charge. Used by more
than 1.6 million companies in 190 countries to transact over $600 billion
(USD) in commerce on an annual basis, the Ariba Network is the world's
largest B2B trading community. Using the network, businesses of all sizes
are able to connect with a global network of partners anywhere, at any
time, from any application or device to buy, sell, and manage their cash
more efficiently and effectively. Reportedly, 60 percent of Ariba
customers are SMEs. And as National Business Furniture, Charles
Seafoods Supply, cSubs, David's Cookies, Mediafly, and many other SME
companies have found, they can deliver results in the form of new
business, increased revenues, greater efficiencies, faster payments, and
access to financing for further innovation and growth.
Following the roundtable discussion, Kevin Gilroy, senior vice president and
general manager, global SME segment and indirect channels at SAP, spoke to Gene
Marks, a recognized technology columnist and owner of a small CRM consultancy.
They shifted the focus of the SME Summit to showcase how SAP and its partners
help small businesses grow and scale. The majority of SAP SME customers are
coming through partners; there are currently 11,900 partners worldwide (over
4,500 of those being channel partners).
Based on the success of the “buy now, pay later” offering introduced in early 2014,
SAP plans to extend it into 2015, making it easier for SMEs to get the technology
they need to compete with larger companies in their industry. This offer, which is
available via SAP channel partners, provides SME customers with zero-percent
financing for up to 24 months for the purchase of any SAP product on the reseller
price list (whereas the partner gets paid immediately by SAP).

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Recent SAP Business One Developments
The rest of the day was spent in networking whereby there were a few demo pods
for some of the aforementioned SAP SME products. I chose to pay more attention
to SAP Business One given the product’s momentum and recent enhancements.
Traditionally being Microsoft-centric (i.e., Microsoft SQL Server and .NET-based),
the product has since 2012 also been ported on HANA and integrated to Ariba
Network. Of 46,000 customers in total, over 1,000 have chosen a HANA version,
and SAP encourages HANA as the preferred platform for the reasons of better
scalability and performance, built in predictive analytics, and other inherent real-
time in-memory HANA capabilities (see Figure 4).
Figure 4. SAP Business One features
As part of the recent expansion of SAP-certified solutions on Amazon Web
Services (AWS), the SAP Business One application that works with and is powered
by the SAP HANA platform can also be offered on AWS Cloud. SMEs can now
deploy and run SAP Business One, version for SAP HANA, on Amazon Elastic
Compute Cloud (Amazon EC2) instances. This AWS pay-as-you go, subscription-
based model will provide more hosting choices and help reduce total cost of
ownership (TCO) for the solution. Customers will be able to use their existing SAP
software licenses on AWS (procure the cloud infrastructure directly from Amazon),
with no additional SAP license fees required, or license SAP applications to run on
AWS from an authorized reseller of SAP Business One. SAP partners claim that
adding AWS as a cloud choice often helps with prospective customers’ anxiety
about where their data will be hosted.
In addition, SAP partners using AWS have access to the developer edition of SAP
Business One, version for SAP HANA. This provides a way for SAP partners and
users to begin development and porting of add-on solutions and other application
extensions for the powered by SAP HANA version of SAP Business One. At the SAP
SME Summit there was a demo of a wine industry add-on solution by RISA
Consulting in Portugal (see video and Figure 5).

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Figure 5. SAP Business One look and feel
In conclusion, no one doubts SAP’s true commitment to the SME sector. But the
vendor has made similar attempts many times before, arguably with mixed
success. On one hand, its aforementioned SME customer figures speak volumes,
but on the other hand, there is still a lingering perception of SAP’s traditional
complexity and price. SAP might be fortunate this time with the advent of modern
consumer-like tools (social, mobile, cloud, etc.) that it has been harnessing to
render its products much cooler and appealing to the millennial workforce.
Traditional ERP SMB incumbents should take SAP quite seriously, as their
traditional defense mechanisms of dismissing SAP as a real SMB threat might not
necessarily work this time around.

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