SAP hones mid-market message
Out of the box thinking
It is a few years now since SAP first aimed its sights at the mid-market, writes Fran Howarth of Bloor Research. At first, this was really just an attempt to extend its reach into the subsidiary organisations and sales offices of its major corporate clients - and SAP made no bones about that. However, competitive pressures have led the vendor to hone its strategy and messaging for the smaller companies in the market.
First, competitive pressures come from the fact that licence revenues for IT implementations from the largest companies are not what they used to be. With IT budgets scaling back in recent years, companies have eschewed large, enterprise-wide blanket technology implementations, turning instead to address particular points of pain with focused solutions targeted at specific problems.
The high end of the market may also have reached some sort of a level of saturation - for example, the market for ERP technology is healthy and growing, but this is not because large companies are implementing ERP solutions for the first time, but is rather being driven by consolidation of enterprise operations and by companies replacing existing systems.
Faced with such pressure, enterprise application vendors across the board have been developing versions of their offerings to cater for the needs of the small and medium enterprise (SME) market. SAP's long-standing rival, Oracle, unveiled new solutions to capture share in this market earlier this year with aggressive price levels. But perhaps the greatest challenge will come from Microsoft, which is a new entrant in the SME business application space.
According to SAP, tolerance levels for errors are close to zero in the SME market and they certainly do not have the time to spend tweaking technology to match their requirements. In the same vein, they also cannot afford to spend lengthy periods training their employees to use new technology systems.
What such companies require is a technology solution that provides the base level of functionality straight out of the box. All applications need to be integrated and be available directly on the same desktop. All the vendors addressing this area realise that tight integration with Microsoft desktop applications is a must given the near ubiquity of its applications, as well as providing the collaboration capabilities that allow a deeper level of information sharing with business partners.
But not all companies operate the same. Businesses in different industries have different requirements, and laws and business practices vary by country. To address these issues, SAP has brought out 'flavours' of its solutions for the SME market that address the broad-brush requirements of 23 different industries.
It is then relying on a network of partner organisations to extend and customise its packaged applications to address the needs of specific micro-vertical sectors. In this way, it is hoping to build high-quality, tailored solutions that flexibly address specific needs among the SME community - rather than providing one-size-fits-all solutions for the mass market.
SAP also recognises that SMEs have different needs, especially those at the smaller end of the scale. It is aiming its SAP All-in-One product at companies at the higher end of the market, whilst its Business One solution is more suited to the needs of smaller companies.
SAP may be better known for its solutions for large-scale enterprises, but its message for the SME market does appear to be resonating. The vendor can point to some 4,500 SME customers that have implemented its solutions as well as approximately 300 solutions available through its partners. One such partner, DDD Gruppen from Denmark, signed up as a partner with SAP in the early Spring and has already signed up 25 customers for its solution based on SAP Business One, but extended to meet the needs of plumbers, electricians and vets, including the provision of wireless capabilities for such professionals when working in the field.
The message that SAP is targeting the SME market is not new, but its focus has been sharpened. It has recognised the competitive threats in the market and is clearly up for the challenge. Even though an exact definition of the boundary of the SME market remains elusive, SAP's stated goal is that 15 per cent of its licence revenues should come from the SME market by 2005 - however it is measured. The battle for the mid-market is heating up.