SAP struggles to find takers for its Business ByDesign SaaS offering

With only 100 customers so far, did the company get its business model wrong?

SAP had high hopes for Business ByDesign

Three years after a supposedly show-stopping release, SAP has signed barely more than 80 new customers to the next-generation version of its enterprise applications – a far cry from its stated goal of 10,000 customers by 2010.

SAP’s Business ByDesign, which was launched with great fanfare in 2007, was intended to catapult the software giant into the fast-growing software-as-a-service (SaaS) arena. Its release was described by the then company chief executive, Henning Kagermann, as “the most important announcement I have made in my career”.

But having started with 20 customers in pilot projects at launch, SAP now puts the number of companies using the software as “more than 100”. This was described by Roland Van Breukelen, from SAP’s UK Business ByDesign team, as “a controlled go-to-market approach”.

Low numbers of customers needn’t indicate a problem with certain enterprise applications, where the target number of customers can be small. But SaaS is supposed to attract customers in their droves.

So what went wrong?

Does the painfully slow uptake of SAP’s Business ByDesign indicate the company got its strategy badly wrong, or was the problem more fundamental?

“We have never seen any indications of the SaaS market for complex business critical applications like ERP being strong,” said Dale Vile, an analyst with IT research group Freeform Dynamics.

While simpler applications and point products such as customer relationship management are suited to SaaS delivery models, few companies have been willing to bet the enterprise application farm on hosted applications, he added.

“[SAP] simply fell into the trap of following the more optimistic/sensationalist pundits rather than listening to its customers or looking at objective market data,” he added.

Not that SAP is willing to admit defeat. With the latest version of Business ByDesign made available in August, and the next version scheduled for early 20 11, Van Breukelen told Computing “interest and uptake has been very positive”.

Van Breukelen said that enhanced mobile support, the addition of real-time analytic capabilities and improvements in its ability to offer both single and multi-tenancy versions had made it more appealing to customers.