SAP Business ByDesign: first analysis
SAP's new A1S offering, formally called Business ByDesign, is intended for companies between 100-500 employees, which do not have deep vertical market software requirements. SAP believes this $15 billion market will help SAP dramatically expand its business over the coming years.
Context & Ripple Effects
The formal unveiling of Business ByDesign caps a pivot SAP has been signalling since its 2006 embrace of on-demand software, converting the A1S project from rumour into a named product aimed at companies of 100-500 employees without deep vertical needs. SAP sizes the addressable segment at $15 billion and frames it as the engine of its next phase of expansion.
The launch lands on awkward terrain. In July 2007 SAP admitted its TomorrowNow subsidiary inappropriately downloaded Oracle documents — a confirmed admission that leaves its third-party support business facing what the company itself calls an uncertain future — while the March 2007 board realignment that produced a new Executive Council also saw Shai Agassi depart. Pickup so far is modest but real: ZDNet plus independent blog commentary, suggesting the story registered as an industry marker rather than a mass-market event.
First-order effects
- Mid-market firms of 100-500 employees gain a subscription-priced SAP suite where previously the vendor's economics were built around large-enterprise licence deals — the buyer's entry cost and contract structure change immediately.
- SAP must staff, sell and support a multi-tenant on-demand product through a sales organisation built for perpetual licences, while defending the TomorrowNow fallout in its ongoing dispute with Oracle.
Second-order effects
- Rivals in the small-and-midmarket segment face a competitor with SAP's balance sheet entering at scale, forcing pricing and packaging responses across the on-demand ERP field.
- The TomorrowNow controversy gives Oracle leverage beyond the courtroom: every SAP sales conversation about hosted, trust-dependent software now carries an espionage-admission footnote.
Third-order effects
- If the $15 billion segment proves real, ERP incumbency shifts from owning installed licences to running rented systems — making recurring-revenue reliability, not feature checklists, the basis of competition.
- Execution now rests with the Executive Council formed in March 2007 after Agassi's exit; whether the on-demand bet survives leadership churn becomes a test case for how incumbent vendors institutionalise disruptive product lines.
The trend: Enterprise applications are moving from perpetual-licence ownership toward vendor-run subscriptions, with SAP's mid-market push marking the point where the largest traditional ERP incumbent commits its own brand to that model.