Sanjeev Aggarwal, Partner, SMB Group
During the week of October 15, I attended SAP TechEd 2012 in Las Vegas, along with about 6,500 SAP technology specialists and partners, and a small group of influencers. Although SAP is more widely renowned for its success in the large enterprise market, the small and medium enterprise or SME market (which SMB Group labels the small and medium business or SMB market) is a core part of SAP’s installed base and essential to SAP’s growth strategy. Roughly 80% of SAP’s more than 128,000 current customers are SMEs with less than 1,000 employees. In addition, SAP has more than 12,000 partners worldwide who provide SAP solutions and services to SME customers.
During this year’s TechEd, SAP discussed three areas that underscore SAP’s commitment to the SME market and its fundamental belief that strong growth opportunities lie ahead in this segment.
Taking HANA to the Cloud and to SMEs
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HANA Cloud was by far the lead theme overall at 2012 TechEd. As Bill McDermott, co-CEO remarked, “HANA lies at the heart of the intellectual renewal going on at SAP.” HANA began life as an in-memory analytics engine, and quickly evolved into a database. Now, as SAP announced at the event, SAP is building the HANA Cloud as a next-generation platform for developers.
SAP HANA AppServices and SAP HANA DatabaseServices are services that allow developers to create next-generation applications using native SAP HANA, Java and other rapid-development services. The good news is that SAP will now offer for free, developer licenses for SAP NetWeaver Cloud to get more support from the developer community. These shared services will build on SAP’s cloud platform vision by providing building blocks for portals, integration, mobile, analytics, collaboration and commercial services required to expedite building and life-cycle management of applications.
SAP HANA One, a deployment of SAP HANA on the Amazon Web Services Cloud. HANA One currently supports a relatively small 64GB HANA instance on Amazon’s AWS cloud for $0.99 per hour. This will make it faster and easier and cheaper for developers to build affordable, HANA-enabled apps for SMEs.Although HANA Cloud is still a work in progress, HANA Cloud services and SAP HANA One are first steps to SAP realizing the HANA Cloud development platform vision. Significant work is required to move this from a development/testing proof-of-concept to a production platform where commercial applications can be deployed. SAP needs to develop a strategy to help developers move rapidly to commercial deployment and promotion, as Salesforce.com has done successfully with its Force.com platform and ecosystem.
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SAP also announced that SAP Business One, version for SAP HANA, has been in limited release mode as of September 18, 2012, with general availability slated for some time next year.
SAP Business One is SAP’s flagship ERP solution for SMEs with fewer than 100 employees. This HANA-powered version uses the HANA database and allows both the transactional (ERP) and analytical application to be run on the same server, and promises significant performance advantages. Running both ERP transactions and analytics on a single platform speeds access to information for analytics, reporting and search, without slowing down transactional processing.
While not every SME will need to turbo-charge these functions, some SMEs are challenged with exponential data growth, and managing and extracting the insights they need from it. For instance in the health care industry, companies can integrate patient transactions with insurance company patient utilization records and hospital electronic medical records, to providing a complete real-time view to better manage patient care and costs. By crunching through more data more quickly, these businesses can more readily gain the insights they need to succeed in an increasingly complex and competitive world.
Meanwhile, SMEs that don’t require the increased speed and power and analytics capabilities that HANA supplies can continue to buy SAP Business One based on Microsoft SQL database, which SAP offers as both an on-premises and cloud based solution.
Enabling Mobility for SMEs
With the acquisition of Sybase and Syclo (which SAP acquired in April’12), SAP is moving to help SMEs develop a mobile application and mobile management strategies. Sybase’s robust, market-proven Sybase Unwired Platform, is now augmented by the Syclo mobile application development platform to enable partners to rapidly develop, configure and deploy mobile apps for SME customers. SAP partners can also help SMEs to add mobile capabilities to their existing business applications, and/or help them develop custom mobile applications to address business requirements. SMB Group research studies indicate that many SMEs are planning to deploy internal mobile solutions in areas such as field service and CRM. In addition, they are planning to provide external mobile apps in areas such as payments, marketing and appointment and reservation scheduling to boost customer engagement and create new revenue opportunities.
Empowering the SME Partner Ecosystem
The partner ecosystem heavily influences SMEs’ business solution purchase decisions. Many of the partners I spoke with at the event provide consulting, implementation services and development for SAP’s SME-focused applications, including Business One, Business by Design, Business All-in-One, Business Objects Edge. Now SAP is helping these partners build skills in HANA and mobility to support new SME requirements.
Partners will play a vital role in helping SMEs customize application, analytics and reporting on the HANA platform or help startups develop new next generation application on SAP HANA Cloud. Likewise, on the mobility front, partners are essential to help SMEs develop a comprehensive mobility strategy that includes mobile access to business application and address the mobile management issues–including devices, access, security and mobile applications –in a unified way.
SAP is sparking renewed interest from and incremental opportunities for the SAP partner ecosystem. HANA Cloud, SAP Business One with analytics powered by HANA, and new mobility solutions will help SAP attract new partners and grow its partner ecosystem. Meanwhile, SAP’s laser focus on the mobility front will help it forge new partnerships with mobile solution developers that want to capitalize on the opportunity to provide mobile solutions via SAP’s Sybase Afaria platform. SAP is also opening up the SAP PartnerEdge program to help attract these new partners with educational tools, resources and training–as well as credentials to validate and certify partner skills for mobility and HANA.
In addition, the current SAP Mentors and partners that I met at TechEd were excited about the new opportunities that this will open up for them. For existing SAP partners, SAP’s new HANA and mobile solutions provides a pathway to incremental opportunities in their existing account, and an entrée to develop business in new ones.
Perspective
SAP is betting that these new technologies and solutions will give it an edge in the SME market. But for many SMEs, this is uncharted territory. SAP will need to make a hefty investment—particularly around HANA—to build awareness and understanding of the value that it brings to the table. Likewise, it must build on TechEd to ensure that it rolls out a steady, effective training program to help partners position, design, build, implement and support SAP solutions in these areas.
That said, as discussed in The Progressive SMB: Customer Stories are Worth 1,000 Analyst Words, SMB Group research indicates a distinct and growing segment of SMEs that we call “Progressive SMBs.” Despite economic uncertainties, Progressive SMBs plan to increase IT investments. They see IT as a tool for business transformation, and a way to create market advantage and level the playing field against bigger companies. Furthermore, Progressive SMBs have higher revenues expectations than their peers.
For instance, 50% of the small and 73% of the medium Progressive businesses (who are increasing technology spending) anticipate revenue gains in 2012, compared to just 15% of the small and 8% of medium businesses that plan to decrease IT spending.
The opportunity for SAP lies in growing the Progressive SME segment. After all, its unlikely that SME technology stragglers are going to become SAP customers. To accomplish this, SAP will need to make a significant investment outside of its installed base (as well as within) to educate SMEs about the increasingly dire consequences that technology laggards are likely to face, and the tremendous upside that they can gain by using IT solutions more strategically. Then, SAP must clearly connect the dots to demonstrate how SMEs can apply its new solutions to leapfrog competitors and grow their businesses.
If SAP can alert and educate a broader SME audience, then it can not only help narrow this gap, but also increase the market opportunity for its new solutions.