SAP Kicks Partner Recruitment For Business ByDesign Into High Gear

Now that SAP has worked out all the bugs of its Business ByDesign on-demand application suite, the vendor is making a big push to recruit channel partners to resell it.

SAP executives pitched Business ByDesign to the company's solution provider partners at the SAP Channel Partner Summit in Savannah, Ga., this week, touting the product's potential in the growing market for cloud-computing applications.

"The opportunity for SAP and our partner ecosystem is phenomenal," said Frank Iannotti, vice president of Business ByDesign in North America, speaking before a packed session on the software at the conference.

SAP debuted Business ByDesign in September 2007, but the company struggled with early releases of the software, which didn't support multi-tenancy like other SaaS applications such as Salesforce.com's popular CRM application. It wasn't until last August when SAP released version 2.5 of the software that the company's sales efforts began in earnest.

While Iannotti didn't disclose specific sales numbers, he told the more than 75 solution providers in the session that Business ByDesign sales grew 224 percent in last year's fourth quarter compared to the third quarter.

"We're seeing it in small, high-growth companies, we're seeing it as an alternative for upgrades, and we've actually had great success in the last few quarters selling into our large [account] installed base," Iannotti said. "The pipeline is growing exponentially."

SAP has been working directly with early adopter customers of Business ByDesign, but the company is increasingly turning sales efforts over to the channel with the goal of eventually relying on the channel for all Business ByDesign sales. "2011 is the year of building out the channel," Iannotti said.

"The only way we can scale this business is through the channel," echoed Jeff Stiles, senior vice president of SME (small and midsize enterprises) marketing, in an interview.

Fifteen partners have been working with Business ByDesign and another 17 are about to start, Iannotti said. (Some at the conference wore light blue, space-age Business ByDesign jackets handed out by SAP.) The company expects to win 1,000 new customers for Business ByDesign this year and partners will account for more than 60 percent of those sales, he said. "The commitment is to be fully 100 percent channel by next year."

And some partners are jumping on the Business ByDesign bandwagon. "It was evident to us that the next-generation, C-level executive was going to want to do business in the cloud," said Robert Gaby, principal with Arxis Technology, an SAP partner based in Simi Valley, Calif. Arxis became a Business ByDesign partner in July, although about 75 percent of the company's business today is reselling Sage ERP applications.

Gaby said he evaluated competing SaaS ERP products from NetSuite, Intacct and others before enlisting with SAP. While he praised the Business ByDesign product itself ("once we looked at the product, it was a no-brainer," he said), "it was equally important to us what the relationship with the vendor would be. And there was a clear sense we were going to have a good relationship with SAP."

Arxis began selling in November, closed a deal in December and has others in the pipeline. "I would say it's exceeding our expectations," Gaby said of the Business ByDesign opportunity.

Next: What Business ByDesign Has To Offer Partners

But other channel partners who already resell SAP's on-premise BusinessOne and Business All-in-One application suites are taking a wait-and-see approach on whether to add Business ByDesign to their product portfolios.

"Business ByDesign is very new to the market," said J. Kevin Huston, sales vice president at Bokanyi Consulting, an SAP partner based in Houston. But he was quick to acknowledge: "I've got to have a SaaS solution in my toolkit."

Other partners worried that Busines ByDesign, which is targeted toward small companies and the low-end of the midsize market, could cannibalize BusinessOne and Business All-in-One sales. (Bob Courteau, president of SAP North America, said in an interview that he expects that over time Business ByDesign will "represent a high percentage of the low end of the marketplace." But the company has said it sees markets for both on-demand and on-premise applications.)

SAP is assembling what it calls a "90-day enablement plan" for partners, including training and lead-generation assistance, to help resellers go from signing a contract to resell Business ByDesign to closing their first deal within 90 days.

The average sales cycle for Business ByDesign is 28 to 35 days, Iannotti said, and the average implementation time is 12 to 16 weeks. Subscription fees for Business ByDesign are $149 per user, per month and the average subscription price for partners has been $15,508.

Partners earn margins of 30 percent for the first year of a Business ByDesign contract and 30 percent of renewals, Stiles said. "And the partner owns the customer relationship."

SAP also plans to develop different business models for partners to follow, including reselling Business ByDesign subscriptions, playing an influencer role or providing services around the SaaS application set. SAP is also encouraging partners to develop packages of services around the software including migrating data from aging on-premise systems to SaaS systems.

SAP is currently on version 2.6 of Business ByDesign, which debuted last month with a new develop kit for building software extensions and add-ons. Release 3.0 is due this summer with a six-month release cycle for subsequent updates.

Business ByDesign is currently hosted in a data center running in SAP's native Germany, but a new hosting facility is being built at the company's U.S. headquarters in Newtown Square, Penn.