SAP ByDesign: Still Ticking, With More to Come

The rumored death or eventual demise of SAP’s Business ByDesign (ByD) have circulated widely this week. Saugatuck believes they’re dead wrong, and here’s why – and what is much more likely to happen.

After a series of interviews and conversations with SAP executives and partners at this week’s TechEd event in Las Vegas, here’s the straight dope: This is a migration that has been planned, is being executed as planned, and has been misconstrued by several parties that should know better.

The net is this: The “old” ByD will kept going while a newer, Cloud-optimized version is being developed and refined, and which will be part of the HANA Cloud Platform-based portfolio. Development and support for the current ByD continues using an India-based team, which is also working with a German team on the migration. And ByD is considered to be strategically important to SAP.

Underneath it all, this is a very normal, very expected move by SAP, as it would be for any software vendor building and evolving from traditional software into Cloud.

Why is it happening? Based on conversations at TechEd with SAP leadership, ByDesign was envisioned prior to the advent of Cloud, especially before the advent of significant Cloud use for business management software. It was architected originally as an on-prem solution, then re-envisioned and reengineered as a Cloud-enabled solution. SAP believes that ByD is a necessary part of its portfolio, particularly as a means to extend the SAP user experience from large corporate environments out to divisions and subsidiaries, as well as out to value chain partners. SAP sees a continuing role for ByD in this manner.

My way of looking at it is this: ByD began as a small, custom-built bicycle with training wheels that SAP used to learn how to ride Cloud ERP to mid-sized customers, and to allow those customers to learn to ride Cloud ERP themselves.

It was built, rebuilt, and over-built using old technologies that had to be extensively adapted and improved, while newer and more flexible, powerful technologies and approaches were coming into the market.  To further the bike analogy: SAP’s skillset, processes, plans and resources stuck it with using cold-rolled steel, while the rest of the world was starting to build carbon-fiber bicycle frames. That made the ByD bicycle more costly, and relatively limited in capability, when compared to more modern velocipedes.

SAP is going to let customers continue to ride the older bike, while building a spiffy new ten-speed cycle that has bigger wheels and a basket (HANA), with tools and parts that are universal within the SAP cosmos.

OK, what about the impact – will SAP lose existing ByD customers because of this? Maybe, but doubtful – and the installed customer base is modest to date thus far. This move by SAP provides little reason for those customers to switch. The product is being supported and refined, while a more powerful and capable version is being developed – and to which those customers will be migrated.  Given its relatively young age, it is very unlikely that ByD has reached its end of useful life for most customers. Besides that, once any business software, Cloud-based or otherwise, becomes part of business operations (and management), it is extremely difficult and costly to swap it out for something else.

Will SAP lose potential customers because of this? Maybe, but equally doubtful. The company has had some, limited success selling ByD as it currently exists. The traditional SAP software sales teams have faced challenges moving the product, and the newer sales teams with Cloud expertise primarily focused on larger enterprises over mid-sized companies. Where SAP has found some success with the product is in a “two-tier” approach, leveraging existing large ERP customers with divisions or subsidiaries that need some ERP but lack resources. NetSuite has pursued this strategy with some success as a entry point into larger enterprises for several years now. Longer term, however, a more powerful, less-expensive, and more scalable Cloud-optimized version should enable significantly improved opportunity for SAP.

SAP’s greatest challenge in this situation is likely to be partners who are uncertain as to what to do while ByD simmers on the back burner and then migrates. SAP must communicate well and frequently, clearly articulating the effects on, and potential / likely benefits to, development and channel partners. And thus far the communication and messaging has been very unclear at best. One significant positive will be the use of a single SDK across the entire SAP Cloud-based software portfolio, reducing the costs of development and extension for partners (and customers).

In a few years, this is going to make little difference anyway. We expect SAP to continue to move relatively quickly away from its legacy model toward a diverse portfolio of Cloud-delivered solutions that will be bundled and formatted for a wide range of different markets and customer use cases. ByD will be part of that portfolio, most likely delivered as both a bundle with other SAP and partner services, and as components of its current incarnation.

Bruce Guptill

About Bruce Guptill

Bruce Guptill is Saugatuck Technology’s SVP and Head of Research, leading the development and delivery of Saugatuck’s ongoing research programs and output. His own work focuses on the changing business of IT, including provider-side business models and go-to-market strategies, enterprise buy-side IT planning/budgeting/acquisition, and the changing roles and value of enterprise IT and Finance organizations. His insight and guidance on IT vendor channel management, market identification and development, and buyer behavior analysis has enabled hundreds of established and startup IT providers to find, enter, and profit from new and traditional markets, while helping to guide user enterprise leaders toward optimal IT procurement and vendor management. In addition to a wide range of technical and professional certifications, Guptill holds an MBA in marketing and finance, and a BA in the psychology and business of mass media communication. Married with three children, Guptill resides on Cape Cod in southeastern Massachusetts, and is a lifelong fan of the Red Sox, Patriots, Celtics, and the University of Connecticut Huskies.

One thought on “SAP ByDesign: Still Ticking, With More to Come

  1. Great comments – and I agree completely. Anyone that is close to ByDesign knows the product is key to SAP’s success in the Cloud, and SAP needs to be successful in the Cloud. As an SAP Business ByDesign implementation partner, while there might be a couple of curves to deal with based on the dis-information, the future is very bright.

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