If you’re following the developments in the SMB (small and midsize business) space, you’ve probably heard about the latest Microsoft move. MS Dynamics Entrepreneur Solution is a new, fully Office-integrated suite aimed at the really small fry. Sage and Intuit are the primary targets for this particular release, and so far the release is limited to the Netherlands, but it’s another little step towards the SAP vs. Microsoft showdown we’ve talked about in the past.

SAP is betting the hard on the SMB market, but Microsoft certainly isn’t about to stand down. Indeed, Microsoft Business Solutions head Kirill Tatarinov recently told Reuters that he’s eager to meet SAP’s new Business ByDesign in the field.

“There are many organizations that may not use Dynamics just yet, but many are already using the infrastructure that Dynamics is built on,” Tatarinov said.

What makes this battle for the SMB space so interesting is the different strengths of the key players. Microsoft has a strong channel and beach heads everywhere, while SAP is (generally) technically solid. Oracle’s fierceness in and of itself goes a long way, and the smaller niche players have the advantage of specialization in their respective fields — which, in combination with their inherent nimbleness, may help keep the big bullies from stealing their lunch money. Here’s to an interesting 2008!

Matt Danielsson
Editor

With product code names, companies tend to lean more towards whimsical and creative. Take Microsoft. The company has used locations, like “Whistler” for Windows XP (Microsoft held design retreats in Whistler, British Columbia) or “Longhorn” for Vista (the Longhorn is apparently a bar in Whistler).

And then there’s SAP, which for its brand new, on-demand, game changing midmarket offering, went with… A1S.

In an interview with SearchSAP.com about the new All-in-One improvements, Tom Kindermans, senior vice president for SAP’s SMB in EMEA, speculated that the A1S code name might be behind some of the confusion surrounding SAP’s midmarket offerings. And it makes sense. Says Kindermans:

Some of the confusion comes from the codename we are using — A1S — for the new suite we announced. This created some confusion because some people believe A1S will be the successor of All-in-One, which is not the case. The real commercial name will be announced in September. And we have a very clear positioning for each of the three [midmarket products].

SAP doesn’t think the error is fatal, though, it will just require that much more investment in marketing to differentiate the products. Still, we might expect a more innovative nickname for SAP’s next new product. Perhaps “Sylt” after the German resort town famous for its clothing-optional beaches?

Kindermans went on to echo what other SAP executives have said: That even with the release of A1S and resulting confusion, he doesn’t expect All-in-One’s growth to slow at all, because the products address different markets.

It’s out of the question that A1S can replace All-in-One for several reasons. One of the reasons is that we’re addressing another type of customer, what we call an unserved market. It’s a hosted solution which we don’t have in the portfolio for the moment. So we are absolutely convinced that the business A1S will generate will not cannibalize All-in-One business.

SAP will, obviously, be relying on the midmarket, and its 3 products, to generate significant customer growth on its way to the company’s goal of 100,000 customers by 2010. So, while some analysts and industry watchers have questioned whether that goal is realistic, Kindermans thinks it is within reach, with the SMB products being relied on heavily.

[The 100,000 customer goal] is definitely within reach. We haven’t changed our goals and there is no reason to change the goal. Our Business One product will contribute heavily to the 100,000 customers. But not only Business One, A1S will contribute. All-in-One has over 10,000 customers but we continue to invest in the product as before and we believe we will have the same growth in the next few years… so this 100,000 customers is within reach and we are very firm to confirm this number.

Jon Franke
News Editor

It’s easy to lose sight of SAP’s push into the midmarket beyond the never-ending hype/secrecy surrounding SAP A1S, the upcoming on-demand ERP solution slated for a 2008 release. Business One, the baby bear of the SAP family targeting the under-100 employee crowd, makes up a sizable chunk (15,000) of SAP’s <40,000 customer base. SAP All-in-One, the other current midmarket solution, makes up another 10,000 customers. And they’re not going anywhere, even though A1S tends to grab all the headlines.

With that in mind, it’s worth noting that SAP is pushing Business One forward with new CRM functions, financial tools, printing tools and general polish in the new release. Business One 2007, as the solution is called, is being tested by partners now and should be generally available in November or December this year, James Niccolai reports.

It’s also worth mentioning that SAP is beefing up the partnership network with another 26 Business One partners. All-in-One scored another seven partners of it own to boot. That’s on top of the nine existing software vendors were announced at its summer sales meeting July 30 in Washington, D.C., Barbara Darrow said. Don’t be surprised if you hear about additional strides in this space before TechEd in October either, as SAP is under increasing pressure to lay the groundwork for that lofty 100,000-customers-by-2010 goal they announced earlier.

Bottom line: There’s more to SAP’s midsize strategy than A1S, and with last year’s 19% growth rate for All-in-One alone, customers seem to realize this too.

Matt Danielsson
Editor

SAP A1S, the new on-demand ERP solution we’ve been hearing about for quite a while now, is something of a tease when it comes to actual specifics. We know a few basic facts, like that it’ll be for the 50-500 user crowd, feature a try-before-you-buy option, and general tidbits about how industry-specific configuration will be a snap. Beyond that, there really hasn’t been much on the news front beyond some hemming and hawing about whether it’ll cannibalize the existing Business One and All-in-One markets.

Frustrating as the secrecy is (especially in combination with SAP’s continuous pre-hype), there’s little doubt in my mind that A1S will indeed make a bit of a splash when it comes out in Q1 2008… Or whenever the final launch will be. SAP is betting big bucks on this one, and most analysts agree it better be the silver bullet SAP thinks it is if the company has a chance of hitting the 100,000 customers-by-2010 mark. The move to an on-demand model may seem strange for a company like SAP, but it’s in line with the general SOA push the company has been espousing over the past few years.

That’s why this latest article from Computer Business Review Online caught my eye. Says Angela Eager in her article:

With its new release, NetSuite is moving up in the market, taking it closer to the SMB ground covered by SAP, Oracle, and Microsoft, through the addition of features designed to automate complex operations and make processes simpler for growing mid-sized companies.

In a nutshell, NetSuite, which registered for an initial public offering (IPO) today, is upping the ante with easier installation, multinational sales support and new BI functionality. Now, Ellison’s baby isn’t going to drive the SAP juggernaut into retreat anytime soon, but it does make the SMB space just a little more crowded.

We’ve written about the upcoming face off with Microsoft Dynamics before, and the ongoing war with Oracle is hardly news either. But what I want to hear is your take on the midsize market by this time next year. How do you see this playing out? Will SAP crush the midmarket with technical superiority, or will Microsoft sucker-punch the German giant with its many SMB beach heads? Will Oracle’s grand plans hit the big time?

Send your thoughts to mdanielsson@techtarget.com by July 10 and you’ll be entered to win an SAP book bundle:

• Succeeding with SOA, by Paul Brown
• SAP Enterprise Portal: Technology and programming, by Arnd Goebel
• Inventory optimization with SAP, by Marc Hoppe

Good luck!

Matt Danielsson
Editor

The peculiar SAP-Microsoft partnership continues to deepen. We’ve written about this in the past, but I think Jon Reed summed up the situation best with the image of “one set of hands shaking and another set in a thumb war“. In the upper end of the market, SAP and the ’softies are best buds, as evidenced by their solid Duet commitment. Last I heard they were well past the 300,000 user mark and it was one of the big stories at Sapphire Atlanta last month.

This week was Sapphire Vienna, and sure enough, another big SAP-Microsoft story dropped: SAP and Microsoft are setting up a joint German lab to marry SAP’s Business Suite with SQL Server 2005. That makes a lot of business sense, and it doesn’t take much imagination to see this as another way of teaming up and sticking it to Oracle. Ellison had a pretty big week too by the way — the Agile acquisition alone is enough to keep SAP on it’s toes.

But then there’s this midmarket business, the elephant in the room neither company seems to want to talk about. Microsoft is serious about Dynamics, and they’re starting to get nods of recognition. But SAP is betting hard on A1S, the upcoming on-demand ERP solution targeting the niche of customers that fall between the already existing SMB solutions BusinessOne and All-in-One. Furthermore, SAP made the public commitment that it will nearly triple its customer base by 2010 — a goal that puts it squarely on a collision course with its friends in Redmond. Indeed, as 2010 and the inevitable SMB surge SAP needs in order to hit the magic 100,000 customer-mark draws near, I predict considerable friction at just about the same time Duet 2.0 rolls out.

But for now, everything is peachy. Kumbaya, and so on.

Matt Danielsson
Editor

Over the years, we've taken our fair share of jabs at SAP for being overly complex, bogged down with acronyms and seemingly always being a few steps ahead and out of sync with many customers. Sure enough, SAP has always been somewhat intimidating, and we did some head-scratching over how SAP was going to accomplish it's very ambitious small- and midmarket push that was announced earlier this year. How are you going to convince a small mail order firm or local coffee shop chain that SAP will make life better than, say a Microsoft Dynamics solution?

Well, it seems like SAP is starting to get it. Yesterday, a Business Week story reported on the simplification of Business One, where both implementation and management have been streamlined enough that we now seem to be hitting that magic tipping point where the practical benefits of SAP outweighs the hassle. Costs are being pushed down too — less than $10,000 for a complete Business One installation is not out of reach for a small company once you factor in the productivity gains and overhead savings. Business One's big brother, All-in-One, is also making rapid strides.

So SAP is making headway on its aggressive downstream push. That's fine and dandy, but the obvious question is, what's going to happen with the Microsoft relationship? In the top end of the market, SAP and Microsoft are quite chummy. Duet is gaining a lot attention. Rightfully so, if you ask me, since it's a cool technology and it seems like a strategically correct path at least for SAP. When asked whether there are more joint SAP-Microsoft products on the horizon, Shai Agassi wouldn't commit to anything but clearly left the door open: "We'll see how Duet plays out — if it's successful, we may look into other areas." That sounds pretty promising to me.

For the small- and midsize market, things get more interesting. Joshua Greenbaum wrote about this in a recent column, pointing to the cautious dance the two are currently engaged in. What's going to happen when Dynamics GP, AX, NAV and so forth get rolled into one single product in 2008? Will Microsoft continue to sit idly by watching SAP bag the fattest account? Doesn't seem like the 'softie style. We're already seeing some headlines pop up hinting of things to come. Microsoft was careful to use diplomatic wording when it ditched SAP in favor of Dynamics for it's Home and Entertainment division, but they couldn't resist plugging the" two-to-four times cheaper" angle in their announcement. Shortly thereafter, military supplier BlackHawk chose Dynamics over SAP because of simplicity and ease of integration. When the new version of Dynamics AX was released in June this year, cost and ease of use came up once again.

There's potential for great things, and there's potential for war. Only time will tell how this is going to play out, but there's potential upside for SAP and Microsoft users alike. In the mean time, we're going to look into the more practical aspects of just how Dynamics stack up against SAP's All-in-One.

In October this year, we will have two experts argue the case for All-in-One vs. Dynamics in a side-by-side face-off column. Those of you who followed the SAP vs. Oracle face-off between Josh Greenbaum and Faun deHenry earlier this year will recognize the format; we aim to move beyond marketing dogma and take a hard look at the practical, real-life pros and cons of either solution so that users can make the best choice for their companies. We have veteran expert Axel Angeli spearheading the All-in-One side of the argument, so expect the gloves to be off. Stay tuned!

Matt Danielsson
Editor

The executives and staff at 5th Gear Solutions, a value added reseller (VAR) of Business One software, have gotten a little clever.

The consultancy, which caters to manufacturers, recently signed on to sell Business One Fourth Shift Edition, as an expansion of its software business. David Payne, who is president of 5th Gear, also runs Advanced Systems Integration, a reseller of Microsoft Dynamics AX software.

Payne and his staff recreated the look and feel of SAP’s Website for 5th Gear. The navigation page, links, etc. are all similar. Even the SAP logo is used at the bottom right hand corner of the page.

Jeff Onesto, a business development executive at 5th Gear, said the site went live about two weeks ago.

“The idea is to take advantage of the ecosystem,” Onesto said. “SAP has created a lot of amazing processes, so why recreate the wheel?”

SAP shows no signs of slowing down their drive into the midmarket, as Matt Danielsson discussed in his recent blog post, SAP turning up the heat on Oracle?. While SAP was already gaining traction in this market with their SAP All-in-One and Business One product, we should continue to hear more about these products, especially next month at Sapphire Orlando.

Dawn Kawamoto of CNet News.com also pointed out the expected growth in SAP's midmarket revenue in SAP eyes midmarket for growth.

"Half of the German company's software revenue will come from new products by 2010, CEO Henning Kagermann said Thursday. Midmarket companies–those with fewer than 2,500 employees–will account for 40 percent to 45 percent of total software sales, he said. That compares with the current level of roughly 30 percent " (CNet News.com).

For the latest details on SAP's midmarket moves and how they are stacking up to their competitors Microsoft and Oracle, read Rob Westervelt's Q and A with Michael Sotnick, senior vice president, small and midsize business, SAP America Inc.

What do you think? Does SAP have what it takes to compete in the midmarket? If you're an IT professional for a small or midsized business, we want to hear from you.

We're also here to help. Our ERP guide for the midmarket will aid you with the decision-making process and will help you decide if SAP is the right choice for your organization. And our latest podcast, SAP implementation challenges, potential pitfalls, addresses how to overcome common challenges for an SMB's SAP implementation.

James Smith, IT director of dishware and stemware maker Rosenthal USA discusses the challenges and potential pitfalls of an SAP implementation.

Download the podcast here: This week we also discuss the latest SAP news including where SAP stands in the business process management market and SAP's march down into the midmarket.