SAP finally admits Business ByDesign defeat

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When SAP announced its decision to buy SuccessFactors in December last year, commentators and analysts said the purchase was a big deal, and not just because the acquisition cost SAP $3.4bn - a 52 per cent premium on the closing price of SuccessFactors at the time.

The purchase was hailed as significant because it could change SAP's delivery of cloud computing applications.

For the last five years SAP's cloud strategy revolved around Business ByDesign, a set of on-demand enterprise resource planning (ERP) applications for the mid-market that includes software for financials, human resources, supply chain management, business analytics and compliance management.

The SuccessFactors technology gave SAP the capability to put core business applications into the cloud as standalone offerings. And this is exactly what SAP has done now, revealing its new strategy at the Sapphire customer event in Orlando.

SuccessFactors clearly stole the limelight at the event - even from SAP's baby of the moment, in-memory database Hana.

Jim Hagemann Snabe, SAP co-chief executive, said a new SAP cloud business unit had been created to save the firm from integrating SuccessFactors technology with its own, and to ensure SAP did not risk hurting its newly acquired powerful portfolio of cloud technology.

Perhaps even more interesting is that SAP is quickly dumping its Business ByDesign set of applications for the newer model of SuccessFactors.

It was the SuccessFactors founder and chief executive Lars Dalgaard who broke the news.

"Business ByDesign was a beautiful vision but it was too big. Everyone does not want to put all their apps out in the cloud in one go. It was intimidating," he said.

SAP will now break up Business ByDesign into a number of different applications that customers can buy as they like.

"The pricing of these applications is attractive and their availability is immediate," added Dalgaard.

Snabe also admitted during a press conference that trying to create cloud versions of on-premise applications, like SAP did with Business ByDesign, was not the right approach to the cloud. He said that Microsoft with its Dynamics offering, and Oracle with its Fusion alternative, would soon find this out.

"It is a fundamental mistake to take an app that is designed for on-premise and put it in the cloud," said Snabe.

"We know this because we worked on Business ByDesign. The fact that they [Oracle and Microsoft] started to create them [Fusion and Dynamics] six years ago, tells you they cannot have been creating them with the cloud in mind."

15 May 2012

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