SAP sets hopes on Web-based apps

As ERP vendors search for the key to unlock the mid-market, SAP AG has declared success in at least one initiative, and is banking on the Web to help them make further inroads.

In addition to its much-hyped portal strategy, SAP AG also announced during the Sapphire ’99 user conference in Nice, France, that select R/3 applications will be made available over the Web.

According to Hasso Plattner, SAP’s co-chairman, such Web-hosted applications will attract companies with annual revenues as low as US$2 and up to US$20 million.

However, SAP will not offer the service directly. Instead, third-party service providers will host the applications, while SAP sticks to support. To that end, SAP has already reached deals in Europe with companies including Deutsche Telekom AG, EDS and AT&T to host SAP software .

Similar plans are in the works for Canada, said Robert Racine, SAP Canada Inc.’s vice-president for eastern Canada in Montreal. “This will provide [small companies] with another solution where they can also have an R/3 solution for their customer base, albeit over the Web in an outsourced environment,” Racine said.

Clients of the service would pay the service provider a one-time set up fee, and then pay for the R/3 functionality on a monthly basis, Racine said. But SAP is so far unwilling to speculate on who these providers might be in Canada, although Racine did offer hints.

“Which companies in Canada have trust relationships with the small – and medium-size businesses? Well, the answer to that is the banks, the telecommunications companies, the audit firms and the larger IT consultant firms.”

According to Racine, all of the above have been talking with SAP about entering into an agreement to provide R/3 services via the Web.

However, at least one industry observer said the outsourcing of applications is still an untested market, and that SAP’s timing in offering such a service may not be ideal.

“Outsourcing has always been a big market. Whether it’s a large market for the applications business, I don’t know,” said John Shoesmith, Canadian software research manager with IDC Canada in Toronto. “There’s probably pretty big opportunities out there, but it’s going to be a hard sell for the next six months, especially because you still have Y2K concerns among those mid-sized organizations.”

Earlier this month, SAP also announced that 150 companies in North America – roughly 20 of them in Canada – have installed ERP modules in as little as 12 weeks as part of another mid-market initiative, AcceleratedSAP.

Launched last May, AcceleratedSAP lets customers rapidly deploy ERP solutions with the help of vertical industry templates that help customers change their business processes to suit the software.

One AcceleratedSAP user is Ken Anderson, CIO at Canadian Blood Services. The Ottawa-based government agency replaced the Red Cross as the blood collection and distribution group for all of Canada, except Quebec. He said SAP offered him the service after a big five consultant decided his implementation goal was unrealistic.

“They essentially said to us…there’s no way we could actually meet an April deadline for implementation, that we’d be lucky to get it in by summer,” Anderson recalled. “But this wasn’t a wish list. This was a must.”

Anderson needed to replace a financial system running on an IBM Corp. ES9000 mainframe that was, by Anderson’s own admission, “many generations out of date.” The new system needed to go live within six months in order to keep pace with the government’s March 31, 1999 fiscal year deadline.

Through a combination of AcceleratedSAP expertise, ruthless stamping out of scope creep and a series of quick decisions, the accounting, general ledger, finance and purchasing modules went live on April 6, and Anderson had his 400 users trained and ready for the switch.

He credits his willingness to go along with the AcceleratedSAP strategy, which involved radically re-designing CBS’ business processes to match SAP’s template for the medical industry, as the key to his success.

“Rather than trying to reinvent the wheel, if you’re telling me don’t change the software and organize my business processes to meet yours because you spent thousands of man hours developing it, I say, ‘Sounds good by me.'”