By Pat Garrehy, Rootstock President & CEO November 12, 2013 - When SAP recently decided to stop working on its mid-market BusinessByDesign Cloud ERP product, it didn’t take long for the competition to voice their opinions. Some thought it appropriate to chide SAP for their decision to stop meaningful development on the product. Of course, other companies promptly stated they were in a position to rectify this mishap and rescue BusinessByDesign customers. Admittedly, I thought it clever when one competitor offered a free trial for 100 user BusinessByDesign customers if they signed up with them by the end of the year. However, my experience told me that these manufacturing firms would take their time making an informed decision.
This is especially true when they were told that a product that they had just bought was, in essence, being pulled off the market.
It just goes to show you no matter how much money you have, it isn’t a guarantee for success. And SAP had more money to throw at their product than the combined revenues of all of the Cloud ERP players! I’m sure all of us that had competed over the past three years against SAP BusinessByDesign knew of their technical issues. Even with the brand favorability of SAP, BusinessByDesign was failing in the mid-market sales channel and not performing for its customers to the standards established by the large SAP On-Premise ERP solutions with its users. We saw SAP being very active in deals in 2010 and into 2011 – yet noticeably absent since late 2012.
My initial reaction was that “SAP is not going to get their 40+ percent of the Cloud ERP manufacturing market as they obtained in the On-Premise ERP Market.” My second thought was to actually compliment SAP for their decision to cancel continued development of BusinessByDesign. Would it have been better to create a massive marketing/sales campaign to get even more mid-market companies to sign up for this Cloud ERP product which was creating so many difficulties for both SAP and its customers? Or, was it better to decide to cut bait? After all, SAP isn’t the first company to make a mistake bringing out a new product with good intentions. Ford’s Edsel, Coca Cola’s New Coke, Apple’s Lisa? All were brought out with great fanfare; all were ultimately cancelled.
All three companies were, in turn, chastised by General Motors, Pepsi and MicroSoft, none of which has a pure as gold history on new product introductions either. What Went Wrong? You can take it to the bank that SAP has, for the most part, figured this out. You just can’t build a software solution with On-Premise rules and, half way through the project, simply switch it to the Cloud. Here is what the rest of us can learn. There is a popular assumption that, with every technological paradigm shift, it is easier to develop software than in the previous era.
One reason behind such thinking is that product designs can be built upon foundations from the past. There is some truth to this. A developer will learn a little more on what to expect with each iteration. In fact, when considering bill of material explosions, cost accounting, inventory control, material requirements planning, material movement transactions, standard cost rollups, batch allocations and scheduling functions, among others, the last 40 years of ERP software have been developed with the most basic of verbs – logic that essentially remains unchanged. Such is true with Cloud ERP as well.
In addition, there is still a capability to generate “simple screens” (pages) quickly. The speed to do so is relatively unchanged with prior generation software.
The Landscape Today
To develop a complex screen in the Cloud today, however, one must be considerate of many more variables than in years past. The many new and different use cases paired with the potential of accessing large transaction sets makes development in certain areas much more difficult. However, what has not changed is that ERP systems are “transaction intensive.” Considerations on how the developer codes to optimize performance are paramount. An example of this can be found in developing for a Public Cloud.
Unlike On-Premise or hosted solutions, a public Cloud ERP solution needs to be very considerate of its imposed governance rules. Thus, considering how governance rules can affect the coding and being ever mindful that the integrity of the data is paramount, programming now requires extra time. There is yet another change from the past. The software needs many different interfaces to other software applications as well as being able to work on various browsers and mobile devices, a major complication while coding. There are many other differences in developing for the cloud versus developing for On-Premise software.
An On-Premise developer cannot jump into cloud development without really understanding and appreciating those differences. If they do start to develop prematurely without a thorough understanding, rework will certainly ensue. Every platform has strengths and limitations. The development team that clearly understands the limitations will craft the logic to effectively execute the complex requirements of ERP. The development team that understands the strengths of the Cloud will exploit those strengths to embed more creative content and customer value into the ERP solution.
In the case of SAP’s BusinessByDesign, it actually started out as an On-Premise replacement for R3 and then switched to a development for the Cloud. As a result, it was doomed from the start and the more the code grew, the more rework was required. That’s why there were so many false starts in the market.
What This Means for SAP BusinessByDesign Customers
SAP has eliminated a major business problem for itself by effectively pulling its product off the market and it can concentrate on doing the ‘right thing’ as a reputable software vendor by supporting their customers in a wind-down period as those customers take their time looking for alternatives. While there were reported technical problems with the software, there were also a great deal of functions and features that customers liked. These more informed BusinessByDesign customers will take their time in reviewing a number of alternatives. They are going to assure that they do not get burned again. Only the most capable Cloud ERP software products will stand up to the scrutiny of these now more knowledgeable customers who will eventually migrate to another Cloud offering.
One has to assume that SAP is being professional about this situation and by supporting their customers, and not leaving them hung out, SAP will be giving their 700+ customers time to look for a strong Manufacturing Cloud ERP provider that can do the job that they and their customer expected BusinessByDesign to accomplish.
ABOUT THE AUTHOR:
Pat Garrehy is the Founder, President, and CEO for Rootstock Software, a Cloud ERP company, and has an extensive background as a software architect and engineer. With over 30 years of management, sales and technical experience, Garrehy brings a unique blend of analytical focus and business savvy to the table. Garrehy is also the founder and former CEO of Relevant Business Systems, a client-server ERP software provider with an exclusive focus on discrete manufacturing companies. Relevant, which was sold in 2006, remains the most profitable division of the acquirer to date. As a University of California at Berkeley graduate, he holds a BS degree in business and mathematics as well as an MBA in finance from the University of Southern California.
