SAP to offer hosted midmarket apps later this year

SAP AG's planned suite of hosted midmarket applications will be available in select markets later this year. The company will offer more details on pricing and functionality after the CeBIT trade show in March, according to CEO Henning Kagermann.

Kagermann spoke about the new hosted product, known internally as A1S, with reporters at the company's headquarters in Walldorf, Germany.

A1S will target midmarket customers seeking an inexpensive, easy-to-deploy, low-risk suite of business applications that includes ERP and CRM. The on-demand product will be available as a monthly subscription, giving smaller companies the flexibility to test the service and drop it if they don't like it.

The new offering comes as SAP moves to capture a larger share of the huge, but cost-sensitive, segment of midmarket companies that are showing interest in hosted business applications such as those offered by Salesforce.com Inc.

Kagermann referred to A1S as an "entirely new product" that will not be a hosted version of the company's All-in-One product. All-in-One is a slimmed-down version of the mySAP Business Suite, which is designed for large enterprises.

The hosted offering will be a highly preconfigured, "off-the-shelf" product that gives companies a range of applications but limited flexibility in terms of customization, he said.

"To drive the price down, the product must be highly standardized," Kagermann said.

By narrowly limiting product customization and thus complexity, SAP and its partners will be able to deploy the offering much faster, Kagermann said. Fewer consultants will be necessary, resulting in lower costs.

SAP aims to squeeze the new hosted offering between two of its existing products targeting small and medium-size businesses (SMB): All-in-One and Business One. As part of the company's assault on the global SMB market, A1S will target businesses with between 100 and 1,000 employees, while All-in-One will focus on companies with between 1,000 and 2,500 employees and Business One on companies with between 10 and 100 workers.

The rollout of the new hosted service will not steal customers from Business One, an inexpensive offering that is also highly preconfigured, Kagermann said. On the contrary, "we expect more than 50,000 of our targeted customer base of 100,000 by 2010 to be Business One customers," he said.

For customers that want more functions and greater flexibility to customize the software, All-in-One is the preferred product, Kagermann said.

SAP currently has 39,000 customers.

Kagermann expects demand for the hosted service to be strongest in the U.S., which is "ahead of Europe" in take-up of on-demand services.

Pricing of the service will be highly transparent, Kagermann said, but he declined to provide details. Nor would he divulge the name of the new service.

"We are currently in talks with customers and partners on numerous issues, including pricing and functionality," Kagermann said. "It's too early to talk details just yet."

Copyright © 2007 IDG Communications, Inc.

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