SAP Makes Its Move

By Rochelle Garner, CRN,

SAP will make much of a topic at this week's Sapphire show that it's never raised at any previous customer conference, in any country: SAP's partner channel for its small to midsize business applications. At the U.S. show in Boston, the Walldorf, Germany-based software giant will—with great fanfare—unveil its first formal partner program and describe its channel approach for selling its SAP Business One and mySAP All-in-One software. In essence, SAP has made the U.S. show the cotillion ball in which its newly matured, global partner effort makes its debut.

Why the coming-out party for SAP's channel? Because of the strategic value SAP now places on markets outside its traditional enterprise playground. On one side, SAP sees midmarket software as "easier-and-cheaper-to-implement" applications it can sell into customers' subsidiaries, SAP CEO Henning Kagermann told CRN last week. "Also, the midmarket is important as we look for growth opportunities. So the first reason is driven by existing customers. And the second is SAP strategically wants to expand beyond our enterprise applications."

Of course, to adequately reach those SMB customers, SAP needs the local presence only business partners can provide. When SAP launched its downmarket efforts two years ago, that channel didn't exist. Since then, the company has built a channel organization from scratch. "We now have hundreds of partners," said Kagermann. "We have resellers. We have partners that are both resellers and offer a micro-vertical solution for mySAP All-in-One, which I call a combination between ISV and reseller. And we have ISVs that complement our solutions and rely on our channel partners."

This past year, the company grew its channel organization by 91 percent. In the process, SAP recruited channel managers from throughout the industry—such as Donna Troy from Network Associates, Ira Simon from Computer Associates International and Michael Sotnick from Veritas Software—to bring structure and discipline to its partner programs.

"We've had to grow up," said Simon, vice president of channel marketing for SAP Global SMB. "There are a lot of one-off agreements out there, and that's not a scalable model."

To be unveiled this week, the SAP PartnerEdge Channel Partner Program will include a new tier structure in place of SAP's currently undifferentiated model, a telesales support organization and an online network where partners can collaborate. While many elements may sound familiar, SAP has given each an unusual twist. Take the new tiered model, where partners will move up through Associate, Silver and Gold ranks by accruing what SAP calls "value points." Unlike similar systems, however, SAP does not assign points by the amount of revenue partners generate. Rather, points are either transactional—as in the number of sales completed or software add-ons a partner developed —or capability-related. The latter category awards points for sales and technical people trained, certifications, customer satisfaction numbers, referenceable customers and producing white papers, for example. Sales transactions will pay out the most points. What's intriguing, though, is that partners cannot rise to the next rank on sales alone. They still need to augment sales with software development or training, for instance.

SAP's SMB partners say they welcome the value points approach. "If you're really serious about [SAP], and you're going to make it a big part of your business, this program really rewards you," said Dan Carr, president of Computer Decisions International, Farmington Hills, Mich., which resells, implements and develops software extensions for Business One. "The more intimate you get with them as a reseller, the higher your score goes. And it punishes the guy who's just hanging around to take my dinner—like the predators in the Microsoft channel that come in and steal a customer from other Microsoft resellers who've cultivated a long sales cycle."

Tier thresholds and other issues will be finalized by July, said Simon. SAP will roll out the new model the beginning of next year. In the meantime, SAP will release a raft of new tools, including a deal-registration system, more co-marketing and co-development funding, online training and competitive positioning, and the PartnerEdge Solution Network—by which partners around the globe can promote and find add-ons each has developed for Business One or All-in-One. And under the new value points system, partners that develop extensions for SAP's SMB applications receive points whenever another partner sells that software.

"In the past four to five weeks I've received calls from partners in Canada and Australia, wanting to talk to us about our Crew solution for the construction and service provider industries," said Braid Nicolaisen, president of Milwaukee-based et alia, an SAP partner for both Business One and All-in-One. "It makes a lot of sense if we can work with partners around the world."

But these and other channel initiatives are only the tip of the proverbial iceberg. Said Troy, senior vice president of Global Small and Medium Business, SAP is poised to recruit partners from rivals in the SMB arena. In the Business One space, that means targeting the best partners working with the Sage Group and Microsoft Business Solutions, for example. In All-in-One, SAP has its sights on implementers and other solution providers that now deliver Oracle's E-Business Suite and EnterpriseOne (late of PeopleSoft and, before that, J.D. Edwards).

"We are looking at really going after our competition's partners and having them come over to us with recruitment programs," said Troy. "We want to encourage those with deep experience in ERP and CRM to look at SAP. But we will not saturate the market. Instead, we will map our recruiting efforts against the products that have the greatest coverage in their different regions. So if you look at the midmarket, we'll go after partners for Axapta, J.D. Edwards and PeopleSoft. In the lower end, we'll target Navision, Sage and, in the U.S., Great Plains. If they meet our criteria and want to do business with us, we want to listen."

The point of this investment, of course, is to win the midmarket with the same authority that SAP now dominates the enterprise space. To succeed, say partners, SAP needs to overcome its reputation as something just for the Global 1000.

"We need to do the kind of marketing that makes the midmarket customer understand that we can take the most powerful enterprise software in the world and bring it down to their needs," said John Haddad, managing director of IDS Scheer, Atlanta, which resells, implements and hosts All-in-One. "This is where Oracle is coming back at SAP, saying we are too cumbersome and too complicated." Which begs the question: Is Oracle winning with that message? For IDS Scheer, at least, the answer is no. "Oracle has not won one win against us in over a year now," said Haddad. "And Oracle has done some amazing things, like absolutely free until after you go live. But here in the South, where we concentrate our efforts, folks appreciate the fact that SAP comes across as an honest company with lots of integrity. We don't play a shell game."

To Kagermann's mind, in fact, the real midmarket threat is Microsoft, with its range of MBS applications and established channel. "We have an advantage—our long history of experience in industries," he said. "I think you need deep industry knowledge in the midmarket as well [as the enterprise]. We have our business process platform, with a modern architecture, that will come early to the market. So far Microsoft is focused on improving the products they've acquired and have had to delay Project Green. So that gives us a period in which we can really compete against them."

Of course, to succeed a company needs more than the right product. It also needs partners that want to work with it. In North America, SAP already has nearly 100 partner firms for its two SMB suites. Almost universally, they sing SAP's praises. "I'm happy to be a member of that SAP partner community," said Forrest Koch, CEO of Omega Business Solutions, a Portland, Ore., solution provider of Business One as well as Microsoft Great Plains and Solomon. "They've been diligent about finding resellers who are competent and have integrity, and that improves the reputation of the entire channel. That's not true of anywhere else I've looked. For Microsoft, I'm just another reseller. At SAP, I'm a business partner."