by John M. Covaleski
New York - Three months into its alliance with American Express Tax & Business Services, software giant SAP AG has new reasons to be pleased with its decision to work with the accounting firm in marketing to small and midsized businesses.
In early June, Dutch-based Baan, one of SAP’s main rivals in selling to large corporations, was itself sold, and rival PeopleSoft became the target of a takeover by another rival, Oracle Corp. When SAP announced its alliance with AmEx, it said that it was going after SMBs because of diminishing sales for all software vendors serving large corporations.
“As we said in March, a lot of companies in our space are under incredible pressure,” said Gary Frommer, senior vice president of SMB operations for SAP. “We are anticipating further consolidation and we will increase our market share.”
How does that bode for the SAP-AmEx alliance? “The question that all sizes of customers must ask when making IT decisions is, ‘What will be the status of my vendor 10 years from now?’” Frommer said. “We can make the case that SAP and American Express will be around 10 years from now.”
Germany-based SAP, best known for servicing the world’s largest businesses, tapped AmEx T&B to co-market a U.S. edition of Business One, business management software for enterprises with as few as 10 employees. In announcing the alliance, SAP executives noted that the $1.3 billion SMB applications market is growing by 21 percent per year, while sales have “shrunk” in the Fortune 1,000 market targeted by itself, Baan, Oracle and PeopleSoft.
Those other three vendors accounted for an industry shakeout in the first week of June. First, PeopleSoft bought middle-market software developer J.D. Edwards, then Baan was acquired by an investment group whose other holdings include Chicago-based ERP vendor SSA Global, and finally Oracle made an unsolicited bid for PeopleSoft.
Baan will reportedly be made part of SSA Global, while Oracle said that, if its deal is approved, it would review whether to support the earlier J.D. Edwards deal. It did not indicate its intentions for PeopleSoft’s products.
In 1998, there was wide speculation that all four vendors would aggressively move into the middle market of end-user companies with under $500 million in annual revenue. The established middle-market software companies were so concerned that they began referring to the group disparagingly by the acronym, the “BOPS.”
SAP and Oracle, which could be the only surviving BOPS if the current consolidation picture plays out, have also been the only ones to make inroads in the middle market. While SAP just entered this space with its AmEx alliance, Oracle is a lead investor in Internet-based SMB business management applications developer NetLedger, which has been recruiting CPAs to its sales and consulting channel since the late 1990s.
According to AmEx and SAP, work on all fronts in their alliance is on or ahead of schedule, and a deal sweetener has been added - zero-percent financing for Business One buyers and resellers.
Full details of the financing were scheduled to be announced at SAP’s annual Sapphire Conference, which occurred after press time for this story. The two companies said that it has been well-received in its soft launch, thus far.
“In this economy, companies want to implement new systems and they want an easy way to finance them,” Frommer said. The zero-percent financing for 36 months applies to Business One software and any hardware, such as servers, required to facilitate the software.
AmEx’s alliance point person, consulting operations managing director Harvey S. Goss, reported strong results in his firm’s top alliance priorities - recruiting a sales channel and developing vertical industry versions of BusinessOne.
He said that AmEx is in serious discussions with at least 25 prospective channel partners, and he fully expects to have resellers and consultants in all major markets. He declined to identify any of the prospective resellers because of nondisclosure agreements, but said that he is particularly interested in recruiting resellers/consultants who have existing referral relationships with AmEx T&B offices. The company has 54 offices in 16 states.
“With Business One, we have a formalized way of working with those firms and a clearly-defined manner in which they can work with the accountants [in AmEx offices],” Goss said. He also plans to establish Business One practices in all AmEx offices that have established technology practices, and expects that other offices may expand into technology by joining the Business One program.
The AmEx technology executive further said that the features in the first Business One vertical edition for distribution companies will rival any other product in the SMB market. Business One’s distribution edition is slated for release this fall. Its distribution-specific features include:
● The ability to electronically connect with the electronic data interchange systems of major national hub buyers;
● Warehouse management features that include radio-frequency-based integration between a user’s warehouse operations and its accounting software; and,
● Document management.
The add-on features are technologies that have been developed by third-party vendors. AmEx is building the interfaces that integrate those systems with the core Business One package.
Business One itself is an integrated package of financial, sales and customer relationship management, and business analytic applications. It is designed to compete head to head with financial/enterprise products from vendors that are focused primarily on SMBs, such as Best Software, Accpac International, Microsoft Business Solutions and Softline AccountMate.
The package may answer widely voiced questions about the ability of high-end vendors to build systems that are affordable and usable by SMBs. A Business One implementation for a firm with three system users can be completed in a few weeks and cost from $25,000 to $30,000 for licenses and services, according to those familiar with the product. Vertical editions would likely cost more.
Business One is not a derivation of SAP’s high-end technol-ogy products, My SAP or MySAP.com. It is an enhanced version of an SMB-specific product from the former TopManage Financial Solution Inc., an Israel-based software developer that SAP acquired in 2001.
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