[IMGCAP(1)]In the world of accounting and ERP there was simply no bigger news this week than SAP discontinuing its Business ByDesign product and I plan to explain more about it, what it means and what it doesn’t.

First off, there are some semantics at play here as to what SAP is saying is happening and what is very likely happening. At the end of the day the product will not, in the near future, receive further development as it is. This doesn’t mean it will cease to exist, not for a while anyway, but instead it will go through a bit of an evolution; at least that’s the plan SAP is proposing, so let’s explore.

News: After reports surfaced about the discontinuation of SAP ByDesign, the company confirmed it is “slowing development” of the cloud ERP product in favor of developing a cloud platform for SMEs. Last week the German business weekly Wirtschaftswoche reported that SAP plans to stop development of Business ByDesign, stating that existing customers will be still able to continue using it. Reuters had reported that an SAP spokesman said development capacity for Business By Design was being reduced, but that the product was not being completely shut down.

But in a recent conversation, SAP AG cloud group senior vice president Rainer Zinow told Accounting Technology the company is planning to release two more updates for Business ByDesign – one coming in the next few days, the next in February – before “scaling back” and shipping updates on more of an “as needed” basis. Ultimately, SAP’s plan is to release a cloud platform in the next year or so, according to Zinow.

My Take: Let me begin by stating that I do not profess to know all of the inner workings of SAP, the Business ByDesign team or anyone associated with its development or deployment. What I can say is what I know many partners and advisors are thinking, what I’ve observed during the product’s existence, and what I've gleaned from conversations with former employees.

So while my conversation with Zinow did help shed some more light on this situation, whatever SAP wants to say is happening with Business ByDesign, the result is that development dollars and staff will be winding down and the product is going to be something else.

SAP says their plans are to now build a platform on which businesses in a variety of sectors can build and grow on in the cloud. They also say, as so many companies that are no longer developing a product do, that they are not totally “abandoning” existing users. The reality is that eventually support will be limited and they will be gently guided towards the next big thing the company has for them.

Now, what exactly this next big thing will be or exactly when it will be remains to be seen. Zinow says a year, we’ll keep an eye out until then. Meanwhile, let’s talk about what happened.

So 10 years ago SAP began development of Business ByDesign as it was already seeing growth from the likes of NetSuite and to a degree Intacct in the world of cloud accounting and ERP. What it appeared SAP failed to do with Business ByDesign, and NetSuite seemed to learn, was that even with a cloud product -- especially with a cloud product -- you have to make it flexible. It can’t be one thing for all businesses, and ultimately a platform idea is the way to go. It’s a shame it took 10 years and a $3 billion investment to figure that out, but at the risk of oversimplifying, this is at the core of what happened. But there’s more to it than that.

Certainly when Business ByDesign was rolled out they had timing on their side. So much of the reseller market was ready for an alternative to their longstanding line of on-premises ERP products and all SAP had to do was say they had a cloud product for the SMB space. Never mind that, to say the least, SAP has not had a history of success in the SMB space or with cloud (that probably mattered less). After all, it was SAP, they are a recognized global brand in the world of business technology, not a startup or public company yet to turn a net profit, so if they say they have something clients and customers can use, why not give it a shot?

I think the first real indication of the problems with Business ByDesign, here in the U.S. anyway, was the difficulty it had onboarding new reseller partners. At one point they had signed up around 100 in the U.S., but did not have the capacity to onboard all of them and the attrition began. Next, ByDesign team executives started to leave or get shifted around. While both aforementioned items were written off by the company as natural occurrences they were dealing with internally, for many the writing was on the wall.

SAP won’t discuss actual partner numbers for the product, but by my best estimates (as in, speaking with the firms I know who still have Business ByDesign on their product sheets), the number is a small handful here in the U.S.

So whenever you have a high-profile “failure” like this, there are always the “I told you so’s” and finger-pointing, especially when it comes to something like cloud ERP that businesses and consultants have not entirely gotten on board with yet. I will go out on a limb and say this is not the beginning of the end for cloud ERP, just a high-profile mistake that, so it seems, SAP is looking to correct.

Zinow admitted that missteps were made with Business ByDesign, but they have far from given up on delivering business applications outside the desktop and on-premises server environment. And let’s face it, a company the size of SAP can afford to learn a $3 billion lesson. They may be a big ship that is slow to turn, but when ships of that size move at all it creates serious waves in the water and can knock some of the smaller boats around.

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