More on SAP Earnings / Business ByDesign

          What Others Are Saying / Will Say…

I’ve been reviewing a number of pieces re: SAP’s recent earnings and their Business ByDesign product line. I found this comment by Patrick Walraven’s of JMP Securities to be particularly jarring:

“On a separate note, our due diligence suggests that SAP's new Business ByDesign solution may have been originally built in a number of silos rather than with a single data model. We believe this unfortunate engineering decision may help explain the magnitude of SAP's investment in the Business ByDesign product in 2007 and 2008. Our due diligence suggests that SAP may have a major update to Business ByDesign later this year to attempt to address these issues.”

On the eve of SAPPHIRE, issues like this reflect poorly on SAP. They suggest that:

-          SAP may have assumed that the SMB SaaS market is very similar to other markets they’ve played in before. That assumption is faulty and may have lured them into making a series of bad decisions re: Business ByDesign architecture, go-to-market strategies, pricing and more

-          SAP was overly cocky and misestimated the challenges, both technical and sales, in successfully creating a product for a market in which they had no prior experience.

Right now, I am reminded of the tortured merger of the Southern Pacific and Union Pacific railroads. Fortune magazine had this insightful comment in a piece they did to examine why the merger led to the biggest rail congestion problem the U.S. ever faced. They said:

“It is a virtual certainty that Union Pacific will solve its operating problems--probably within the year. The same pride and arrogance that got it into trouble will eventually get it out.” (see: http://money.cnn.com/magazines/fortune/fortune_archive/1998/03/30/240141/index.htm )

   

Pride and arrogance might be two cultural concepts that SAP may want to look at. The Union Pacific (UP) lesson is interesting as the solution for the UP may be the same solution SAP will need to embrace.

Next week should be interesting….