SAP plugs hole in Business One

A couple of years ago, SAP decided that it needed a completely separate offering for small businesses. So it acquired an Israeli firm, Top Manage, and renamed its product SAP Business One. However, the package lacked much of the manufacturing systems functionality required to serve small manufacturers. Now, rather than develop this functionality from scratch, SAP is forming a strategic relationship with SoftBrands to integrate its Fourth Shift manufacturing modules with SAP Business One.

On the negative side, this move is an acknowledgement that SAP's Business One has not been a complete offering. Even if SAP resellers offer the combination of Business One and Fourth Shift as a single sale, it's not clear how well prospects will receive the news that they need two packages to meet their needs. Especially when there are so many other complete solutions out there for small and mid-size companies, such as Microsoft's Great Plains, Solomon, Navision, and Axapta.

On the other hand, maybe SAP's primary objective is not to sell Business One to the general population of small businesses. In reviewing SAP's web site, there are hints that SAP's first priority is to sell Business One to its large customers, as a solution for smaller divisions where its flagship product, SAP R/3 (mySAP), is simply too big. For example, one scenario on SAP's web site shows how a company could run Business One at a small sales subsidiary and interface it seamlessly with a central SAP R/3 system to check product availability and place orders. Another scenario shows divisional purchasing and sales performed in Business One, with centralized cash management and accounting performed in R/3.

So, if I am right, SAP's primary market for Business One is its own customer base. This allows SAP to claim a larger piece of the corporate IT spend and keep other vendors from establishing a foothold. To complete the strategy, SAP should develop a well-defined migration tool to move users from Business One to mySAP, when they outgrow Business One.

For more analysis on SAP's Business One, see my posts on Jan. 22 and Nov. 17.