Dynamics Perspective

Is there an SAP market left for Dynamics?

SAP AG's announcement in mid-September of its Business ByDesign (BBD) midmarket ERP suite caused ripples across the industry, largely because it signaled the entry of the top-tier market leader into the increasingly crowded midmarket space.

But SAP's new entry also signals a major potential shift in strategy for Microsoft Dynamics partners. That change, while expected, could well leave partners wondering about a key question: Does BBD's arrival spell the end of Dynamics' much-ballyhooed "hub-and-spoke" strategy for infusing the SAP customer base with Dynamics products? In other words, does it mean that Dynamics partners can no longer count on opportunities in the subsidiary and regional operations of SAP's Global 1000 clients?

The answer: It's still possible to sell to SAP's customers, but things just got harder. And the market shift that SAP's new product heralds highlights another essential truth: Dynamics partners that aren't expert at selling business solutions (as opposed to technology solutions) to midmarket executives now have another reason to feel marginalized.

Generating Growth
BBD represents many significant changes for SAP. Among the most important is the hope that BBD will be an agent of growth for a market leader facing a maturing Global 1000 market. SAP is counting on BBD to generate that growth by offering a midmarket ERP suite that combines model-based development, services-oriented architecture (SOA) integration and Software as a Service (SaaS) deployment and pricing.

But SAP faces multiple barriers to success. It must overcome its reputation for complexity and win over a largely skeptical midmarket audience. Meanwhile, the restrictions to customization inherent in a SaaS model can't be show-stoppers for midmarket customers who value customization as a competitive differentiator. And SAP must prove that it can digest an entirely new business model -- a third-party channel selling an arguably more advanced product than the traditional direct sales force has to offer -- without damaging the rest of its business model.

While these issues face SAP as it challenges Dynamics in the non-SAP market, most vanish when SAP views the opportunity in its Global 1000 core. The consistency that BBD can provide to SAP customers' IT strategies at the subsidiary and regional levels promises to greatly complicate the job of selling Dynamics to these companies-especially as SAP can be expected to take a direct role in helping partners sell to these core customers.

With BBD being pitched at the "spokes," integration, master data management, analytics and support for global processes, like financial reconciliation and procurement, are all going to look a lot simpler to implement on an SAP code base -- with NetWeaver under the hood -- than through a .NET-based Dynamics product.

Skillful and Savvy
But Dynamics partners can take some steps to stay in the game. First, they can take heart in recognizing that SAP's dreams of a business-savvy, volume-selling channel will be hard to implement, and that, over the next few years, SAP will face a lot of uncertainty in the market but little in the way of partners and product. That means that SAP won't be in on most deals in its own customer base for a while.

That, in turn, presents Dynamics partners with another opportunity: becoming more business-savvy and continuing to improve their C-level selling skills. SAP won't be able to win just by pitching On Demand, SOA and model-driven development. It will have to succeed based on feature functionality and the competitive advantage that software can bring to midmarket companies. In that regard, Dynamics still has much to offer.

So, welcome to a new market reality. It was bound to happen one day, and that day has arrived. It was never easy selling to SAP's customers; now it's that much more difficult. But you can still find opportunity in the SAP customer base, if you know how to look. The rest is up to you.

About the Author

Joshua Greenbaum (josh@eaconsult.com) is founder and principal of Berkeley, Calif.-based Enterprise Applications Consulting.