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SAP Business One to Offer Subscription Model

SAP announced on July 5th that their Business One suite will now be available in a subscription model through partners. Although some of SAP’s partners had already been selling the software suite through a hosted model, it was never done officially through SAP. Partners were required to buy licenses and then offer them to clients with a subscription model. Partners will now be able to rent licenses on a monthly basis and offer them to customers. According to Astrid Poelchen, an SAP spokeswoman, this direct subscription based model should represent savings for current customers. SAP sells its software solely through partners who configure the software to match customer needs.

SAP Business One is a software suite that includes financial management, warehouse/production management, CRM, purchasing, and reporting modules. SAP also announced the availability of different starter software packages that offer the basic functionalities needed for running a business. These packages can be purchased for a maximum of 5 users and can be implemented in three days. These packages can be upgrade to standard editions of the product. Contract duration are from 12 months to 4 years and are renewable by year.

The new hosted option for the software will be available in phases. Right now the suite is offered in China, France, Germany, India, Italy, Southeast Asia, Spain, and the UK. The option will be available in the US and other countries later on in 2011.

Carlos Iribarren, Director of Seidor, a Spanish reseller of the software suite, commented on the move:

“Small businesses are increasingly looking for an integrated solution to run their business while minimizing TCO. We expect this trend to increase in the future, and we are happy to be one of the first partners to address this growing market demand jointly with SAP.”

A Service Future?

SAP’s movement to the cloud highlights the growing importance of the Software-as-a-Service model and cloud solutions. According to Ray Wang, CEO of Constellation Research, “Subscription pricing is what [the small business] market is looking for, and what the general market is looking for.” Subscription pricing is attractive to small to mid-sized businesses because of the quicker implementation, cutting of installation costs, and a single consistent expense that helps match expenses with revenues in a stable stream. In addition, the hosted model offers greater flexibility to a company, making it easier to switch or upgrade to new software.

This move also hints at a greater focus on the small enterprise market as SAP actively moves against hosted software companies that compete with it. If this move to a hosted model works for the Business One product, SAP may consider subscription models for its other software products in order to compete better. Companies like have a much higher growth rate than SAP, adding pressure to the software giant.

What do you think about SAP Business One’s move to a hosted model? Smart move? Is SAP feeling pressure from hosted software providers? Leave your thoughts in the comments below.


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