SAP Sees Bright Future in Mid-Market

SAP executives were in what can only be described as a giddy mood during the company’s July 19 conference call with press and analysts to discuss SAP’s earnings report for the second quarter of 2007.

They also provided a fuller picture (sans any actual technical details) of the company’s long-anticipated midmarket suite.

Code-named A1S, the suite has been in the works at SAP since the beginning of the 2007, when SAP CEO Henning Kagermann outlined the company’s plans to invest between $414 million and $552 million (300 to 400 million euros) over eight quarters to build up a new midmarket business; nearly $70 million (50 million euros) of that war chest has already been spent in the first two quarters of 2007.

Kagermann confirmed during the July 19 call that A1S will be available both as an on-demand and on-premises application, as reported by eWEEK in January.

“[A1S] is planned first to be hosted exclusively. Then once it works, to offer it as an appliance on-site—it gives customers more security as they feel that it’s not only their data that is separated, but also the drive,” Kagermann said. If customers chose, “They could cut the line [to hosted services] and run,” he said.

Click here to read more about SAP’s second-quarter earnings.

Kagermann said SAP, based in Walldorf, Germany, plans to first host A1S in its own data centers in order to keep close tabs on the product and operations; over time the company will extend hosting opportunities to partners.

Like many SAP rollouts, A1S will be phased into existence. SAP is working now with a group of customers who are testing the product; it will not officially launch until September, and even then, only on a limited basis. “I think we will combine the launch of the new brand [and] new name, with presenting live customers so that you are feeling this is reality, this is true and not just a nice demo,” Kagermann said. “Anyone can present a nice demo.”

After the September launch, SAP will enter the “operation set-up phase,” which Kagermann referred to as the “Is this working?” phase, which will last to the end of 2007. At the beginning of 2008, SAP will see how fast it can ramp up production.

“We should have in mind that we have never done a launch like this in our history,” Kagermann said. “It’s not a product launch—it should not be compared to CRM [customer relationship management] or a new GRC [governance risk and compliance] product. It’s a new business, with an entirely new product, on entirely new technology, addressing an entirely new model with entirely new customers and demands.”

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