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SMB Market Awaits SAP's Web 2.0 Play

Can the company that gave the world something as rigid and monolithic as R/3 transform itself into a Web 2.0-savvy alternative for small and mid-sized businesses?

The answer could come as early as the end of this year when SAP  finally launches A1S, it's much-hyped and long-awaited software-as-a-service offering(SaaS)  geared for small and mid-sized companies.

"We will have an announcement soon, very soon," said Peter Graf, executive vice president of solution marketing, in an interview with internetnews.com. "We'll be taking the process knowledge we've accumulated over 30 years and delivering an integrated suite of applications, on demand, to this new market."

A1S represents a bold foray into uncharted territory for SAP. While few outside SAP know exactly what it will ultimately look like, analysts say A1S was built on a future version of the NetWeaver platform and will provide a suite of business applications to the SMB market on a subscription basis.

It's expected to include a slew of Web 2.0 bells and whistles including widgets and mash-ups to help users tap into and gather data from its core ERP  and CRM  applications.

"A1S is a big bet for SAP," said Gartner analyst Dan Sholler. "This has to succeed or they will have a whole host of business challenges ahead of them. No one has ever proven they can sell this type of business technology this way. SAP is betting the profitability of the company that it will be able to do it."

Earlier this year, CEO Henning Kagermann said the company plans to grow its total customer base from to 39,000 to more than 100,000 by 2010. Much of that growth, he said, will be tied to the SMB market. That's why the company is investing between $300 million and $400 million on the A1S launch.

The A1S launch has been delayed twice since SAP began singing its praise in December 2006, a sign to some that SAP understands how much is at stake.

"You're talking about a new technology, a new channel, a new business model and entirely new market," Sholler said. "Any one of those things could easily get screwed up. SAP has to get all four exactly right to drive revenue."

Once it's finally available, customers should expect a fairly vanilla offering until SAP forges the partnerships it needs to customize applications for specific industries, Sholler said. It's conceivable that some of SAP's bread-and-butter enterprise customers might eventually discover that A1S could serve its needs just as well as the company's flagship ERP 6 package.