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SAP to Innovate Heavily in SMB On-Demand Suite

Updated: PALO ALTO, Calif. – SAP said it plans to aggressively pursue new markets with a slew of innovative new technologies for its troubled Business ByDesign on-demand suite of products for small and medium-sized business (SMB) customers. When SAP first detailed its plans for Business ByDesign a year ago, it was met with tepid reviews.

"When you come to challenging times, you have to take risks," co-CEO Henning Kagermann told a press conference at SAP's offices yesterday. "Business ByDesign is not just about product, we also want to focus on profitability, and in the volume business you have to do a lot of innovation to make the business profitable," Kagermann said.

At SAP (NYSE: SAP), the word innovation now takes on a whole new meaning. "You can look at it from two angles," said Jim Snabe, who heads SAP's business solutions and technology organization. "One is how to convert money into ideas; the other is how to convert ideas into money."

The new version of the suite will incorporate an innovative approach to customer relationship management (CRM) and incorporate business intelligence technology from Business Objects, for which SAP bid $6.7 billion in October. The deal was finalized in December.

Business ByDesign broke the mold at SAP when the vendor introduced it last September. It was SAP's first on-demand offering, and Kagermann described it as the most important announcement I've made in my career" when announcing the suite last year.

SAP said it will integrate a "very competitive" customer relationship management (CRM) product into the SAP Business Suite later this year, Snabe said. Next, Business Objects technology will be integrated into the business processes in SAP Business Suite "so analytics is integrated into the business," he added. These products will be delivered this year, Snabe said.

Analytics embedded into the SAP processes will let people in various departments conduct instant analyses on their projections both historically and into the future, said John Schwarz, president of SAP Labs, North America and CEO of Business Objects.

Business Objects is also "working on a consolidated business planning and consolidation suite that will be the leading and most comprehensive application in the marketplace, bar none," Schwartz said. This will be available both on SAP's NetWeaver platform and in a non-NetWeaver environment "so that customers who are not SAP customers today can use it," Schwarz explained.

Business ByDesign Meets Business Objects

By next year, SAP will roll out a version of Business ByDesign with Business Objects technology rolled in that will deliver an "integrated and consistent customer experience," Schwarz said.

SAP has wasted no time in leveraging its acquisition of Business Objects. In January, it unveiled nine new business intelligence and business optimization software packages that leveraged Business Objects technology.

Like other major vendors such as IBM (NYSE: IBM), SAP is finding the very top end of the market slim pickings -- after all, there are only five thousand or so really large enterprises. It has targeted SMBs, where the real growth is.

Co-CEO Leo Apotheker, who will replace Kagermann in March, in a move widely seen by analysts as a bid to boost SAP's focus on profitability, is very much on board with targeting of SMBs.

"We're committed to achieving 100,000 customers in 2010 and you can't do that without the mid-market," Apotheker said. SAP currently has about 75,000 customers and said it plans to hit the 100,000-customer mark in 2010.

Updated to clarify that SAP will integrate CRM into its SAP Business Suite offering next year and corrects spelling of John Schwarz