September 29, 2008, 10:25 AM — Artisan Hardwood Floors' purchase of SAP's BusinessOne ERP software in late 2007 wasn't anything that triggered a gushing press release from SAP's PR staff. It most likely didn't hit the radar screens of SAP CEO Henning Kagermann or CEO-in-waiting Leo Apotheker over in Walldorf, Germany.
But it's a telling story, nevertheless, that starts with a "de facto" CIO and no IT staff, disparate systems, and almost no customer knowledge of SAP's ERP expertise.
If you've worked in a small business, that scenario doesn't seem so surprising.
But if you work for SAP, that scenario is a radical change from the past.
Located in Austin, Texas, Artisan Hardwood Floors is a family owned and operated company with 37 employees and virtually no in-house IT staff. Like most small businesses, it found itself in 2007 running a couple of disconnected software packages for operations and accounting, and relying heavily on manual processes, says Pat Bailey, a general manager and co-owner of the business, as well as a self-described "guy who does everything."
"We didn't have any network [connection] between operations and accounting," Bailey recalls.
So he began looking for a new package that could unite back-office functions of Artisan's three separate business lines: a flooring installation business; a lumber yard that imports wood from South America and sells both at retail and wholesale; and a distribution arm to a network of U.S. dealers.
Even with the modicum of complexity between the separate operations, Bailey (the de facto CIO for big tech decisions) was going to need only a dozen or so seats for a new software package, which has not been an area that SAP (or Oracle, for that matter) has had much interest in selling to in the past. After all, SAP made its bones implementing large, complex and expensive software rollouts almost exclusively to the Fortune 1000 set: the Coca-Colas and Wal-Marts of the world were its signature deals.
So the chances of Artisan Hardwood Floors using SAP software were seemingly as likely as Larry Ellison inviting Hasso Plattner over for a brats and beer BBQ. But today, Artisan Hardwood Floors is running SAP BusinessOne 100 percent. "I was sold the first day they did the demo," Bailey says.
If that's any indication of future SMB success for SAP, then the small potatoes deal should have at least brought a grin to Kagermann's and Apotheker's faces. For it was perfect execution on SAP's newfound strategy to infiltrate the small business space with easy-to-use ERP applications.
SAP: Just a Name on a Golf Hat
Not every SMB deal is going to have as happy an ending for SAP. What did Bailey know of SAP when he was reluctantly introduced to it by a persistent consulting sales guy? Bailey's response illustrates just how difficult a challenge lies ahead for SAP: "Absolutely nothing. Well, I knew that golfer from South Africa [Ernie Els] wore it on his hat." He also was convinced that SAP was going to be way too expensive.
Besides sponsoring a professional golfer, SAP is spending lots of marketing and partnership dollars to make SMBs take notice of its product set. (Maybe you've seen the "SAP is for great companies, not just great big companies" advertisements.)
In April 2008, SAP announced a new referral and incentive program for its partners and nonpartners to drive SMB customers' business SAP's way. The move, paying for new software business, was a first for SAP, and it shows just how much thirst enterprise software vendors have for new customers in the SMB business applications market. (See "SAP Pays Partners, Goes with Gusto for Small and Medium-Sized Business Customers" for an in-depth look at SAP's strategy.)
TBC International Consulting of Salado, Texas, was the SAP channel partner that eventually sold Bailey on the software and did the implementation. (Bailey was not the warmest of potential customers at first: "This SAP guy came in and he said, 'Hey, I want to sell you this product.' I ran him out of here a couple of times before he got through the door.")
The implementation team was just three people: two from TBC and a consultant hired by Bailey.
Unlike inside big companies, where sometimes no one wants to take full responsibility for an ERP rollout, Bailey became immersed in the software purchasing and rollout process. "I became a research junkie, and I learned about pieces of software in our price range and picked the best one," he says. "I'm a bit of an overachiever. So by the time those SAP consultants left, I probably could have been one." (To read about the workforce implications of SAP's SMB strategy, see "SAP's Push Into the SMB Market Is Creating a Skills Gap for IT Departments.")
Just after SAP's April announcement about its channel strategy, Patricia Hume, SAP's senior vice president for channel sales and strategic alliances in the SMB sector, told CIO: "Right or wrong, SAP has been for 35 years the leading industry supplier of ERP to large enterprises." And now, she added, SAP's goal is to "bust the myth that SAP is only for great, big companies."
Can SAP Beat Microsoft's Ease of Use?
One of the key selling points for Bailey was BusinessOne's ease of use-an area where some of SAP's product sets have earned reputations for exactly the opposite in terms of usability, especially within large, complex implementations that required business process change. "It's one of the easiest products I've see to operate, both all the way from operations up to the accounting department," Bailey says.
Today, he says, he can see Artisan's financial and operational picture "much clearer than I could before. Am I where I want to be? Not yet. The big thing for me is: the information is being put into the system." In addition, "at any point of time, any person can walk up to a station, log in, get a phone number, fax number, account balance, get an agent report-anything like that," Bailey says. "That's what I was shooting for, and I succeeded."
What's also interesting about Bailey's decision-making process: Microsoft did not win out. Microsoft often wins ease-of-use comparisons, simply because everybody knows Office. That familiarity, in turn, is giving Microsoft an advantage as it continues to market and roll out its SMB ERP and CRM product lines, called Dynamics.
Bailey says he considered the Dynamics ERP product set as well as several other vendors' offerings, but for the staffers that would be using the new system, the BusinessOne software offered the easiest training environment. "Because I had to educate a lot of non-technical people about a system, I wanted to do it in something that was easy to learn," he says. "BusinessOne is just too easy to navigate."
SAP's Mission: 100,000 Customers
SAP's ultimate and oft-stated goal is to get to 100,000 customers by 2010, and the SMB market and more user-friendly BusinessOne suite is an important piece of the plan. "Already 21,000 of our more than 37,500 worldwide customers are SAP Business One customers and we expect to see a very strong contribution from SAP Business One in achieving our goal of 100,000 overall customers in 2010," Hume says via e-mail. She also notes that 40 percent of U.S. SMB customers have fewer than 25 employees.
Warren Wilson, a research director at Ovum, notes that in targeting companies with 10 to 100 employees, SAP is tapping what is largely a "green field." Most companies that size don't have an integrated management solution and are using manual paper-based processes or Excel, so an easy-to-use, integrated and cost-effective application set would be most welcome, as was the case at Artisan.
Wilson also points out that Oracle doesn't target companies that small; its mid-market efforts reach down only to companies of about US$30 million in revenue or larger. In addition, while Microsoft does target the smaller segment, "it's growing fast enough and is so under-penetrated that SAP, Microsoft and other smaller players can grow customers and share without really bumping into each other much."
Though Bailey's opinion and experience is just one among thousands of companies that are buying enterprise software these days, it's telling for the big industry players who continue to battle for the SMB sector.
Does Bailey consider himself a techie now? His hedged answer reveals both the opportunity and the cost of technology at small businesses. "Yes and no: Yes, because I know it better than anyone here and a lot of people, I think, that are in my position," he says. "And no, because there are 5 million things I've yet to do with it yet. I have not come close to meeting its capabilities."