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SAP delays small-business software

The German software maker plans to release a new set of business applications for small companies in the United States this spring, several months behind schedule.

German software maker SAP plans to release a new set of business applications for small companies in the United States this spring, several months behind schedule.

The company's delayed introduction of its SAP Business One applications, originally scheduled for U.S. release by the end of last year, comes just as Microsoft revs up a new initiative to expand sales of competing small-business software through its Microsoft Business Solutions division. The Redmond, Wash., company said Wednesday that it has assigned its head of worldwide sales to lead the effort.

At stake is a big chunk of change. SAP's goal is to grow revenue from small and midsize business deals from around 6 percent of software license revenue last year to at least 15 percent by 2005, said Gary Fromer, vice president of small and midsize business at SAP America, SAP's U.S. subsidiary. SAP reported 2.3 billion euros of license revenue last year.

The company already released Business One in Germany and a handful of other European companies, Fromer said. The U.S. release of the software, which is designed for companies with fewer than 150 employees, is slated for late May, he said. The software, built from applications SAP gained in its acquisition last year of Israeli company Top Manage Financial Solutions, streamlines accounting, human resources, sales and purchasing activities, he said.

The reason for the late start, according to Fromer, is that SAP has taken longer than planned to add certain features to the software that are unique to the needs of American companies. But the real reason, one analyst contended, is that SAP is having a tough go of finding suitable distribution partners to resell the product.

"Qualifying channel partners is hard to do," said Josh Greenbaum, an analyst at Enterprise Applications Consulting. "They were a little ambitious about how fast they thought they could get these partners lined up."

Fromer declined to discuss the progress of SAP's efforts to ink reseller partnerships in the United States, but he agreed that building a reseller channel is his biggest challenge. The company's goal is to eventually have several hundred resale partners in 25 cities across the country.

Managing a reseller channel is a big switch for SAP, which typically sells directly to its traditional base of large, multinational customers through its own formidable sales force. In an effort to target small businesses, however, the Walldorf, Germany, company embarked on building a reseller channel last year, enlisting the help of Hewlett-Packard. Some analysts wonder, however, if SAP will succeed given its track record. The company launched a similar program in 1996 and quietly shut it down a couple of years later after signing up just a few hundred customers.

"The issue has been channel development," Greenbaum said. "That's been a problem all along, and that's why they are back to square one."

A strong distribution channel is the strength of Microsoft, SAP's primary rival in the small-business segment. But even if it takes longer than expected, SAP plans on getting it right this time around.

"We are a smart and patient company," Fromer said.