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SAP falls short of its goals for Business ByDesign

Co-CEO Leo Apotheker says on-demand application suite is delayed because company wasn't able to achieve 10-times reduction in total cost of ownership.

At SAP's Sapphire conference this week in Orlando, Fla., a question posed by one of my colleagues concerns the status of Business ByDesign, an on-demand suite of applications that has been in development for about five years.

SAP co-CEO Leo Apotheker Dan Farber/CNET

Last week, it was announced that the product would take 12 to 18 months longer than the original target of 2010 to reach $1 billion in revenue and touch 10,000 customers in the mid-market globally.

ZDNet's Larry Dignan reports on a conversation with SAP co-CEO Leo Apotheker, who explained that Business ByDesign was delayed because the company wasn't able to achieve the planned 10-times reduction in total cost of ownership.

Larry wrote:

That's a fancy way of saying SAP hasn't figured out how to make money at its $149-per-user, per-month price point. SAP confirmed that it was delaying Business ByDesign when it reported its first-quarter earnings. "We've announced a price point, and now we're working backwards," says Apotheker.

Apotheker is looking to "labor arbitrage" (cheaper programmers offshore) and the next release of SAP's NetWeaver middleware to help bring the costs in line. He contends that the delay won't give an advantage to competitors: "No one will be able to offer an end-to-end, comprehensive business suite."

Being bigger and more comprehensive may prove to lead to unwieldy, more costly, and less agile software development. Perhaps SAP will offer some demonstrations of Business ByDesign at this week's conference to prove that it will be worth waiting for the product to get into fiscal alignment.