SAP Reaches For $71 Taking Small Business Solutions To The Cloud

by Trefis Team
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SAP All-in-One is SAP‘s (NYSE:SAP) business software brand for small and medium sized enterprises. It includes a range of products like SAP CRM, SAP ERP, SAP Product Lifecycle Management, SAP Supply Chain Management, SAP Supplier Relationship Management, SAP Human Resources and SAP Financial Management. The company has now certified this application for cloud-based deployments on Amazon Web Services (AWS) and will run on both Windows and Linux-based instances. It competes with players such as Oracle NASDAQ:ORCL), (NYSE:CRM), IBM (NYSE:IBM), and Microsoft (NASDAQ:MSFT).

Check out our complete analysis for SAP

Focus On Cost Reduction As AWS Becomes Infrastructure Of Choice

SAP and Amazon claim that customers can save up to 69% over a five-year period on infrastructure and operations costs compared to running a 100-user Business All-in-One on premises. This is in addition to SAP products already available on AWS such as Business Objects and Rapid Deployment Solutions. Though SAP offers stand-alone cloud based services as well, such as Business ByDesign ERP suite, it seems to rely more on the AWS infrastructure, and we may see SAP move away from its own infrastructure and deploy on AWS and OpenStack. While significant savings can be achieved, we believe the reported figures are on the higher side as we expect smaller businesses to be the main target market compared to the 100-user benchmark used.

SAP is increasing its focus on mobile and cloud businesses. These are likely to drive revenues for 2012 as it diversifies its business mix. It is targeting mobile revenues of about Euro 220 million ($290 million) in 2012. The cloud business will put it in direct competition with – the leader in cloud-based CRM.

The company will also change its reporting structure to show revenues from cloud with expected growth in this revenue line. The cloud-based offering will be driven mainly by SMBs in the short term as SAP offers a lower price point for these customers. An added benefit is the ease with which smaller companies can integrate their businesses with the new systems as it would not involve legacy ERP and CRM systems. These services, however, may be adopted by larger businesses slowly, only after the legacy systems are virtualized. We expect income from larger businesses to grow in the future.

We currently have a $71 Trefis price estimate for SAP, which is about 10% above the current market price.

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