SAP looks to grow S/4HANA Cloud presence in midmarket

Focus on midmarket companies

The intent is to not only provide midmarket companies with an ERP system that can support their requirements now and as they grow, but to also provide the tools and services they need to get systems up faster and with less complexity, said Julia White, chief marketing and solutions officer at SAP.

SAP often highlights the largest enterprises it works with, but White said 80% of its customers are midmarket businesses.

Rise with SAP, which launched in 2021 to provide existing customers with a path to the cloud, was created to simplify and accelerate S/4HANA Cloud migrations among SAP's installed base of larger customers. The Rise program provides a step-by-step plan that includes auditing business processes and managing cloud contracts. Grow with SAP is designed as a similar offering that's targeted at midsized organizations, White said.

The program is available now in two packages. The base package includes S/4HANA Cloud, public edition, with limited financial functionality for companies with less complex requirements. The premium package includes S/4HANA Cloud, public edition with more functionality for more complex financial requirements.

This allows companies to take what best suits their current needs but move to the more advanced functionality as they grow, White said. SAP did not disclose pricing information.

For implementation and support services, SAP is enlisting partners from its ecosystem that are experienced in working with midmarket companies, White said. This is a different approach than Rise with SAP, which primarily uses large global systems integrators.

"Similar to the customer base, there tends to be a different set of partner organizations that serve this segment," she said. "We wanted to make sure that we also had the right channel for this set of customers."

Good intent, but will execution follow?

Overall, Grow with SAP is a good idea, as SAP needs to sell more S/4HANA Cloud licenses, according to Holger Mueller, an analyst at Constellation Research.

But the question remains as to whether one suite can be everything to all organizations, from large enterprises to midmarket firms, he said.

"The problem is that SMBs want it simple, except for one or two automation areas where they are sometimes more complex than large enterprises," Mueller said. "It's a tricky requirements landscape."

Grow with SAP may attract more midmarket companies that have shied away from SAP because of its perceived complexity, but this is up in the air, he said.

"SAP will try to go to high-growth companies that [may feel that they'll] need to end up with SAP anyway, but it's a big ask," Mueller said. "It would not be the first SMB attempt by a large enterprise vendor to fizzle out."

Given SAP's brand recognition, they should be invited to many cloud ERP selections just as a default. I could see this competing with Oracle Fusion, Infor's products, Epicor, Dynamics and Workday.

Predrag Jakovljevic, an analyst at Technology Evaluation Centers, said Grow with SAP was explained with more clarity than Rise with SAP when it was introduced, but there are questions about how successful it can be.

"Given SAP's brand recognition, they should be invited to many cloud ERP selections just as a default," Jakovljevic said. "I could see this competing with Oracle Fusion, Infor's products, Epicor, Dynamics and Workday."

Success may depend on the specific industry offerings that will be developed with Grow with SAP, he said. However, S/4HANA Cloud may have too much complexity for midmarket organizations.

"If SAP was serious about SMBs, they should start an entirely different [line of business], change the sales pitch and experience and really offer an S/4HANA lite," Jakovljevic said.

A seat at the midmarket table

The program shows promise for SAP to reach a market where there's a lot of opportunity, said Joshua Greenbaum, principal at Enterprise Applications Consulting. However, SAP must show that it has real commitment to customer success and not just use Grow with SAP as a vehicle to satisfy Wall Street.

"My concern is that like Rise, the main metrics on the table right now are mostly focused on how successful SAP will do in selling Grow and [pay less attention to] how they're measuring customer success," Greenbaum said. "The flipside is that this is a legitimate requirement of SAP to expand strongly into the midmarket, and S/4HANA public cloud is a good candidate for that. If they can succeed in bundling services this way, it should fast track a lot of companies that otherwise might hesitate."

S/4HANA public cloud edition could appeal to midmarket companies if they can implement it and start to see value in a few months, Greenbaum said. This would make it a legitimate competitor to other systems that have strength in that market, primarily Oracle NetSuite, Microsoft Dynamics and Infor products.

"S/4HANA Cloud has a right to a seat at the table," he said.

There's also plenty of opportunity in the midmarket for SAP, Greenbaum said, and not only with net-new customers.

"They'll also want to look at larger global companies that have subsidiaries or smaller operations that want a SaaS ERP product," he said. "There are hundreds of thousands of companies worldwide that need a new ERP system, so there's opportunity for sure."

Where does SAP ByDesign fit?

The push into the midmarket with Grow with SAP does call into question SAP's commitment to SAP Business ByDesign, which has been its longtime entrant in the midmarket cloud ERP stakes.

"I wonder why they still have ByDesign if there is now Cloud S/4HANA," Jakovljevic said.

Greenbaum said he believes that SAP Business ByDesign is on the way to product irrelevance.

"We've all been watching the clock ticking on ByDesign -- the tea leaves have already been read," he said. "It's just a matter of time."

SAP will continue to support Business ByDesign, White said. But it has limitations and existing customers can use Grow with SAP as the next step in their ERP evolution, she added.

Jim O'Donnell is a senior news writer who covers ERP and other enterprise applications for TechTarget Editorial.