SAP Walks On Dangerous Ground

SAP (SAP), the huge German provider of enterprise software, will introduce products for small and mid-sized companies. The firm has always made its money selling complex back-office and process management software to Fortune Global 1000 companies. But, Oracle (ORCL) and Microsoft (MSFT) have moved aggressively into the same markets, and there are only so many huge enterprise customers.

So, SAP is going to begin to offer software that runs over the internet and carries monthly licensing fees instead of large up-front payments. As The Wall Street Journal writes the product "helps companies manage back-office work and important tasks such as running a sales force or filling orders."

SAP faces a significant risk. Companies will only buy what they can use and support, whether the budgets are large or small. The German firm is entering a part of the marketplace where there is very little internal IT support. Smaller companies cannot afford it. That means that SAP will have to take on this role, if it is going to do well in signing up and retaining new customers. Customer support can dig a fairly large hole for a company as big as SAP

And, that could be very, very expensive.

Douglas A. McIntyre