Arik Hesseldahl

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SAP Cutting Back on Development of Business ByDesign

German software giant SAP appears close to ending active development of its Business ByDesign suite of applications.

The company said Saturday that it will shift its development resources away from the software platform aimed at smaller businesses and instead move the Business ByDesign applications into its mainstream HANA cloud software platform, as part of a larger effort to unify all of its applications on HANA.

SAP disputed a Saturday report by German magazine WirtschaftsWoche (English translation here) that portrayed the move as essentially sounding a death knell for the product, calling it the “biggest flop” in SAP’s history. The publication claims that Business ByDesign cost the company 3 billion Euros and required seven years of development work. But after three years on the market it has only managed to attract 785 customers and brings in no more than 23 million euro ($31.5 million) in annual revenue.

Either way, SAP’s new plans for Business ByDesign mark a rare market retreat for the company, which has been aggressive in its efforts to rejigger it’s existing suite of applications to run more off-premise, or in the cloud. Launched in 2010, Business ByDesign is SAP’s Enterprise Resource Management suite aimed at small- and medium-sized businesses. ERP is a fancy way of describing software that’s used to run a company’s operations and basic business processes such as supply chain, manufacturing capacity and paying suppliers. SAP’s main rival in the category is NetSuite, the cloud software firm occasionally known as “Larry Ellison’s other company,” because the Oracle CEO invested in its founding.

SAP spokesman Jim Dever said the company’s plan for Business ByDesign is a little more nuanced than the total shutdown of the product, as portrayed by WirtschaftsWoche. He said SAP is essentially concentrating its development efforts on its HANA cloud application platform, of which Business ByDesign will become a part.

“It will still exist and will remain on the market and our partners will continue to build add-ons for it,” he said. However, development resources that had once been committed to Business ByDesign will be redeployed to focus on HANA, he said.

Dever also sent the following statement:

“We are taking a significant and innovative step forward by putting all of our cloud offerings on the SAP HANA Platform. Moving forward, SAP HANA will be the single, unified platform that enables businesses of all sizes across all industries and lines of business to run their entire business in the cloud more efficiently and effectively than ever before. SAP Business ByDesign will become part of the SAP HANA Cloud, and will continue to be supported and actively promoted in its current functionality and scope through our extensive partner ecosystem. Optimizing SAP’s cloud portfolio on our HANA platform means a dramatic price-performance improvement with all the benefits of simplicity in the cloud for all our customers. And SAP’s BYD customers have a clear roadmap to our future HANA powered tightly integrated Suite of business applications in the cloud.”

SAP’s new plans for Business ByDesign will likely be seen as a victory for NetSuite, the cloud-based ERP software company that caters to small and medium businesses, but which has lately starting going after bigger fish. NetSuite CEO Zach Nelson told AllThingsD that the company will move quickly to try and pick up some of SAP’s Business ByDesign customers.

“SAP stopped investing in Business ByDesign about two years ago,” Nelson said in an emailed statement. “It’s a shame they kept selling it to customers. NetSuite will announce a migration program next week for those customers who are now left high and dry. And they can switch to NetSuite knowing they are moving to a company and a product that are leaders in the cloud.”

As for SAP, all the work it has been putting into HANA doesn’t seem to be paying off quite as well as the company had hoped. Earlier this year, slower than expected cloud sales dragged down the company’s quarterly results, which caused some analysts to wonder if it can still hit its guidance for the year. Earlier this year SAP was accused of inflating HANA sales numbers, though not everyone was convinced.

SAP has also seen some management shake-ups. First Lars Dalgaard, the CEO of SuccessFactors, the cloud-based human resources software firm that SAP bought in 2011, bolted to join venture capital firm Andreessen Horowitz as a partner. After that, co-CEO Jim Hagemann Snabe stepped down, leaving Bill McDermott as the sole CEO.

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