SAP’s big move into on-demand services is set to cause a sea-change in the way buyers in small businesses and satellite operations view their application needs.

The 19 September launch of Business ByDesign, formerly codenamed A1S, is SAP’s attempt to target companies with 100 to 500 staff via web-based software that delivers a broad set of application capabilities with ease of use, adaptability and lower total cost of ownership.

“We don’t want to follow the old business model [but instead want to change the way we] design, develop, implement and manage business software,” said SAP chief executive Henning Kagermann. “We haven’t designed [Business ByDesign] with traditional categories in mind like CRM and ERP but for end-to-end business processes with a user interface people can tailor for roles and responsibilities.”

SAP will charge US users $149 per month per user with a minimum of 25 users. "Efficiency users”, that is those needing limited access to capabilities, will be charged at $54 per month for a set of five users. UK buyers will pay a sterling equivalent tariff and firms will pay more for additional modules offering manufacturing management, warehouse management and service management.

Initially targeted at US and German firms, the service is also available now to UK buyers with two customers already live. SAP is phasing in the service with plans to be “volume-ready” early next year.

Despite that cautious approach, many buyers will wait longer to compare SAP’s offering with other on-demand services by comparative veterans in the sector.

“This is the 1.0 version of SAP A1S, so when stacked up against NetSuite’s current version 12.0 product, we don’t think there will really be any comparison on a functionality basis,” said Zach Nelson, chief executive of NetSuite, a company that also offers on-demand business applications.

SAP small and medium-sized enterprise (SME) president Hans-Peter Klaey said SAP’s initial focus will be on small businesses before reaching out to sub-groups of blue-chip firms where it already has a huge installed base.

“In the beginning we’re focusing on pure-plays because it’s an underserved market,” he said. “They can start with finance, HR or CRM and then expand.”

Some analysts are sceptical of SAP’s ability to move downmarket.

“It’s an improving market but SAP is going to have quite a job to get traction,” said Dale Vile of analyst firm Freeform Dynamics. “It won’t explode overnight but Business ByDemand makes it a player. However, by making it for the web alone, it immediately cuts off the market that is not interested in a hosted solution.”

The idea that there is resistance to hosted services in the target customer base was disputed by SAP, however.

“Out of about 40 conversations with C-level executives, only two said ‘over my dead body’,” said Ciaran Rafferty, general manager of SAP’s SME business.