SAP's launch Wednesday of Business ByDesign, a hosted on-demand offering for mid-market customers, is a significant improvement relative to its other offerings in this space, but simplicity and ease of use still remain elusive to the vendor, an analyst observed.

According to Ray Wang, senior analyst for enterprise applications with Cambridge, Mass.-based Forrester Research, SAP's new offering is complex despite considerable research into the mid-market space. "Key features like easy access to reporting, quick portal construction, and easy integration to Office remain missing."

Although SAP is not a newcomer to the mid-market arena and actually leads the space by revenue, customers don't necessarily look to the vendor for ERP products, said Wang.

He thinks adopters of SAP Business ByDemand -- originally codenamed A1S and targeted at companies of 100 to 500 employees -- will likely stem from its existing customer base, but that could change depending on how well the company launches and markets this latest product.

SAP is hoping to capture the customer segment not serviced by the two existing products in its mid-market portfolio -- All-in-One and Business One. CEO Henning Kagermann called it a "complete solution" designed for "end to end, flexible, adaptable, business processes within the company and beyond the boundaries of a company."

The launch he said, comes at a time when globalization and the digital revolution are creating a new world of business, therefore requiring a solution such as this one that simplifies IT, reduces the cost of ownership, and allows customers to grow by exploiting the full potential of future business trends.

Business ByDemand, said Kagermann, completes SAP's portfolio of mid-market offerings. Twenty customers went live with the product same day. The product will be available in the U.S. and Germany, with the U.K., China, and France to follow. General availability was not announced.

Among the drivers behind SAP's offering, said Wang, is the shift in buying behavior in the mid-market space based on the emergence of easily accessed and deployable tools that don't require IT funds or board approvals. "That's changing the way people are buying software, and with that, it's creating a whole new set of decision makers."

Also, if SAP is to tackle this space, it needs to offer a SaaS multitenant solution to grant customers long-term ability to cut costs -- something Wang doesn't think the company has accomplished with Business ByDesign.

The hosted offering will have moderate success but won't be a "slam dunk" at the moment, predicted Wang, because other vendors, notably NetSuite, offer tools with rich configuration and a good user interface, and they already have a solid reputation in the space. Other on-demand ERP vendors, such as Workday, have offerings designed for Web 2.0 environments, unlike offerings by SAP.

Rival mid-market vendor Microsoft expressed no concern for SAP's new hosted offering.

"While we certainly recognize other vendors as formidable competitors, at the end of the day the SMB spot is our sweet spot. We've been servicing this space for years," said Nancy Teixeira, group manager for Microsoft Dynamics with Microsoft Canada.

"We understand that this is a market that other vendors would certainly like to go after as well."

In the new year, Microsoft will offer on-demand service as an option for its mid-market customer relationship management products, said Teixeira.

Pricing for Business ByDemand, including service and support, starts at $149 per user per month for a minimum of 25 users, and $54 per month for five "efficiency users."

The offering will be sold initially through direct sales, and once in full deployment, the expectation is a vast majority of business will be driven by partners, the company said.

ComputerWorld Canada is an InfoWorld affiliate.