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SAP Business ByDesign vs. SAP S/4HANA: A comparison

After years of evolution, Business ByDesign has found a sweet spot in SaaS ERP for SMBs and the public sector compared with S/4HANA's strengths in larger enterprise deployments.

SAP's release of S/4HANA in 2015 marked a giant leap forward for the company's flagship SAP ERP software. Among the many changes was a distinct shift toward a cloud-first approach to doing business. Yet this was not SAP's first foray into cloud-based ERP. Nearly a decade earlier, the company embarked on a SaaS-only ERP product called SAP Business ByDesign, which continues to occupy an important place among SAP's portfolio of ERP products.

When it comes to comparing SAP Business ByDesign vs. SAP S/4HANA, the existence of two SaaS ERP products has naturally led prospective customers to ask questions like, what is Business ByDesign (ByD) used for and how is it different from S/4HANA? SAP offers a slimmed-down version of S/4HANA for smaller, less complex companies, so why should a new customer opt for ByD instead?

What is SAP Business ByDesign used for?

For SMBs seeking to get up and running quickly, ByD may be a good fit, provided that the product's business processes meet the organization's detailed functional requirements. It's especially well-suited for utilities and public sector organizations. Subsidiaries of larger SAP customers will benefit from strong integration of ByD and S/4HANA.

ByD's evolution

Business ByDesign arose from SAP's aspirations to capture a larger share of the SMB market and its desire to build a cloud-native ERP that could accommodate multi-tenancy. In the late 2000s, SAP was still struggling to master the fundamentals of software as a service, so ByD served as a testing ground for the company's foray into cloud-first design and SaaS business practices.

SAP initially announced ByD in 2007, building its new ERP product from a combination of native code and elements borrowed from its flagship ERP system. Multi-tenancy was a key design principle, affording the company greater flexibility and economies of scale than a traditional on-premises or private cloud scenario.

Business ByDesign's strengths and weaknesses
Business ByDesign's applications, strengths and limitations differentiate the system from S/4HANA.

The constraints of public cloud SaaS, however, represented a sharp departure from SAP's previous experience. That, plus the challenges of building a new ERP product largely from scratch, led to a slow start for ByD. It took several years for the product to gain traction in the marketplace.

Today, Business ByDesign occupies a space in the middle tier of the company's ERP portfolio. For smaller firms, SAP offers SAP Business One on premises or in the cloud. Larger enterprises typically run S/4HANA, which is available in multiple variants to suit organizations of different sizes and complexity. Between those two, ByD serves businesses with annual revenues ranging from $25 million to $500 million and 20 to 1,000 named users.

S/4HANA Cloud's simplicity

For customers choosing SAP's flagship ERP product, SAP HANA Cloud is the entry-level version of the company's large enterprise ERP software. It's a simplified and standardized offering for companies with limited customization requirements. Compared to the higher-end versions of S/4HANA, customers must give up some flexibility, but they get more simplicity in return. For those who want greater flexibility, SAP offers other deployment models for S/4HANA.

Best suited for new customers or subsidiaries of larger enterprises running SAP software, S/4HANA Cloud provides a subset of SAP's core ERP features. Several of SAP's industry products are available for S/4HANA Cloud, and localized versions are available in 42 countries.

SAP Business ByDesign vs. SAP S/4 HANA: Key differences

Even though S/4HANA Cloud is simple relative to other versions of the same product, it's still more complex than Business ByDesign. ByD was built for small and midsize businesses that need some of the sophisticated features of a high-end ERP, but without the immense range of configuration options available in S/4HANA.

ByD features pre-configured end-to-end business processes. Customers can choose the processes best suited to the needs of their specific businesses. A typical order-to-cash process for a B2B services organization, for example, might begin with a customer inquiry, followed by a sales quote, a sales contract, customer acceptance and an advance payment. As services are delivered, that company might issue invoices based on progress to date and will eventually collect payment. ByD provides a pre-configured workflow around this entire process. Users playing a role in that process see an inbox of required actions and will receive alerts when immediate attention is needed.

Just as S/4HANA comes with functionality aimed at the needs of certain verticals, ByD supports industry-specific workflows as well. Telecom companies, for example, can use a predefined business process that begins with a new customer requesting service, followed by the creation of a master record, a service request, provisioning and so on.

ByD's strengths and weaknesses

For SMBs, particularly midsize companies, Business ByDesign offers strong ERP features with some distinct advantages, including the following:

  • Customers can implement ByD relatively quickly.
  • ByD is very good at handling multiple ledgers for companies that need to report in GAAP, IFRS and other accounting standards in parallel.
  • As a SaaS product, it's updated quarterly with new functionality.
  • It's especially strong in utilities and public sector accounting, but performs reasonably well in manufacturing, distribution and professional services as well.

Prospective customers should also be aware of Business ByDesign's limitations and weaknesses, such as the following:

  • Although ByD is strong in financial accounting, it may lack the sophistication that some customers are looking for in other areas.
  • There are relatively few add-on products available to augment ByD, and those products may require additional consulting whenever SAP upgrades the software. That can be expensive and may lead to short-term disruptions.
  • As a general rule, ByD can't be customized. Although some configuration is possible, there's a limit on how much custom functionality can be added.

ByD's fan base

Since its inception in 2007, Business ByDesign has seen its ups and downs. Yet SAP has remained committed to the product over the years, and ByD certainly has its share of fans, especially among SMBs, utilities and the public sector.

Contrasting SAP Business ByDesign vs. SAP S/4HANA, ByD was built for organizations that need some of the sophisticated features of a high-end ERP, but without the wide range of S/4HANA's configuration options. ByD and S/4HANA come with functionality that meets the needs of certain verticals and industry-specific workflows.

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