SAP tries to improve growth, targets small business

It has occurred to SAP (NYSE: SAP), the world's largest business software company, that there are only so many large corporations in the world that can afford its high-end products. That growth limitation is causing the company to introduce lines of products to appeal to smaller businesses.

In a move that it hopes will help it get a leg up on rival Oracle (NASDAQ: ORCL), SAP is launching a line of web-based software. The products will be delivered and will operate over the interent. According to The Wall Street Journal, the new offerings "help companies manage back-office work and important tasks such as running a sales force or filling orders." SAP will be able to offer the products by charging monthly licensing fees instead of large up-front payments like the ones it bills it big multinational client base.

With SAP, Oracle, and Microsoft (NASDAQ: MSFT) all selling software to help manage business processes at the world's largest companies, the German outfit wants to find a new outlet for its products. Moving to the large market of smaller businesses seems to make sense, at least on the surface.

What SAP is almost certainly underestimating is the lack of IT staff that most medium and small businesses have available. The cost of giving proper support for software could eat into SAP's margins. A company with 500 employees cannot support a large CIO operation, meaning the task will fall to SAP.

Douglas A. McIntyre is a partner at 247wallst.com.