Australian customers will be forced to wait until mid 2008 for the release of SAP's hosted Enterprise Resource Planning (ERP) solution, Business ByDesign, despite its launch this week in the United States and Germany.

BusinessByDesign, built on a Software-as-a-Service (SaaS) model, targets the SME market, which accounts for $30 billion of SAP's revenues, and integrates purchasing, HR, manufacturing, finance, sales and support through a Web portal.

Pricing for the service starts at $US149 per user per month for a minimum of 25 users, including services and support, while a restricted package is available at $US54 per month for a group of five users to access the software just to fill out expense reports and purchase confirmations, for example.

SAP Australia and New Zealand CEO, Alan Hyde, said the application, previously codenamed A1S, will be hosted from the company's German headquarters, but refuted security concerns with the offshore model

"Many SMEs typically do not have the resources for their own IT department and their security can be [lax], so they would see this as strengthening security," Hyde said.

"There could be a customer backlash over offshoring customer data, but we are extremely flexible and we could move the hosted service locally, or build a Virtual Private Network if necessary.

"The big benefit is the ability to avoid big lengthy upgrades because the application will be continuously upgraded as an SaaS model."

Hyde said Australian customers would have to wait until the "controlled roll out" for next year, and a local support centre would also be built next year.

Customers won't be able to simply purchase the service and opt to use overseas support staff because the portal will lock-out customers originating in countries which have not received an official launch.

SAP Australia and New Zealand A1S launch manager, John Goldrick, said the network connecting Australia to Germany has sufficient bandwidth to handle unlimited video streaming and customer data requests because of a high packet compression ratio used on the links.

SAP has said it will invest $US400 million to $US550 million by the end of 2008 to support the introduction of the service, including a consumer marketing campaign on the Web to alter the perception of SAP as a provider of software for big business.

The software is live today at 20 customers in Germany and the US including a small aircraft manufacturer, a manufacturer of air fresheners, a technology consulting company and a company that offers packaging and distribution services to pharmaceutical companies.

SAP is "currently engaging with pilot customers" in the US and Germany and "validating" the product with customers in the U.K., France and China.

Next year it will offer the service in additional markets including Australia and India in the Asia-Pacific; Italy, the Netherlands, the Nordic region and Spain in Europe; Canada and Mexico in the Americas; and South Africa. Other countries will follow in 2009.

Rivals in the market include Salesforce.com, and Microsoft which is in the process of rolling out a hosted version of its Dynamics CRM software, and many smaller companies operating in the Australian market including WebCentra, Saasu and TPP Internet.

A study by Springboard Research found that SaaS was growing at a compound annual growth rate of 65 per cent and was set to top $506 million by 2010.

Growth in the Australian market is attributed to a growing awareness of the SaaS model. Springboard Research says awareness of SaaS has jumped 31 per cent over the last year.