UPDATE 2-SAP to release delayed Web software in July

* Will launch in US, Germany, UK, France, India and China

* Could start to contribute to revenue in 2011 (Includes comments from SAP, NetSuite CEOs. Adds byline)

By Jim Finkle

NEW YORK, April 28 (Reuters) - SAP AG (SAPG.DE) will start selling a long-delayed suite of Web-based software for running small to mid-sized businesses in July, a top company executive said on Wednesday.

Co-Chief Executive Bill McDermott said in an interview that SAP would initially sell the software, dubbed Business by Design, as a hosted, Web-based service to small to mid-sized businesses in the United States, Germany, UK, France, India and China.

The product, which has been in development for some six years, represents SAP's highest-profile attempt at cracking the fast-growing business of hosting software and delivering it as a Web-based service. That area is growing far faster than SAP's traditional business of developing software that customers install in their own data centers.

SAP, which is the world's biggest maker of business management software, originally projected that Business by Design would reach 10,000 customers and generate $1 billion of revenue by 2010.

McDermott said that he did not expect the new software to generate significant revenue during 2010 but that it might start making a material contribution to sales next year.

SAP is looking to diversify sales beyond its traditional market of large corporations and government agencies with Business by Design, whose primary competition is a suite of Web-based software sold by NetSuite Inc (N.N), a company founded more than a decade ago by Oracle Corp (ORCL.O) Chief Executive Larry Ellison.

McDermott said he believes Business by Design's sales will be able to quickly surpass those of NetSuite, which last year posted $167 million in revenue.

SAP did not disclose the product's pricing, though McDermott said it would comparable to what NetSuite charges its customers.

"When Business by Design is coming at them like a 99-mile-an-hour fastball, let's see how tough they are," McDermott said of NetSuite.

"That's the bluster of a sales guy," said NetSuite Chief Executive Zach Nelson, whose company has 6,600 customers. SAP has some 100,000 corporate and government customers who use its high-end software, though only about 100 small and mid-sized businesses have tried out Business by Design.

Nelson said he believed the competition from such a large software maker would help his company's sales by stimulating interest among smaller businesses in Web-based business management software suites.

NetSuite and Business by Design offer the broadest lines of Web-based software for running small businesses. Other competitors include Microsoft Corp (MSFT.O), Intuit Inc (INTU.O) and Salesforce.com Inc (CRM.N). (Reporting by Jim Finkle; Editing by Steve Orlofsky and Matthew Lewis)