Technology

updated 1:55 pm June 8, 2010

Tech Enterprise: SAP Cloud-Ready For SMEs in APAC

“We want to reach double digit growth and grow at least double as fast as the market. We want to do 60% of all our business through partners and it is my vision that SME business should be via partners. But unfortunately we are not there yet.” - Kindermans

Partner-driven SME business target 60% portion

Tom Kindermans, SAP’s senior VP for SME in APAC and Japan, kicked off SAP’s Southeast Asia SME Channel Partner Summit in Singapore for the press, by heralding the changes that the organisation had undergone. “We returned to a co-CEO-ship in our company, so we have now two CEOs, Bill McDermott and Jim Hagemann Snabe. We are very confident that with this kind of set up, we will be very successful in the future.”

He also mentions several other movements in and out of the company, but points out that the one thing which hasn’t changed is organisation strategy.

“The strategy remains consistent, and one characteristic of a good strategy is that you will see tweaks, but the line and direction is the same. And our company has the reputation of executing its strategy with laser sharpness.”

He also shows some numbers to illustrate the impact SAP has on the world of business.

“We are producing 40 billion barrels of oil per day, which means 90% of the world oil production is going through our books somehow. US$330 million worth of retail transactions every day. We are producing 32,000 car engines every day. 75% of all beer we are drinking is produced by our software and it’s more or less the same for chocolate.

“We have 96k customers, 35 million users, and we are making operational profit of 27%. We want to have one billion users with a margin of 35%.” He emphasises that this will be via increasing revenues and not cost-cutting.

He also implies that this will be possible due to external factors like current market trends and a change in customer buying behaviour. He cites that new technology adoption is accelerating more than ever before and that this was impacting SAP strategy.

“When you define your strategy, you need to take into account the new technologies which are coming into market, what the market trends will be and the behaviour of our potential customers.”

Inevitable trends

Kindermans explains how shifting behaviour in the market was affecting the way SAP approaches the market.

“Our business, the way we sell our solutions to market, is changing dramatically. Before, we were interfacing with the IT department, the CIO. Now, this is not the case.”

He points out that now every project is evaluated as a business project and while the IT department is still an enabler and influencer, it’s the business people who are deciding on projects.

“Also nobody is buying software anymore for the technology. Every buying decision is backed by a business case.”

A second trend Kindermans notices is that customers want to have instant value.

“IT is making the journey from CAPEX to OPEX. IT will not be the big capital investment, anymore but will be seen as something you consume, and you pay a certain amount for a certain transaction, every month for the user who uses it.”

Also known as on-demand cloud computing or software as a service (SaaS), Kindermans opines that is a huge success because users demand faster and faster gratification. “You implement something today and you see value tomorrow.”

SaaS has limitations, in that it is something that is quite standardised. But the market is willing to compromise perfection to have the instant value that the solution has. Kindermans also noted that for more and more customers, speed is more important than perfection.

He says: “It’s a trend we clearly embrace. SAP is not at all late in the game for offering on-demand services. Our technology stack is ready for the path. We have a very, very strong offering now already.”

SAP ready for SaaS

A compelling reason SaaS is popular now is also because customers can’t afford the downtime that usually comes with integration projects.

“Our customers want to buy a complete solution, which works from end to end. Our customers don’t want a CRM system, where they need to integrate a logistics system, where they need to integrate a financial system, and all this with a complex middleware. This is all stuff that our customers do not want to confront anymore.”

He also cites that every company now wants to become a clear enterprise: “… we see every company has obligation to show transparency to shareholders, the employees, the customers etc.

“Let’s face it, the global financial crisis was created because of lack of transparency. Transparency will become a very big topic in the future.”

Kindermans alludes to some conversations with customers centering around business continuity whilst at same time allowing innovation to happen. “Customers choose partners who can guarantee this continuity.”

New tech trends

SAP is convinced that hardware, platform and software will move to the cloud. “There are other companies out there who believe the strategy should be to bundle hardware with platform, database with software, and to bring one stack to market. We believe it’s totally different, which is hardware and software should be in the cloud,” says Kindermans.

He also talks about in-memory database which is a big ongoing research for SAP. “Imagine the possibilities if you could load huge quantities of data in an in-memory database, and when you query it, you can get your answers at the speed of thought.”

“In-memory is 10,000 times faster than the fastest storage. So if we succeed to load all this data into a memory, which has to do with compressing the data, and then we query this data, and immediately get the answer, this is huge. It’s still in research, but the first products are entering the market and one of these is BusinessObjects Explorer,” informs Kindermans, who adds that this is also dubbed IT for the CEO.

“This is something which is very big and which will influence our business.”

Mobile also plays a huge role in SAP’s product and solutions portfolio and it is already touting mobile software solutions that can be accessed and consumed on any mobile device. For example, BusinessObjects Explorer is accessible on the iPhone, Blackberry and most other mobile operating systems out there.

Product strategy

Kindermans rightly observes that product strategy for SMEs is different than for large enterprises. “SMEs want to have choice. One size does not fit all. And we have a complete portfolio of solutions for SMEs.”

He gives examples of SAP BusinessOne, Business ByDesign and Business All In One, which have several options and support.

“Our strategy is to offer a maximum of choices to SMEs, because we are aware that they are different and you need to have a much broader portfolio to cover this market.”

Currently, 77% of SAP’s 95,000 customers are SMEs and Kindermans says that the percentages for Asia and Southeast Asia are roughly translated to the same. “What we sell through partners is more than 50%, and we tripled the number of SME customers during the last three years.”

He also admits that with over 6,000 companies in its ecosystem, SAP is very dependent on its partner network of implementation partners. But it is to the point that it can add 35 new customers on a daily basis, hence partners driving sales in the SME market is something which it wants to increase. “Every year we are increasing the portion of the business we are doing through customers,” he affirms.

He attributes this to a misperception in the market that SAP only supplies to big businesses. “We want to change this. We want the market to see that we also have SME customers and I ask our partners to position again and again that we work with SMEs.”

This is especially crucial as SAP also aims for stronger representation in emerging SEA countries where the market is small but the growth is enormous. The only way it sees itself doing that successfully is via its partner network as well.

Kindermans also demonstrates commitment when he says: “We invest a lot in our ecosystem and we want to change our reach, we want to optimise our coverage and not by buying other companies, but by investing in our partners. Our partners grew significantly in the past year and for 2010, we want to grow this partner community, not by recruiting new ones, but by helping existing ones grow 30%.”