ORLANDO — With a reputation of offering complex and highly expensive enterprise software, SAP AG is faced with perhaps its most daunting task yet: Can the company transform itself into the Mercedes Benz of business software firms and appeal to the global mid-market?
Mercedes Benz, owned by German
automaker giant Daimler-Chrysler, faced a similar dilemma as it tried to maintain demand for its products and preserve its market share. So far, it has managed to do so by coming down from its pedestal to offer consumers better financing options and healthy cash rebates.
There was a sense of unease at the recent Sapphire Conference 2003. Anticipation of the outcome of the Oracle/J. D. Edwards/PeopleSoft brouhaha hung thick in the air, though no SAP executives would share their predictions.
Instead, everyone from SAP’s president and CEO Henning Kagermann, to Hasso Plattner, the company’s co-founder and chairman of the supervisory board, to the likes of hired talking head Stuart Varney (former host of CNN’s MoneyLine News Hour), downplayed the possible outcomes.
“”SAP is a rock, an island unto itself,”” Varney said during a panel discussion here on June 16. “”I say this because they’re sponsoring me.””
“”It’s (the Oracle-PeopleSoft merger) very good timing for us and it couldn’t be better,”” Plattner said during his keynote address. “”It shows we’ve done something right in the last three years.””
While not an immediate threat, the fallout of the Oracle-PeopleSoft merger will pose difficulties for SAP. It will have to play catch-up to Oracle and PeopleSoft in the mid-markets.
“”For SAP to really grow, they have to expand into the mid-market,”” said Alan Pelz-Sharpe, vice-president, North America for Ovum Consultants Inc. in Boston.
“”They absolutely dominate the high end, but that’s a relatively saturated market. In the IT industry, SAP is considered a very stable, very solid, high-quality marquee application company. But to end-users, it’s considered very complex and very expensive.””
SAP isn’t standing still on the issue. The company partnered with IBM to address the worldwide mid-market opportunity (pegged by Ovum at about US$350 billion a year), but for many small- and mid-sized enterprises (SMEs), SAP and Big Blue don’t exactly conjure up images of affordability, quick and easy installations and a silky smooth return-on-investment.
“”If you think about the worst implementations of all time, particularly in the 1990s, they were SAP installations,”” Pelz-Sharpe told Computing Canada.
“”For most smaller companies, they are going to be interested in Oracle or J.D. Edwards. SAP just looks like a big, scary option.””
Branding, Pelz-Sharpe said, is one element SAP must address to change the perception with SMEs that its solutions are pricey and complex.
“”In the mid-market, there’s definitely a threat to SAP from a merged Oracle-PeopleSoft . . . SAP is not very good at the brand thing,”” he said.
“”They’re very good at the technology but when it comes to pure advertising and brand management, they’re not very good at it and they’ll have to do a lot of work to address that.””
Hosted services is emerging as an important area for budget conscious SMEs, and it’s one strategy that Kagermann stated during his keynote address SAP will not be aggressively pursuing.
Pelz-Sharpe said that is “”a very big mistake.””
News of SAP’s new NetWeaver open integration and application platform release was seemingly overshadowed by the endless wooing of SMEs at Sapphire.
SAP Canada president and CEO Michel Brisson acknowledged an estimated 90 per cent of business in Canada falls into the category of small or medium-sized operations.
To better address this market, SAP Canada will refocus its marketing efforts and enlist the assistance of regional partners.
“”We need to position SAP’s culture and solutions at small enterprise, and these companies won’t have to go through the pain of cultural changes in doing so . . . we have the greatest product in the world, but if we can not commercialize this product, it will only stay on the shelves,”” Brisson said.
“”Companies with annual revenues of $20 million have the same problems to solve as companies with $100 million in revenues.””
To that end, SAP Canada is offering tailored versions of its mySAP All-in-One and SAP Business One solutions through its channel partners nationwide.
SAP America CEO Bill McDermott also sounded off on the company’s performance north of the 49th parallel.
“”Our business in Canada is doing very well,”” he said. “”We are the enterprise application market leader and we think we can better serve our Canadian customers with our Business Suite and our NetWeaver architecture.””
McDermott said Canada is a unique entity and will be treated as such.
“”Canada is a very special place, and we don’t manage it as a region of the United States (the way) a lot of technology companies do,”” he said.
