How SAP will Almost Double Revenue by 2015
SAP has set the goal of increasing revenue from 12.5 billion EUROS to 20 billion EUROS annually by 2015. First we have to start out with Full Disclosure: I worked for SAP negotiating and drafting contracts in the late 90’s and early 2000’s. I learned my trade there dealing with Fortune 500’s and also the SME market space. Additionally, as a sole practitioner, my largest client is a National SAP Channel Partner for a global entity. Needless to say, I am very familiar with the corporate culture and I also have a bias toward increasing revenues, because as the saying goes a rising tide raises all ships.
Dan Woods, chief technology officer and editor of CITO Research, a firm focused on the needs of CTOs and CIOs, reports in his article in FORBES entitled How SAP is Betting Its Growth on Partnerships that SAP will need to change its approach to its partners and be more open to working with them and allowing these partners to share in the revenue potential from new sales and new innovations as it had in the past with system integrators. Woods refers to the old corporate culture as “historically insular”. As the person whose duties included acting as the primary contract support for SAP’s national network of VARs (these VARs were originally referred to as CBS ‘Certified Business Solutions' providers, revised to the SMB market place, finally revised to the SME market space) and now as outside counsel to a large SAP Channel Partner, I have been on both sides of the table. I can attest to Woods’ description as being accurate.
Woods refers to an interview given by Eric Duffaut, President SAP Global Ecosystem and Channels. Duffaut came to SAP from Oracle, where he spent 15 years working in the SME .jpg)
Channel. Upon arrival to SAP in 2005, Duffaut headed up the SME market for EMEA (Europe, Middle East, Asia). In the interview Duffaut states that while the industry average is 40%, that in 2005 only 7% of sales were through Channel partners. This increased to 20% by 2010 and 25% through the second quarter of 2011.
Duffaut states that the new strategy to expand revenue by utilizing its Channel partners is centered on a 3 prong approach:
1. Consolidation of all partner activity under Duffaut’s leadership (developments, sales, and service).
2. Expansion of its co-development program. ERP is no longer the sole product, although it remains the central focus. Business Objects and the Sybase mobility capability are two other platforms to build upon. The new direction encompasses new solutions for these platforms, through co-developments with partners.
3. Increase the availability of competent service integrators and execute new engagements and transfer these to the partners (i.e. “SAP will become much more like an incubator for new service offerings …”).
The cultural shift for SAP will be tough. The two obstacles Woods points to are:
a. SAP’s product standards for the resale of SAP products and also to allow SAP to sell others products are extremely rigorous, and
b. The certification process to become an SAP Partner is onerous and arduous to say the least.
Woods lays out the salient issue facing Duffaut quiet succinctly. SAP can succeed in growing its revenue through its Channel partners by allowing its Channel Partners to keep more of the expanding revenue that is generated. As Woods states it, “SAP will have to get good at making its partners rich.”
Time will tell …..
