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SAP Pays Partners, Goes with Gusto for Small and Medium-Sized Business Customers

Enterprise software vendors such as SAP and Oracle are hot on the trail of the SMB market, offering substantial referral fees to technology partners for delivering small and midsize customers to them.

By Thomas Wailgum

April 18, 2008 — CIO — In early April, SAP announced a new referral and incentive program for its partners and nonpartners to drive small and midsize customers' business SAP's way. The move, paying for new software business, was a first for the German software giant, and it shows just how much thirst enterprise software vendors have for new customers in the SMB business applications market.

Those who can receive the referral fees consist of nearly every conceivable company in the software sales channel and SAP ecosystem: value-added resellers (VARs), solution resellers and independent software vendors (ISVs) who may or may not currently be authorized SAP partners. In addition, the referral program applies to alliance partners, technology and business consultants, accountancy practices and other companies already working with SAP.

No potential partner, it seems, has been ruled out. "For these companies, the program can be the first step in a long-term partnership with SAP," the announcement noted.

"In order to address the small and midsize market, it's essential that you have a 'go to market' model that is inclusive of channel partners," says Patricia Hume, SAP's senior vice president for channel sales and strategic alliances in the SMB sector. "And the further down market you go, the more important it is to have the appropriate partnership to be able to capture marketshare."

Like other software vendor referral programs, such as Oracle's SMB plan called Accelerate, the reward is cash for those who generate leads eventually closed by SAP. The "closing reward," as SAP terms it, is usually 5 percent of the deal's net software license value with a maximum amount of $50,000.

These customer bounties—also know as influence or partnership fees—are not anything new to the enterprise software industry. "[The referral fee] strategy is not in any way unique and certainly not a radical idea," says Warren Wilson, a research director at Ovum.

But SAP's offering of the fees is, nonetheless, telling. The fees "are just another sign of the intensified competition that SAP and Oracle, in particular, are engaging in for the midmarket," says Wilson. "And, boy, they're just going after the midmarket hammer and tong."

The Mid-Market Land Grab

Once an afterthought of the giant software vendors, the midmarket area has suddenly become fertile hunting grounds. "It's big, growing fast and it's relatively untapped. Most companies are still using Excel spreadsheets" [to manage their businesses], Wilson says of small and mid-market companies. "What they're using is almost archaic systems compared to what you can do with SAP."

 

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