SMBs a Big Challenge; Opportunity for Application Vendors

Some business application vendors see it as highly fragmented, others as inherently complex. Donna Troy sees the small and medium-size business (SMB) market simply as “a huge opportunity.”

Troy, senior vice president of SAP’s global SMB business, is on a mission to carve out a bigger chunk of the global SMB market.

“There are more than 75 million small and medium-size companies globally,” she said Thursday at the Sapphire customer event in Paris. “There’s plenty of room to grow.”

SAP has swung its attention to SMBs after having nearly saturated the market for large enterprises. The company hired Troy last year to craft a plan that would carve inroads into the market and try to give SAP a solid lead over rivals such as Oracle and Microsoft.

The SMB market is expected to grow faster than the large-enterprise accounts, according to IDC. But vendors must spend heavily to ensure the quality of sales and support staff in the channel. The research company highlighted SAP, Microsoft and The Sage Group as “channel friendly” vendors that have seen growing momentum among their partners.

Establishing a skilled network of channel partners weighs big in Troy’s strategy. Currently, more than 1,200 companies sell SAP’s Business One package for small businesses, and another 800 sell its All-in-One package, a slimmed-down version of the mySAP Business Suite for large enterprises.

One of her first moves was to introduce the PartnerEdge Channel Partner Program. Under the new global channel framework, the company awards resellers, independent software vendors and other partners points based on their performance. The points are given not only for the volume of sales, but also for the ability to satisfy customers through enhanced applications and service. With the points, partners can move across three levels: associate, silver and gold. The higher the level, the greater SAP’s support, which includes funding and training.

The incentives for climbing the ladder include certain discount prices, market development funding, participation in beta tests, early access to technical and product releases, and educational and consulting services, which carry a fee at the associate level but are free at the gold level.

“We’re mapping partners into this program in stages,” she said. “Europe will be complete this quarter. In summer, we’ll do the Americas and Asia Pacific, and Latin America in fall.”

In January, SAP introduced a hybrid model that combines direct and indirect sales for all deals US$1 billion and below. Previously, the domain of indirect sales was $200 million and below, according to Troy. “The approach gives us a more addressable market,” she said.

To what extent SAP’s plunge into subscription-based, on-demand offerings will attract SMBs remains to be seen. “We haven’t seen huge demand in the midmarket for that model yet,” Troy said. “But if there is demand, we’ll look at it. We want to give our partners the largest possible portfolio of offerings to address their customers.”

High on Troy’s priority list are SMBs in Eastern Europe, especially Russia, emerging economies such as China and Russia, and Brazil. Midmarket companies in these regions face many of the same requirements: As they expand cross-border or become suppliers to global companies, they need to make their operations compliant and transparent.

Businesses in these markets also face similar challenges. “One of the biggest challenges is the stability of the local government and its tax system,” Troy said. “In Russia, for instance, tax authorities have been making changes by the month.”

One of biggest challenges facing SAP in China is dealing with the sheer size of the market, both in the number of companies and their widespread locations, according to Troy. SAP is working with local distributors there “to help build a channel more quickly,” she said. “They’re on the ground and can help us gain access more quickly.”

-John Blau, IDG News Service

For related news coverage, read SAP Targets Eastern European Midmarket and SAP Plans Collaborative Centers for SMBs.

Check out our CIO News Alerts and Tech Informer pages for more updated news coverage.