Q&A: SAP Looks to Replicate U.S. Success

For SAP, the U.S. market remains the main driver of its growth, with the company looking to duplicate that success elsewhere in the world, notably in Latin America.

Last month, the business-applications company reported its 14th consecutive quarter of double-digit revenue growth in the United States. The architect of that continued growth is Bill McDermott, who joined SAP in October 2002 from Siebel Systems, now part of Oracle.

Formerly in charge of SAP’s U.S. and Canadian operations, McDermott became president and chief executive officer of SAP Americas in January when SAP merged its North American and Latin American business operations into a single organization.

IDG News Service sat down with McDermott last week at SAP’s Sapphire U.S. user conference in Orlando to talk through the company’s global strategy. An edited transcript of that conversation follows.

IDGNS: To what do you attribute your success so far in the U.S. market?

McDermott: A single-minded obsession on customers. In four years, we’ve more than doubled the size of the company. We’ve worked hard on our coverage model [targeting] small, medium and large customers in the West, Central, Northeast, Southeast and Southwest geographies.

How do you define small, medium and large customers, and what’s your current customer split look like?

Small is zero to US$250,000 in revenue, medium $250,000 to $1 billion, large is above $1 billion. Small plus medium is about one-third of our business versus large at two-thirds. That’s the case for the U.S. and roughly also for the world. It’s shifting over time. We’ll have a 58 percent large, 42 percent small plus medium [customer] mix in two years.

Is new business mostly coming from the small to midsize business space?

If you look at the white space, there are still quite a few large customers who might have ERP but not SCM [supply chain management], CRM or a master data management platform. There’s a lot of legacy ERP looking to move to a modern platform.

At the high end, it’s us versus a database company which has spent $19.5 billion on failed companies and isn’t strong enough to stand on its own two feet. People are going to go to the only viable alternative, SAP. I expect to see lots of switching at the high end.

In the midmarket, a lot of customers have failed with best-of-breed applications. We have a clear intention to serve small and midsize customers. We’ve built and positioned our brand already, but we’ll emphasize it more. We have customer references in 29 industries in the small and midsize space; that’s the most powerful way to change minds.

How has the merging of SAP’s North and Latin American operations worked out?

It’s been a very good move. Why did we do it? One, it’s better for the customer; the relationship spans the hemisphere. Two, partners mainly go to market in an Americas model; before we had two separate lines of business. Three, we can leverage insight and best practices and easily move good ideas. We see a big opportunity in Latin America. We’re focusing on Brazil and Mexico in particular. We look to take best practices there up a notch.

Is SAP planning on changing its 100-user minimum requirement for its on-demand CRM software?

We’re a little flexible. The 100-user limit is a guideline. We won’t go into 10 users and a credit card. That’s for 1-800 call best-of-breed. We’re aiming at business users. If it’s 50 or 75 users, we won’t turn them away.

Will SAP make ERP available on-demand?

You can’t take something as intricate as ERP and bring it down to the consumption model. We’ve integrated payroll on-demand with ADP [Automated Data Processing]. It’ll be pieces of ERP, not the core process that go on-demand; they’re the heart and lungs of the enterprise.

What do you see happening to Oracle?

I feel for them. Database is their DNA, and they have anemic growth in the low single digits. They’re under real pressure from Microsoft, IBM and, looming in the shadows, open source. Merging the code of the different applications they have has a level of complexity of rebuilding the Hoover Dam. They also have to merge cultures and people. It’ll take three to seven years.

Our race isn’t with Oracle. We’re running in a race without a finish line, to achieve customer satisfaction, that’s never over.

-China Martens, IDG News Service

For related news coverage, read SAP Demos New Muse Interface at Sapphire and SAP Broadens Customer Base at Sapphire.

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