If its customers are to be believed, SAP, once saddled with a reputation for expensive and large scale ERP implementations is beginning to make a distinctly positive impression in the mid-market. Now several years into an SME strategy built around a portfolio of products and implementation options, SAP is beginning to differentiate its market positioning by leveraging its heritage in business process knowledge and, ironically, the strength of its global brand that just a few years ago would have scared off SMEs. The result is a more compelling business cased and tough competition for other vendors, says Gary Simon, FSN’s managing editor.
As recessionary times approach, the fight for the hearts and minds (as well as the wallets) of the SME market will become more fierce. Faced with a more testing economic climate the pressure on suppliers and their partner networks to demonstrate business value will be even greater.
Initially handicapped by a reputation built around serving multinational corporations, SAP faced an uphill struggle trying to convince the market that it was serious about the SME sector. Commentators could see the economic imperative of winning market share in the global mid-market in terms of generating growth and creating shareholder value but doubts surfaced about the ability of a company steeped in multi-million pound corporate deals to build a partner/dealer network (a necessary pre-requisite in the SME space) and be convincing to small businesses.
In what appears to be something of a marketing coup, the SAP mantra, “The Best-Run Businesses Run SAP” seems to be making its mark. A brand that would have terrified a small business several years back appears to have been turned into a more valuable corporate asset.
Talking to FSN last week at an SAP conference several SME customers described how the SAP brand lent them credibility with their very large customers and suppliers, many of whom used large scale SAP solutions to run their own businesses. Chris Robinson of Davis Langdon, a UK construction and property company using Business All-in-One said, “SAP is a brand that most people know about. SME customers see it on billboards in every airport. Many of our large clients run SAP and if we run SAP it says that we are a company to be taken seriously.”
Nickolas Lindop, of Pentagon, a UK chemicals specialist implementing Business By Design (SAP’s hosted Software as a service Solution) went even further, suggesting that it added Qudos to the business and perhaps even adding value.
Jonathan Schaffer, Managing Director, Plum Products, a UK garden furniture wholesaler that is using Business One to support its expansion into Europe, told FSN, “We had heard the nightmare stories about SAP but didn’t find that at all. We wanted a company that would definitely stay at the forefront and we have ended up with systems that that are in many cases more sophisticated than the multiples that we serve.”
The success of the brand is reflected in SAP’s performance. SAP says that globally it has 20,000 customers for its low end Business One product and 1,103 SAP Business One partners. At the end of Q2 2008 the number of SAP Business All-in-One customers was 12,189. However, the success of SAP Business ByDesign, offered as a Software as a Service (SaaS option) appears more muted. Customer engagements for this product at the end of Q2 2008 were 150. SAP is still setting its sights high. It says it remains committed to its goal of achieving 100,000 customers of all sizes by 2010.
Historically, one of the strengths of SAP has been its investment in ‘know-how’ around business processes, developed when the company was at the forefront of business process re-engineering (BPR) projects which were fashionable with global multinationals throughout the nineties. It was not obvious how this combination of industry and business process knowledge could be ported to the SME sector for which business process maps and descriptions were largely an alien concept. However, the rapidly maturing mid-market seems surprisingly appreciative of process capability.
Ignacio Simon of Axima, a Spanish provider of heating, ventilation and air conditioning and a user of SAP Business All In One told FSN, “SAP is a process tool. We can follow the processes they have designed so that we are not re-inventing the wheel. As a result we only need 2 people in IT to support more than 300 users.” Allan Dowie, Finance Director of Clyde Pumps, a pump manufacturer that is implementing Business All-in-One to drive operational efficiencies told FSN the business had benefitted from a template solution which fitted with the rapid implementation timescales the organisation was seeking.
So where does this leave other players in the mid-market? Well in broad terms the global mid-market has bifurcated and is now structured around two major providers, namely SAP and Microsoft. The latter is enjoying success around the Dynamics brand, including the Axapta, Navision and Great Plains, playing opposite SAP’s Business One, All-in-One and By Design.
Both have extensive dealer (partner) networks and both have global reach. But the brands represent different things. SAP has shaken off its “big business only” title and Microsoft has to a large extent jettisoned its “technology only” label. It means that the brands are coalescing but coming from different directions. What matters most is how brand values are translated on the ground.
It is the dealers and business partners that are pivotal to success. Their ability to deliver a business case, implement effectively, articulate business processes and manage costs will ultimately determine who wins through in this competitive space.
