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On a roll

SAP’s new license revenues have shot up by 100%. Akhtar Pasha analyses the story behind this and if SAP India can sustain its growth and keep up this momentum in 2008 and beyond.

SAP India’s success in the enterprise application software (EAS) market is revealed by the fact that it is the fastest growing subsidiary for SAP globally. 2007 saw the Indian subsidiary deliver its best ever performance from its inception in 1996. Some highlights SAP India’s growth in CY 2007 were:

• 100% YOY growth in new license revenue
• 68% YOY growth in total revenue
• Customer acquisition more than doubled—from 1,350 in Dec 2006 to 3,024 in Dec 2007
• Triple digit growth in new customer acquisitions over FY 2006
• 2.3 times growth in SME revenue YoY over FY 06
• Two consecutive quarters of triple digit growth
• Over six new customers for each working day of 2007
• More deals than all of the competition put together
• Excellent results for the second year in a row

SAP has beaten its competition in every possible verticals and markets. MRF, Essel Propack, Bharat Bijlee, JK Cements, Nicholas Piramal, ITC Retail, Emco, JB Chemicals are some of the competitive win-backs for the company. Recently MRF, which had struggled go live with its Oracle’s E-biz application over the past 6-7 years picked up SAP. Its CIO Prince Azariah said, “Even the implementation partner for Oracle had never done the implementation. Whereas SAP has a choice of 19 implementation partners and it took us nine months to go live with SAP and we have already seen some quantitative benefits.”

Frost and Sullivan said that SAP controls 42.5% of the total EAS license market and has a market share of 36.5% in ERP. SAP has maintained its position as a market leader in India by focusing on serving the needs of customers through constant innovation and delivery of solutions that are simple, flexible and comprehensive. Gartner acknowledges that SAP leads the Indian EAS market.

Ranjan Das, President & CEO, SAP Indian Subcontinent summarizes the growth, “It feels like living inside the tornado—we have marketed well during hyper growth and feel that we have reached a critical mass. This has been possible because of the trust our customers have placed in us, as they grow to global leadership positions in their own spheres. We are the clear partner of choice for government, Indian large, medium and small industries cutting across verticals.”

Value engineering

Das said, “We offer value engineering as a free service to our most strategic customers [not to all customers] and prospects wherein SAP helps the customer to map its business growth and technology roadmap.” Under this umbrella service, SAP analyses its customer/prospect’s corporate strategy, interviews its critical stakeholders and builds the roadmap while identifying business gaps. This helps to achieve the corporate objective, which is then aligned with an IT roadmap and the products required to achieve the business objective are mapped onto the same. It’s a complete analysis of loss of potential revenue, quality affecting revenues that addresses problems and optimizes RoI. Das said, “We also do a value realization study for customers and benchmark processes. It was during the value realization study that BPCL found that it had saved Rs 40 crores in revenues, which was directly added to its bottom line.” Additionally SAP has a database of 16,000 customers globally who share their best practices and the challenges that they have faced. This has helped SAP understand key verticals better than its competition—it has 27 vertical-specific solutions to cater to different industries.

Choice of products/solutions

The entire SMB/SME segment is addressed by the SAP Business One (B1) and SAP All-in-One (A1) solutions. Predominantly B1 solutions are sold as bundled offerings—user licenses along with hardware (server) and are priced at aggressive price point starting from Rs 10 lakhs onwards. SAP works closely with server vendors for bundling its business application solution. The success of the offering can be gauged by the fact that SAP roped in 1,700 B1 customers in 2007. It has three distributors and 80 resellers in India for this product line, while A1 has 23 partners, 20 service partners and 75 ISVs supporting it.

Then there’s the special announcement that SAP will make towards AMJ 08 about the availability of On-demand ERP solutions—all in one functionality meant for smaller companies who want to quickly optimize and automate their transactional and operational systems. The SAP On-demand ERP solution is called Business ByDesign.

Even in turbulent times, SAP can sail its ship without worry. Das explained, “Currently India’s economic is growing and tomorrow if there were to be turbulent times in the global economy, companies would still need solutions that can beat the competition, help them focus on increasing efficiency, and they would need business process models that are flexible—new business process that can be changed quickly to fit market conditions and regulations. That way they will continue to invest where it matters the most. “

SAP continues to deliver localized solutions suited to Indian business environment. Continuing its commitment to localize enterprise solutions to suit Indian business requirements, SAP India has delivered vertical and solution specific functionalities that would enable its customers to adhere to the local business process and legal requirements. Indian localizations have been an integral part of SAP India’s solutions and the initial releases have been around Logistics, Financials and Human Capital Management. Enhancing the localization span to other solutions from SAP, SAP India has announced the availability of localizations in significant verticals like Public Services and Utilities and across important and niche operations like Real Estate Management, Treasury Risk Management, Supplier Relationship Management.

Some of the India-specific functionalities that have been released for SAP for Utilities include features like ECS Mandate, Late Payment Charges, Prompt Payment Incentive and Security Deposit Enhancements amongst others. The SAP For Public Services has niche localizations such as Roster Management for Reservation Candidates, Employee Self Services for Reimbursements (Claims), Loans, Leave Encashment, Increment Processing etc. Similarly localization features for Real Estate Management includes India specific requirements like TDS computation and deduction for lease in process etc.

Nagaraj L Bhargava, Vice President-Marketing, SAP India Pvt Ltd., said, “Our overall platform business that comprises of NetWeaver, MDM, GRC, industry specific solutions has grown five times.” SAP is the clear leader in SCM and CRM solutions as well. BEST, JUSCO, Dishergarh Power Supply Corporation, Dakshin Haryana Bijili Vitran Nigam Ltd, Prudential ICICI are its CRM customers as many of them are using it for billing and customer care. In the SCM space Hindustan Uniliver Ltd is using sophisticated warehouse management solution; Nicholas Piramal is using advanced SCM solution for inventory management, Advance Planning Optimization (APO), warehouse management and streamlining its supply chain.

In 2008, the company’s priorities will be to:

Focus on Public sector, retail, EC&O

Public sector is one vertical where SAP has yet to achieve its objective. Bhargava said, “There are plenty of business opportunity in the public sector—banking and insurance and e-governance projects—and we would like to focus strongly on this in 2008. EC&O (Engineering, Construction and Operations) in a new found focus for SAP along with Retail.” SAP has already acquired the big players of the Indian retail sector but there is still plenty left to achieve there. Oil & gas, automotive and utility will continue be its other focus areas in 2008.

SAP Business ByDesign

This on-demand business software solution specifically addresses a new market of prospective, fast-growing smaller customers. Designed around four key principles—completeness, ease of use, adaptability and significantly cutting total cost of ownership (TCO). SAP Business ByDesign delivers an on-demand software solution with built-in service and support. “With SAP Business ByDesign, today we are adding a completely new business model to our successful, established one and are changing the on-demand marketplace. It is designed to significantly simplify IT for small companies by substantially reducing the cost of ownership and combining efficiency with business flexibility. It will give additional choice to the customer,” said Bhargava. Invited customers will get the chance to explore, evaluate and experience the solution. Globally pricing is at $149 per month per user. The Indian pricing will be declared towards the Indian launch of Business ByDesign, which is scheduled in April 2008.

Post the Business Objects acquisition

With the acquisition of Business Objects, SAP has an expanded ecosystem with opportunities for collaboration and innovation around governance, risk, and compliance (GRC), enterprise performance management, business intelligence (BI), and enterprise information management. Das added, “The integration is already done and complete but there is a small overlap, which will settle down soon and it has opened up an opportunity in Business Performance Optimization.” SAP and Business Objects have already announced their first joint offerings—nine joint product packages that will become available and will be sold by both organizations’ global sales teams. These packages were chosen to address the most common challenges facing the executive suite today, creating the first opportunities for companies to license, install and manage solutions from SAP and Business Objects in a single IT investment transaction. Among the initial packages announced for large enterprises are Financial Performance Management; Governance, Risk and Compliance; Visualization and Reporting; Enterprise Query, Reporting and Analysis; Master Data Services; and Data Integration and Data Quality Management. For small businesses and midsized companies, the packages are BusinessObjects Edge Series; SAP Business All-in-One with BusinessObjects Edge Standard; and Crystal Reports Server. These new packages will be offered in addition to the existing portfolios of products available from SAP and Business Objects, which the companies will continue to innovate and support going forward.

Joint Go-To-Market programs

SAP has 17 global relationships with large SIs (referred as GSI), out which three are from Bangalore and Wipro Infotech in one among SAP’s 17 GSIs. It implemented 60 installations in India and the Middle East in 2007. Rajat Mathur, Cheif Executive-Business Solutions Division, Wipro Infotech said, “Being a large SI player, customers see a big value in our services. Additionally our templatization capability has helped us to quickly make inroads in the mid-market. We have created new modules/systems for customers which are unique for example for GIC we have created the Penal Interest Calculator, which is core to their business. In fact GIC experience/templatization has helped us to get a large North American customer in the insurance space. Similarly we have done work for ITC and BEL.” In 2008-0 SAP’s joint GTM (Go-To-Market) will be in key verticals such as retail, oil, utility, manufacturing and real-estate.

‘Third Wave’ of IT adoption

While large enterprises in primarily large cities formed the ‘first wave’ of IT adoption in India, SMEs in larger non-metro cities formed the ‘second wave’. Now with India’s economic growth broad-basing into its smaller towns and cities, local businesses there are forming the ‘third wave’ of IT adoption for companies like SAP. Most of these businesses are part of extended value chains of larger corporates including their dealers, distributors, traders, suppliers and even large customers.

One example of the ‘third wave’ in action is Infodart Technologies India Ltd, a Videocon Group Company. The company is partnering SAP to roll out SAP Business One to over 2,000 of its dealers, distributors, traders and vendors across all major cities and towns across India. Commenting on the benefits of extending SAP across its entire value chain in India, Pawan Kalra, Director, Infodart Technologies India Ltd said, “Videocon, by virtue of its diversified businesses, has one of the most extensive ecosystems in India. Standardizing on SAP Business One as a common solution for all our partners will enable us to form a seamless value chain with our partners and together execute on future growth plans.” Das added, “Today’s era of accelerated change has led to the rise of the business network as a primary source of competitive advantage. Using SAP solutions across its extended business network will allow Videocon to collaborate with partners, customers and suppliers resulting in joint value creation.

A few more examples of this wave include companies such as Phoenix Lamps Ltd based out of Gautam Budh Nagar in Uttar Pradesh up North to a PSN group of companies from Trissur in Kerala.

Das concluded, “We want to make every Indian customer a best-run-business on SAP. We have set a target to be [India] fastest region in the SAP global.”

SAP enters the year 2008 with loads of new opportunities it has identified that will further fuel its growth—PSU, retail, EC&O, banking, Business ByDesign, and focus on third wave [Videocon type of companies] are further set to accelerate SAP’s growth in India.

akhtar.pasha@expressindia.com