Savannah, Ga. — Taking another step in its evolution from a direct-first vendor to one with an direct/indirect mix, business software vendor SAP AG (NYSE: SAP) told partners at its Channel Partner Summit that it’s opening-up a large chunk of the enterprise market and making it channel-exclusive.
Previously, SAP has been building its channel focus in the small and medium-sized enterprise (SME) space, growing its channel capacity and program to the point where, in 2011, 100 per cent of new SME business will go through the channel. While everything under a certain revenue figure was reserved for the channel, now that ceiling is gone. The greenfield program will see the naming of 4600 prospects in North America, scaling into the enterprise and net-new to SAP, that the vendor will allow the channel to compete for exclusively.
“We’ll only work with VARs to sell this channel, and there’s no limit in revenue. The definition is customers net-new to SAP,” said Kurt Bilafer, global vice-president, analytics, ecosystem & channel partners. “We started off in SME leveraging our VAR relationships to sell more, and now we’re leveraging the channel to sell higher into enterprises. There’s an opportunity for VARs to all increase their transaction revenue and their service revenue.”
The move is part of SAP’s goal to become a 20 billion Euro company; it can’t get there without the channel. It follows the merger of the SME and channel organizations, the elevation of the global channel chief role to a presidential title, and the restructuring of executive compensation to include measurements on channel sales and partner satisfaction.
“Over the last 20 months we’ve seen a fundamental shift in how we look at and value the channel, and it has given u a lot of confidence to create this program,” said Bilafer. “We need people that understand business problems and provide solutions, and that’s what our VARs do.”
In Canada, the program will see about 500 new companies open to the channel said Conrad Mandala, SAP’s national vice-president for SME. Analytics will continue to be a joint sell in Canada, but ERP sales will be driven by the channel. SAP has also taken other steps to open more of the Canadian market to the channel, including last year shifting the entire municipal government market, including major cities like Toronto and Vancouver, from the direct to the indirect channel.
“We’re seeing a continuing blurring as we move to a direct/indirect model,” said Mandala. “We’re trying to drive 40 per cent of our revenue through the channel over time, and to get there we need to drive big volume.”
Mandala added for many enterprise customers, indirect is their preferred way to go. Partner-led engagements tend me as much as 50 per cent cheaper, and partners can also bring industry-specific expertise that SAP can’t.
“The market segmentation isn’t going to be by size anymore, but by customer predisposition,” said Mandala. “That’s more relevant than an arbitrary line of revenue.”
The program and the change in philosophy is being welcomed by Canadian partners. Richmond Hill, Ont.-based Illumiti was honoured in Savannah as SAP’s Business All in One partner of the year for Canada, and Illumiti president Nir Orbach he’s thrilled about the opportunity to go after enterprise customers.
“While it may be tougher in that space with larger companies, we have a sizeable SAP services practices that work with larger organizations,” said Orbach. “We feel it’s a great opportunity for us to work with larger clients in the channel. We’re very excited.”
Michael Pearson, president of Toronto-based Contax Inc., said he’s impressed with SAP’s moves to put into action it’s talk about changing its channel philosophy.
“This greenfield program, that’s big. We’ve never had this opportunity before and it’s portfolio wide, not just (Business Objects) and ERP,” said Pearson.
Contax began its business focused on the sub-$500 million market because that’s where SAP was positioning the channel, but with the new opportunity Pearson said they’ll be scaling-up to take advantage of it.
“It’s a different sales strategy and a different cycle,” said Pearson. “It’s a big change. Huge. I never thought I’d see SAP make this level of commitment to the channel.”
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