SAP (NYSE: SAP) had six employees and five customers in Canada back in 1989. That was surprisingly it for the software powerhouse.
From that modest start SAP has built itself into one of the best 50 employers in the country. It has 2,300 employees and boasts 1,200 customers such as RIM, Bombardier, CN, Loblaw, and Canada Post.
President and managing director Mark Aboud said that when SAP started in Germany back in 1972 there were no PCs, no Blackberries and no Internet. Fast forward to 1989 when the Canadian office was opened the market had a mainframe heritage and corporate applications. We had to evolve it from there.
One of SAP Canada’s watershed moments was signing up RIM back in 1999. RIM co-CEO Mike Lazaridis said that at the time his company reported $70 million in revenue and people thought “RIM was silly and imprudent” to invest in a large ERP system from SAP. “But it is easier to prepare for growth when you are small rather than when you are big,” Lazaridis added.
Aboud said that the SAP’s enterprise business software evolved to manage the business process in a modular fashion. “You can start wherever the customer thinks it can get the best return first,” he said. SAP has industry functionality with 23 different industries and it is highly configurable. It also comes in a format that supports business. Aboud said that SAP is “vanilla software” that can be deployed into any kind of business and then can be configured towards that business’s core competencies and objectives.
This was the kind of software product that caught the eye of Lou Gerstner, CEO of IBM when he and former IBM Canada president John M. Thompson were building up Big Blue’s software business in the mid to late nineties. Boyd by IBM’s historic takeover of Lotus Development Corp., Gerstner, said in his book Who says elephants can’t dance, that SAP was an acquisition target because of is software capabilities.
Aboud, for one, is grateful IBM did not acquire SAP. “SAP has 48,000 employees worldwide and they focus on one thing: enterprise apps. Our people wake up in the morning and it is all about providing efficient software. If we were acquired that would get diluted and IBM made a big play in services back then and that is not our main thing or how we go to market. I would worry that we would be diluted if SAP was not an independent software company especially now as you see the consolidation in the IT industry,” he said.
As the years passed SAP’s focus in Canada changed dramatically from a predominant direct only vendor to a channel player in the small-medium enterprise (SME) space. Currently, SAP Canada has 40 channel partners and it will grow that number steadily where there are white space opportunities in vertical industries or geographies in Canada.
SAP Canada channel chief Conrad Mandala said that 67 per cent of SAP Canada’s business is in the SME space. “We have seen this huge ramp up in the channel and our focus is partner centric now. We want to grow the partner space substantially. The question is how do we transition ourselves from the perception that we are only a large enterprise software provider,” Mandala said.
Aboud said that the medium-size customer doesn’t know that SAP has value for them. “We need to get that message out. We have a dedicated team for that. This is a good opportunity for the Canadian small and medium space. You can start small like RIM and get big and you do not have to replace your ERP. That would be too expensive and too complex. If you go with SAP, no matter the size, you do not have to do it again and you can move in the direction your business goes,” Aboud said.
SAP is also going beyond ERP software and has expanded its product portfolio with a new business intelligence tool that works similar to a Google search and is intended for every worker in an organization.
Called SAP BusinessObjects Explorer, it runs Internet-type searches on company data to get almost instant responses to ad hoc business questions. Aboud said that Explorer use natural language queries. “You type in a thought and from there you get a sub-second response no matter how many records you have,” he added.
Andreas Hofer, a solution advisor for SAP Canada, based in Toronto, said that Explorer addresses an underserved market. “Most workers and executives make business decisions on a gut feeling rather than hard facts. Most of those end up being bad decisions and it’s because they are based on insufficient data,” Hofer said.
The channel strategy behind Explorer will be the same as SAP Business One and All-In-One products. Mandala said that his go to market strategy is to make the channel partners look like a sales rep inside SAP. “To the customer they will look the same,” he said.
SAP Canada’s channel plans will be one of quality over quantity. Currently, the 40 SAP Canada channel partners are hiring more people and increasing its marketing spend to exploit market opportunities with SAP, Mandala said.
Mandala continues to explore working relationships with distributors and direct market resellers along with firming up channel coverage in the Atlantic provinces for SAP.
SAP has come along way in the past 20 years. The company handles half of the world’s business transactions. Along with:
* Approximately 40 billion barrels of oil are processed using SAP software.
* 75 per cent of the beer production companies use SAP.
* 50 million bank accounts are on SAP.
* 65 per cent of worldwide chocolate production is run by SAP.
* And, in Canada 80 per cent of the large utilities run SAP.
