SAP sinks teeth into rich SME pie

SAP wants a bigger piece of the large and potentially lucrative SME (small and medium-size enterprise) market for business software to fuel the company's growth moving ahead. After introducing products tailored to meet the needs of smaller businesses, the German vendor now aims to follow through on marketing and support with a new dedicated unit -- Global SME.

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The unit will launch in January with Hans-Peter Klaey at the helm. Klaey, who helped establish SAP's EMEA (Europe, Middle East and Africa) operations and, since 2002, has served as president and chief executive officer of SAP's Asia-Pacific activities, will report to Léo Apotheker, SAP board member and president of customer solutions and operations.

Klaey spoke with IDG News Service about SAP's midmarket strategy and his role as president of Global SME. The following is an edited transcript.

IDGNS: To start off, what's your definition of SME and what products are you targeting at this market?

Klaey: In the midmarket, we have All-in-One, which we sell both directly and indirectly through channels partners. The product is targeted at companies with employees between 100 and 1,000 or thereabouts. It's preconfigured and allows partners to add more preconfigured micro-vertical solutions on top. Our Business One offering, which is sold exclusively by channel partners, is targeted at companies with between 10 and 100 employees.

IDGNS: So would you say you have a flexible definition of SME?

Klaey: What I've learned from working around the world is that SME is defined differently in different markets. If you go to India or China, for instance, the number of employees don't match the revenue numbers. So we qualify our midmarket as to what make sense in a specific country, how companies view themselves -- as a small or midmarket company or a large enterprise -- and what solutions they require. We need a differentiated approach to SME markets because they are local markets that require local knowledge.

IDGNS: If SAP has been so successful in the SME market as the company claims, why the need for a special unit?

Klaey: We've worked very well in midmarket but now it's time to bring everything together into an organization that has an even greater focus on the SME market and can offer these customers even more.

IDGNS: What exactly will change -- more direct salespeople or channel partners, or more developers committed to SME?

Klaey: We'll have a line of business totally dedicated to SMEs. It will bring together our direct and indirect channels into the midmarket as part of our multichannel approach. Moreover, we'll have dedicated SME heads in the regions who will report to the regional president.

IDGNS: Do you plan to beef up your direct channel as part of your new SME strategy?

Klaey: We'll beef up both. We've added close to 500 new channel partners in the last 12 months to bring the total to around 2,200. Also during this period, we added over 5,000 new customers in the indirect channel area alone, or 22 new customers per working day. This is a fast growing business.

IDGNS: What is the percentage of direct SME sales to indirect sales?

Klaey: We don't break this down but I can say from experience that it's very even.

IDGNS: And how big is your SME customer base?

Klaey: Of our 36,000 customers, 65 percent are SMEs. And 31 percent of our order entries come from SME.

IDGNS: Is there any one region where you feel a particular need to focus, for instance China?

Klaey: That was my focus for the past 5 years and will remain a focus. Asia is a classical midmarket region. And we'll continue to have a big focus on it. But India, Russia and Brazil are also areas of tremendous focus for our SME business.

IDGNS: Who are your main competitors in these markets -- Oracle? Microsoft?

Klaey: Yes, those two and many more. The competition scenario in the SME environment is different from that in the large enterprise environment. The SME sector has many local competitors with local solutions. We have already gone through the localization and globalization of our products so we're competing successfully with local competitors as well as global competitors wherever they are.