SAP targets Eastern European midmarket

SAP's expertise in numerous industries opens growth opportunities with East European SMBs

Even if SAP has gone west to conquer the large and lucrative U.S. market for business software, the German company hasn't lost sight of the potential lurking in its backyard to the east.

Eastern Europe is bursting with small and medium-size businesses (SMBs), many of which are still using older, "home-grown" ERP (enterprise resource planning) systems, according to Ernie Gunst, SAP president for EMEA (Europe, the Middle East and Africa). "We see huge growth opportunities in the region," he told reporters Tuesday at the company's Sapphire customer event in Paris.

The enlargement of the European Union and a desire to expand internationally create a need for midsize companies to deploy IT as a competitive weapon, according to Gunst. "SMBs in Eastern Europe want to grow beyond their local markets, but they need help on the IT side because many of the vendors that have supplied them with software probably aren't going to survive the consolidation currently underway in the region," he said. "These midmarket businesses seek longevity, and that's a big plus for us."

The SMB market in Eastern Europe, like Western Europe, is highly fragmented, requiring SAP to work closely with local channel partners through its PartnerEdge program, Gunst said.

Price plays a big role in convincing SMBs in the region to sign license contracts, according to Gunst. "We need to be competitive, and we are," he said. "That said, software matters to us, and we're not about to give it away."

To help SMBs buy technology, SAP cooperates with groups providing financing services, including Siemens. "Together with Siemens Finance, we provide financing for software, hardware and applications," he said. SAP doesn't provide any direct financing services, however.

Another crucial factor is convincing customers that buying SAP products will generate value. "Businesses in Eastern Europe want to see a return on their investment," Gunst said. "They want to know that an investment in SAP will help solve their problems."

A big benefit for SAP, in this context, is the company's expertise in numerous industries, according to Gunst. "We have a platform to incorporate ideas and combine knowledge and expertise," he said.

Midsize companies in Eastern Europe are beginning to feel globalization pressure, according to Gunst. "They know that if they don't use IT to gain a competitive edge, they're out of the game."

Copyright © 2006 IDG Communications, Inc.