SAP strengthens smaller business campaign
Published: 28 Jul 2004 10:40 BST
Business software giant SAP continued reaching out to midsized companies on Tuesday, announcing two new applications and a pair of new resellers.
SAP, which makes programs that automate business processes for larger companies, introduced new tools for firms smaller than its usual stable of corporate giants. The German company said it will team with Summit Enterprise Solutions to deliver a MySAP All-in-One package for beverage distributors and work with Itelligence to market a set of tools designed for consumer products and food companies.
Both products aim to streamline business processes ranging from back-office financials to supply chain operations. SAP said each release includes a number of guidelines designed specifically to help customers best utilise its software, based on the demands of a certain industry.
SAP also moved to expand its regional reach by adding reselling partners in Atlanta and California. The new resellers, Enterprise Specialist Group of Atlanta and Ki Solutions will help SAP get its products to midmarket business, which it defines as customers with less than $1bn (£0.55bn) in annual revenue. Small and midsized businesses tend to prefer working with such "channel partners". Smaller firms often complain that major technology vendors fail to give them the same attention giant corporate customers get. Local resellers cater directly to the smaller customers.
Like its largest enterprise software rivals -- Oracle, PeopleSoft and Siebel Systems -- SAP has increasingly emphasised selling to midsized firms, as demand from the largest firms in the enterprise sector cools off. Over the last several fiscal quarters, the company has reported making larger numbers of deals with smaller companies outside its core of Fortune 500 customers.
Last week, SAP broke out its quarterly performance in the small- and midsized-business segment for the first time ever when it released second-quarter earnings. The company said midmarket deals represented 28 percent of its $2.2bn quarterly revenue.
Larger than medium, smaller than large
While SAP is clearly focused on expanding its presence with smaller customers, some industry watchers don't classify SAP as a major player at that level. Peter Russo, an analyst at Pierre Audoin Consultants, said it is important to note that what SAP calls "midmarket" is actually the upper reaches of that range, pretty close to its traditional large-enterprise turf.
"What they call small and medium-sized business also includes what is really the upper midmarket, and the bulk of the 28 percent of revenue is going to be with customers from $500m to $999m," Russo said.
The analyst said SAP has moved up its definition of the midmarket to make itself appear more palatable to small customers. Russo estimated that only 3 percent of SAP's business comes from companies with $100m to $500m in annual revenues. Russo said SAP used to classify the midmarket within those parameters but redid the math after failing to win many customers among businesses of that size. Russo said SAP and its rivals are still struggling to tailor their products and corporate cultures to smaller clients.
"The biggest problem with SAP, Oracle, PeopleSoft and Siebel, when they try to go low, is that their business models weren't built for this," Russo said. "They built their business and sustain themselves on large deals."
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