SAP expands offshore to cater to growth markets

SAP AG plans to more than double the number of staff at its software development centres in Bangalore, India, and Shanghai by 2006, and is also considering setting up a new development centre in Eastern Europe, according to a company executive.

“Our main driver is not to save cost but to have huge hubs where the growing markets are,” said Peter Zencke, executive board member of SAP in Walldorf, Germany, who added that there are local market requirements that SAP needs to understand.

In line with this reasoning, SAP will not reduce the number of people it employs in research and development (R&D) in Germany, according to Zencke. “The biggest installed base we have, and still a stable growth market, is in German-speaking countries,” said Zencke.

The company’s R&D operation in Germany, with a staff of about 5,000, will however not grow as much in terms of head count as the operation in India or in China, according to Zencke, who added that the growth in R&D staff in Germany over the next year would be in the 1.5 to 2.0 percent range.

SAP Labs India, the company’s development centre in Bangalore, does both technology and application development. It is SAP’s largest development facility outside Germany. SAP, which currently employs 1,300 staff at the lab, plans to take the total number of staff to 3,000 by 2006. The Bangalore lab was involved in the development of NetWeaver, the company’s integration and application platform, and also works on mobile technologies.

SAP Labs China in Shanghai currently employs nearly 200 staff who work on software localization, particularly in the area of the double-byte enabling of SAP software for the Chinese, Japanese, Korean and Taiwanese markets. SAP plans to increase the number of staff at this lab to about 400 by 2006.

“The supply of well educated, highly intelligent IT engineers is much better in India than in China,” said Zencke who added that another reason SAP is not doing as much development work in China as in India is the company’s apprehension about inadequate protection in China for intellectual property rights.

SAP also has a development centre in Bulgaria, which was the offshoot of an acquisition of a local company, Zencke said. This centre focuses on Java technology infrastructure.

Besides the development operations, SAP also has services operations in India and in China. This year it set up a services operation in Dalian, China, to offer services to the local market and neighboring markets such as Japan and Taiwan.

“In China there is the perception that services should come for free,” said Zencke. “The ability to offer these services at a cost level that was fitting to the local market was very important to us.” SAP uses a combination of remote delivery of services and remote diagnostics to drive down service costs, Zencke said.

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