SAP eyes the SMB market

SAP Canada Inc. announced its intention to go after a larger portion of the small to medium-sized business (SMB) market, but analysts cautioned that unless the software giant makes more of an effort to recruit new channel partners, it may be a fruitless effort.

At Sapphire, SAP’s annual user conference held in Orlando, Fla. last month, SAP Canada announced that the software maker is charging ahead with plans to make a name for itself in the SMB market.

During an SAP Canada press conference at Sapphire, Michel Brisson, president and managing director of SAP Canada, called Canadian SMBs a “very important and very strategic marketplace in the country.”

He added that 60 per cent of SAP’s customers worldwide are companies with $500 million or less in revenues and that by 2005, 15 to 20 per cent of SAP’s global software revenue will come from SMBs. Michel Vincent, vice-president of SMBs for SAP Canada, said he is convinced there is global support for the SMB initiative. He added that the fabric of Canada’s economy is based on SMBs.

The market has potential – an estimated 99.8 per cent of Canadian companies have 499 or fewer employees, and account for an estimated $12 billion in spending, according to IDC Canada.

Although support for SAP may exist, analysts say large application software vendors like SAP will need to focus on channel partners in order to take a big bite out of the SMB market.

Mike Dominy, a senior analyst of business application and commerce with the Yankee Group in Boston, said one of the key reasons channel partners are essential in the SMB market is because the enterprise business sales model would be too difficult and too expensive to replicate for most mid-market companies.

But this was not the case for Addmore Personnel Inc. The argument that SAP’s solutions are too expensive for SMBs is unfounded, said Hylton Maizels, the company’s Toronto-based president. His company, with annual revenues of $15 million, found SAP less expensive than other basic business practices.

Addmore’s SAP business solution “cost us in hardware, software and consulting fees for the original implementation, under US$40,000 and our annual maintenance is approximately US$4,500 or US$5,000,” Maizels said. “I pay more money for two ads in a local newspaper.”

Warren Shiau, a software analyst at IDC Canada Ltd. in Toronto, said that although Microsoft controls most of the channel relationships, SAP can still be successful in carving out its own niche.

“It doesn’t mean to say that they can’t be removed or that a lot of those people can’t be convinced to carry SAP or PeopleSoft or Oracle, but Microsoft already has relationships with more people who can address small business or midmarket,” Shiau said.

Bill McDermott, Sap America’s CEO and president, joined in on SAP Canada’s press conference to say that SAP is not worried about going up against the “Microsofts of the world” in the SMB market because “there is enough elbow room for everyone.”

Although the SMB market does have room for more players, Karen Peterson, a research vice-president at Gartner Inc. in Dallas, said Microsoft represents SAP’s next competitive threat because it has bought a couple of ERP vendors – Great Plains and Navision – that serve SMBs. She added that if SAP wants to maintain its dominance in the ERP market, it has no choice but to go after SMBs.

Peterson said SAP’s chances of survival in the midmarket are hurt by the fact that it has “never been viewed as being a vendor that provides solutions that are easy to use, easy to deploy or low in cost.” She added that only time will tell if SAP can be successful in its quest for the midmarket, and that organizations will be watching closely to see if SAP will woo enough channel partners to allow them to penetrate the SMB space.

Yankee Group’s Dominy said the SMB market share is attractive to vendors now because the tier one market has dried up. For the most part, large enterprises spent their money in the late ’90s in preparation for Y2K, whereas the mid-sized market didn’t have the resources to follow in the footsteps of the larger organizations, he said.

Paul Edwards, director of strategic partnering and alliances with IDC in Toronto, said it is essential for SAP to provide potential partners with a strong road map around what their strategy is going to be, and to dispel thinking that SAP’s traditional sales model – selling directly to customers – is unchangeable.

“I wouldn’t see SAP jumping in and going with some kind of crazy recruitment strategy where they are looking at a ton of players; that’s not going to happen,” Edwards said. “Their best strategy would be to pick and choose specific partners across the country on a regional basis that can work closely with SAP and build up from there.”

Would you recommend this article?


Thanks for taking the time to let us know what you think of this article!
We'd love to hear your opinion about this or any other story you read in our publication.

Jim Love, Chief Content Officer, IT World Canada

Featured Download

Featured Articles

Empowering the hybrid workforce: how technology can build a better employee experience

Across the country, employees from organizations of all sizes expect flexibility...

What’s behind the best customer experience: How to make it real for your business

The best customer experience – the kind that builds businesses and...

Overcoming the obstacles to optimized operations

Network-driven optimization is a top priority for many Canadian business leaders...

Thriving amid Canada’s tech talent shortage

With today’s tight labour market, rising customer demands, fast-evolving cyber threats...

Staying protected and compliant in an evolving IT landscape

Canadian businesses have changed remarkably and quickly over the last few...

Related Tech News

Tech Jobs

Our experienced team of journalists and bloggers bring you engaging in-depth interviews, videos and content targeted to IT professionals and line-of-business executives.

Tech Companies Hiring Right Now