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  • Jul 29, 2014
  • Updated: 9:03am
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THE INTERVIEW

SAP targets 1M small and medium-sized business customers in China

Jim Hagemann Snabe to join supervisory board of SAP as the German software firm continues expansion in China to help SMEs go global

PUBLISHED : Saturday, 28 September, 2013, 12:00am
UPDATED : Saturday, 28 September, 2013, 3:20am

In July, Jim Hagemann Snabe said he would relinquish his role as co-chief executive at SAP, the world's leading supplier of business management software, to serve as a member of the German company's supervisory board.

"After more than 20 years with SAP, I have decided that it is time for me to begin the next phase of my career, closer to my family," Snabe said at the time.

The supervisory board has proposed his election to the body during the company's annual general meeting of shareholders in May next year.

Snabe and Bill McDermott were named as co-chief executives in February 2010, with a mandate to strengthen relationships with customers and partners, drive SAP's innovation portfolio across all markets, and ensure operational excellence across the company.

This next phase of Snabe's career will also find him lending his expertise at the boardroom of another big German firm. Siemens, Europe's largest engineering group, appointed Snabe to its supervisory board last week.

We want to become more Chinese, rather than just a German [firm], in China

Snabe, however, remains focused on SAP, where he has held management roles in consulting, sales and development since 1990. He started as a consultant with SAP Denmark, briefly moved to IBM Denmark in 1994 and rejoined SAP in 1996. He was also responsible for the design and creation of the company's flagship enterprise resource planning software, as well as solutions for financial and public services industries.

Since taking the reins at SAP, Snabe and McDermott have invested more than US$14 billion on acquisitions to build up the firm's capabilities for bigger inroads into what it estimates is an addressable global market worth about US$220 billion.

In a call with market analysts in July, Snabe said: "In 2010, we started a remarkable journey to transform the industry based on innovations in in-memory, in cloud and on the mobile."

"We anticipated then that data would move off disk into main memory [inside computers], that data centres would move off premises into a secure cloud and that users would be on the move with mobile devices. Today, we lead in all these innovation areas."

The company's fastest-growing product is Hana, its database platform used by companies to speed up analysis of information and get relevant results to conduct transactions.

Hana, which supports SAP's suite of business management software, is positioned to become a strong rival to database products from industry leader Oracle, IBM and Microsoft.

Recent acquisitions have also helped SAP, which has been operating on the mainland for about 20 years, build up its cloud computing expertise.

Despite the sluggish global economy, SAP's total revenue rose 6 per cent to €7.66 billion (HK$80 billion) in the first half of this year from €7.25 billion in the same period last year.

SAP, the world's third-biggest software company by revenue, is in the middle of a five-year, US$2 billion expansion programme on the mainland. This initiative includes opening more offices, hiring more staff, setting up research and development facilities, training more experts and consultants, and even targeting acquisitions. The number of employees has grown to 4,000 from about 2,500 last year. It also has nearly 10,000 certified consultants and 5,700 corporate customers in the market.

In a recent interview, Snabe discussed with the South China Morning Post SAP's expansion initiatives on the mainland, including an ambitious strategy to become a major information-technology supplier to about 40 million small and medium-sized enterprises in the market.

 

How have you moved forward with your expansion plan on the mainland amid the economic slowdown in that market?

The first year of this plan was more successful than we had expected, so we have decided to continue with our fast pace of development. We see many opportunities to innovate around Hana and mobile. You'll see us accelerating in selected areas - in particular, small and medium-sized enterprises.

We have a product called Business One which runs on Hana, which was initially deployed in 20 SMEs. We would like to increase that number to one million. Business One, which was developed by our innovation team in China and is now sold in 122 countries, provides SMEs with business automation capabilities to help them grow and become global companies.

In this mid-market segment, our typical competitors are local players. In China, these players include Kingdee and Ufida [now known as Yonyou]. Our SME agenda provides us with a strong competitive advantage because we have been helping many large firms go global for about 40 years.

We are investing to grow the number of partners with local expertise, which includes the ability to sell, help implement and support SMEs.

I believe that difficult economic situations can be a force multiplier for us. The more uncertain the market you are operating in, the more accurate you must run your company. And the more accurate you need to run your company, the more you need end-to-end business applications that help you define data in real time.

Like the cloud business, you will see this [SME] strategy take a while before it takes off. It is much more a volume business than a value market.

 

Do you also expect to generate demand for Business One in the mainland's public sector?

I believe that a cloud-based e-government platform, which allows citizens to interact with government services through their mobile devices, would best serve the public sector. We have very advanced e-government solutions that are used in many countries in Europe. Of course, those solutions need to be adjusted for the local environment. But that is why we have more than 1,500 developers in China.

 

What advantages does SAP have over the competition in the cloud computing business?

We have products that compete in four categories: My Money, which is a financial management solution; My People, which is for human resources management; My Supplier, which is a solution for interacting between buyers and sellers; and My Customer, which is customer relationship management.

Our acquisition of SuccessFactors, the largest cloud-based human resources management provider, and Ariba, which has the leading buyer-seller collaboration network, has made SAP the leader in two out of those four cloud categories.

As one of the leading cloud providers in the world, we have an ambition to build a €2 billion cloud business by 2015.

 

What other initiatives on the mainland will SAP drive over the next few years?

We have built up 20 years of good relationships in China. We are moving to a whole new level by taking the lead in our [information-technology] industry to pursue innovation in China. Having the SAP supervisory board meeting in Beijing is a pretty big statement of our intentions in this market. We want to become more Chinese, rather than just a German company, in China.

We have relationships with about 48 universities in China, which is important for [harnessing] skills to build mathematical libraries around Hana.

We have this enormous opportunity to look at raw data at very high speeds and use mathematical models to optimise transport, forecast demand for furniture, or analyse DNA.

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