By focusing on what it does best, the software giant aims to retain its fighting edge when it comes to the battle with Oracle for market share.
SAP slugs it out with software contenders
Few might have thought it, but the business software industry is a fiercely competitive battleground where multibillion-dollar blows regularly rain down on rivals.
The sector's top two heavyweights, SAP and Oracle, have been particularly aggressive as they try to build up software specialities to help businesses track and analyse data.
In 2010, SAP acquired a business called Sybase for US$5.8 billion (Dh21.3bn) to help it better reach into the mobile software space. It followed that last year with a $3.4bn deal for SuccessFactors, which helps human resource units.
Then Oracle struck back with a $1.9bn agreement in February to acquire Taleo, another human resources management software company. For $1.5bn, it has also swallowed RightNow, which specialises in providing cloud-based services for managing customer service.
But SAP is also looking to expand its cloud-based services to help companies save, access and analyse data remotely instead of physically on just one computer. Last month, it announced a $4.3bn agreement to acquire Ariba, which helps businesses connect with other businesses for products and services.
"The way we compete with [SAP], and we do that across the world, is, obviously, we try to play to our strength," says Thomas Popp-Madsen, who heads Oracle's enterprise performance management for the Middle East and Africa.
But then, software providers are not just fighting each other for new business. Those behind pirated programmes are also eating away at potential revenue. "I can't comment on other software industry rivals but for Adobe, the main rival is software piracy," says Naser Samaenah, the licence compliance manager in the Middle East and North Africa (Mena) for Adobe Systems, a software seller.
Despite this problem, global revenues from business analytic and performance software topped $12.2bn last year, a 16 per cent increase from the year before, according to data from Gartner, a market research firm.
SAP, the dominant player in this sector with nearly 24 per cent market share, is looking to expand its lead in front of Oracle, SAS Institute, IBM and Microsoft. Jim Hagemann Snabe, the global co-chief executive at SAP, discusses how expanding into Mena with a $450m investment may help keep its edge.
Why did SAP decide to invest $450m in this region?
We've seen the interest for world-class global software increasing rapidly over the last five or so years. That led to a conversation last year where we ... feel the region is going into various different industries and has a lot of ambitions to create the future in many ways. We thought it was a special moment for us to double-down our commitment to the region.
What, exactly, is your commitment?
We committed to a four-year plan to add another $450m into the region. We're creating more jobs at SAP, growing rapidly and significantly faster than the average SAP [region elsewhere]. Secondly, we have a strong commitment to a training institute where we will educate the market on our software. With that, we'll triple the amount of consultants in the region. With this we believe we can create a growth opportunity.
Last month, SAP announced a $4.3bn deal to acquire Ariba. What is the strategy for this move?
We're basically saying there are three technologies that will fundamentally change how our business is conducted. Ariba, we think, represents the next wave in the cloud. The cloud today is about consuming software in a simpler way; it's like software as a service. What if we could make interaction not just between friends or colleagues [such as on Facebook, but] connect business with business. That's what Ariba is doing. They run a trading network ... [where] larger companies get connected with smaller companies, and you can source [services] more effectively. Think of it as an eBay for businesses, where you automate all the transactions.
SAP earned more than €14bn (Dh64.31bn) in revenue last year and has more than 55,000 employees globally. How do you continue to grow while remaining nimble enough to address customer needs?
The biggest trap of success is you become complacent and lose speed. We've been working for two and a half years to speed up acceleration. We've cut, on average by four months, [the] time to market new products. We think the best way of dealing with risk of size and success is to empower small teams with customers for direct interaction.
Very few companies have two chief executives running the show. How do you and Bill McDermott, your co-chief executive, split work?
It's very unusual. The model is very powerful if you can make it work. It gives you two brains, four eyes and four hands. That assumes you can make it work. With Bill and myself [it] is a partnership, where we very much value [our] competence and our style. We can divide and conquer and still be responsible for the outcome. I am focusing more on the innovation strategy of the company. Bill is focusing more on the customer interaction but we cover both. Together, we're more successful than individually.
Logistically, what are the challenges of having two chief executives?
So far we haven't had many. There were, at the beginning, [questions] of who to ask; that was easily handled because you make sure nobody asks both [of us]. That's rule number one: you can only ask one of us. Secondly, we try to always stay synchronised. It's a little bit like a team sport, where you know where your colleague on a team is and their skill, and you pass the ball at the right moment and know it's better for the company. I think that's hard work.
And what is the risk of this kind of management strategy with a tech company?
The risk is you can't make decisions because you disagree. We've been making high-speed decisions. We bought Sybase a couple of months after we were put in office and recently made the bid for Ariba, which we were able to make quite fast because we share the same passion.
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