SAP AG, the world’s fifth-

Founded in Walldorf, Germany 1989  Go Public

largest software firm and the
1972, by four young software
leasing producer of real-time,
engineers who had vision of an
integrated application
integrated software package
software for client-server
Strategic Focus : focused on
computing
selling software packages
rather than solution

Its R/3 product quickly dominate the

enterprise information systems (EIS)
segment of the client-server market

• Besier’s strategy to address American markets :

• Commissioned sales force
 put the entire sales force (rather than just a pilot group) on commission
 recruit more sales force from professional sales people rather than engineers
• Target Customers
 multinational/global companies with revenues of at least $2.5 billion
• Regional Organization
 autonomous regional offices with separate P&L center (own presales, sales,
consulting & training services , flexible in dealmaking), reporting to a regional vice
president (RVP)
 regions divided into three districts, led by a district director, which did not have
separate P&L, for accounting & compensation purposes considered part of the region
 SAP headquarter handle events, public relations & advertising,
 In 3 years, SAP America (Systems, Application,
Programs in Data processing) had gone from relative
obscurity to being the phenomenon of the corporate
computing world
 Decide to be a product company or a solution
campany.
 Decide how many percentage that will be made to
partnership.
Resourcing Explosive Growth (1/4)
• Three things to achieve massive growth in SAP America ($1 billion revenue
target in 1997)
• Create an industry strategy (ICOEs)
 delivered through industry centers of expertise (ICOE)
 serve as a bridge between R/3 customers & the product dev organization in
Walldorf
 six manufacturing sectors, incl oil & gas, process industries and high
technology
 these markets accounted for 80 percent of SAP America’s licensing revenues
 small, highly autonomous units consist of two to six presales & consulting
experts, led by directors who has entrepreneurship and industry specific
knowledge, reported to RVP
• Expand partnership strategy
 four categories of partnership :
 Alliance, professional service firms that provide services & resources in
sales & implementation of SAP products)
 Platform, provide hardware on which R/3 runs
 Technology, provide operating systems & databases through which R/3
runs
 Complementary, wide range of applications and tools that run on top
of or with R/3
Resourcing Explosive Growth (2/4)
• Competency Centers
 Establish Competency Centers with each of its platform & technology
partners
 provide a range of presales information to customers & a focal point
for the flow of knowledge between SAP & its partners. Partners
provide a dedicated team of technical & applications consultants who
were highly knowledgeable about their own product as well as R/3
• Ramp up services & support capabilities
 Consulting was the core of professional services, training spanned both as a
professional & support activities
 Two main works of consulting :
 basis consulting : put R/3 and its support system in place & ensured
that the software was functioning correctly in a network
 application consulting : work with customer to identify their
requirements and customize software configuration to match those
requirements
Resourcing Explosive Growth (3/4)
 Training :
• SAP developed scores of modules on product functionality (1992-1993)
• June 1994, found a Partner Academy, to create a large-scale operation
that could provided the quantity of external resources of the desired
quality level
 Support and Infrastructure
• Licensing & contracts :
 Generate standardized license agreements and a clear-cut proposal process
to create order
 Standard pricing manuals for contract management to empower contract
administrators
 Copyrighted the product
• Building infrastructure
 In 1996, SAP America began paying far more attention to issues of
organization, systems & infrastructure. As CFO, Kevin McKay build additional
infrastructure to support customer base, which include : hotline services
(7/24 basis), consulting resources, training & human resources
Resourcing Explosive Growth (4/4)
 Sales & Implementation Process
• Presales & Sales :
 The sales cycle was a long one, especially for global clients. Often took a year
or more to the point where an opportunity arose that could be used to gain
access for the 12-18 month presales & sales process
 District Director has to find resources for a presales team, sales team and
consulting team to manage the sales cycle for the softwar. Putting together
all strategies because there is a sales cycle for the consulting partner,
hardware & database
• Implementation
 Outside partners like Andersen & Price Waterhouse usually took the lead
role in R/3 project management and implementation with their own
methodologies.
 SAP consultants usually served on multiple projects at the same time. Each
region’s consultants used their own implementation methodology
 SAP handle all the installation process if customers didn’t want to rely on
outside partners or required special skills
 Internal Threats
◦ Increased Fragmentation: Districts, Regions, ICOEs
operating largely autonomously

◦ Little attention to cost and efficiency

◦ Growing need to shift from entrepreneurial to a

more professional style of management, with
greater attention to systems and infrastructure in
order to handle SAP America’s vastly increased size
and complexity

◦ Change in framework from generating new

customers to farming old ones while generating
new ones. Be partner to clients’ growth
 External Threats
◦ Increase in Competition from Oracle, Baan.
Willingness to compete aggressively through price
and competition.
◦ Growing market perception that R/3 is expensive
and time-consuming to implement.
◦ A need to move downstream toward the small and
medium enterprises. If you help SMEs grow, then
when the become large firms they may stick with
your systems.
◦ Sales, Consulting and Training became separate
lines of business with separate profit and loss
accounts

◦ Mid-market and global accounts were separated.

◦ The existing ICOE came under a new director of

industry marketing. Those in emerging markets
(SMES and service based industries) has separate
lines of business under a different VP.
 Advantages
◦ SAP America became a “one Company”

 Possible Disadvantages
◦ Since Sales, Consulting and Training become separate
P&L, they might compete with each other. E.g.,
Consulting may be slower to increased its bottom-line
thereby affecting repeat sales. Also coordinating issues.

◦ Remains largely sales driven. Marketing was still a

sideline. Marketing reports to product development
teams in Germany.