Technology giant SAP sets sights on Middle East growth [National, The (United Arab Emirates)]
(National, The (United Arab Emirates) Via Acquire Media NewsEdge) w SAP, the world's biggest business software maker, has set its sights on the Mena region. But the company's regional head admits it faces many hurdles. Angel Navarrete / Bloomberg News
To someone outside of business software circles, Sapphire Now may seem like something of a strange social gathering.
The annual technology event, which was held in Madrid last month, tried to wow attendees by exhibiting a McLaren Formula One race car and hosting the British rock band Supertramp during a concert on the final night. But the main point of this three-day affair was to educate more than 11,000 of SAP's customers about the products and services that the company has available - and convince them to upgrade to the latest digital wares.
Never heard of SAP before Many consumers may not be familiar with the German-based software giant, mainly because it focuses on helping other businesses - rather than individuals - improve the way they track, analyse and digitally display customer data through various kinds of computer programmes.
While SAP does not sell sleek smartphones or flashy videogame consoles, the company has managed to grow its workforce to about 65,000 people, which is more than Apple boasts and about double the size of Google's employee base.
It is the leader in the business software market with major customers such as Dubai Electricity and Water Authority (Dewa), BMW, Siemens and Unilever, and SAP sits comfortably ahead of rivals that include Oracle, SAS Institute, IBM and Microsoft.
SAP's co-chief executives - yes, two men share that title - regularly bring up their company's long run of sales increases. Their latest tally: 11 consecutive quarters of double-digit growth, with €14.2 billion (Dh67.7bn) earned in revenue last year.
To further increase business, SAP is releasing faster-running software and more powerful databases so that its corporate customers can better interact with consumers who might be booking an airline flight or paying their electricity bill, for example.
"We are no longer in a business to business world. We're in a business to business to consumer world," Bill McDermott, the SAP co-chief executive, said at Sapphire Now.
But as SAP turns its sights on high-growth emerging countries within the Middle East and North Africa (Mena), it is encountering certain hurdles that may make it more difficult to expand sales and maintain its position as the market leader. The list of challenges, notes Sam Alkharrat, the SAP managing director for Mena, is a long one.
"Where do we start " he jokes. "I need a big whiteboard here. If you want, get me a pen and leave me for a couple of hours."
SAP first entered Mena in the 1990s, though its software and service offerings were only available through a distributor back then. In 2007, SAP launched its own direct operations that have since grown to include about 450 employees across eight offices in the region, with its headquarters based in Dubai.
At the beginning of the transition, Mr Alkharrat says, "We obviously had all the start-up challenges. You're not deep in any one country; you're thin and trying to go deeper so you have to put more resources on the ground."
Over the years, different countries within the region have developed at an uneven pace - along with SAP's business. Countries in the Arabian Gulf have moved ahead more quickly than others, with Saudi Arabia, the Emirates, Qatar, Kuwait then Egypt accounting for SAP's lion's share of revenues.
"Our challenge has been much more around resources, and around finding the capability that's necessary in the region to go as deep as we want to go with some of our customers," says Mr Alkharrat.
In other words, SAP is seeking talent to sell more software. And it is willing to invest a lot of money to secure the right people.
In March, the company announced a four-year plan to spend US$450 million (Dh1.6bn) in Mena to recruit additional workers, train young Arabs and Nationals as well as redeploy existing talent from different countries around the world to help oversee this transition. All told, there are between 10 and 12 different areas of focus within the plan.
But unveiling a plan versus implanting it is quite different.
SAP says it began spreading itself too thin with its ambitious goals this year, and it is now looking for faster, more tangible returns. That is why the company is already reconsidering how to spend future allotments of money. "We might kind of shift our focus a little bit," says Mr Alkharrat.
"We're finding some of the streams may not have as much effect as we would like, so part of reconsideration for next year is that we take the plan from having to touch 12 streams down to five streams … because we think those are going to bring faster returns and solve bigger problems," says Mr Alkharrat.
The company says it will concentrate on enhancing training for its own employees who are on the ground in Mena as well as fostering greater "customer intimacy" for larger clients who may want to convert to SAP software but are first looking to build a trustworthy relationship. Those kinds of connections, SAP hopes, will land major contracts in its weakest areas: retail, banking and the public sector - "these are big areas for SAP," says Mr Alkharrat.
So far, SAP's business has been strongest among manufacturing and utility companies.
Dewa, for one, is implementing SAP's software over a seven-year plan so that its logistics, human resources and finance team can more easily analyse and share data. In September, the company's senior executives started using a programme on their iPads that accepts their digital signature - from anywhere in the world - to approve massive purchase orders worth hundreds of millions of dirhams. More than 600,000 utility customers, meanwhile, now have more options to make real-time payments from various banks and ATM-like machines, whereas before they had to walk up to a service rep in Dewa.
"Any improvement in your internal processes has to reflect on external processes," says Hatem Mohamed Al Shafei, a senior manager of IT projects at Dewa.
Yet SAP's customers from the Mena region warn that the company's software licensing fees typically only run 10 to 15 per cent of an entire project's costs - which could run €3 million to €10m in some cases. Businesses may also have to incur significant costs to beef up hardware infrastructure, as well as hire employees who can actually harness the software and convince older workers to do the same.
"We had to recruit new blood to act as a mediator between the old generation and the project," says Hadi Darwiche, the business development manager of Cap France Bat, an engineering and construction firm in Riyadh. He notes that with the significant investment his company undertook they are taking a "long-term view."
SAP, of course, would not have it any other way.
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