What's Your APAC Enterprise Software Strategy — SAP Or SaaP?

A number of Forrester analysts from the Asia Pacific region attended the recent SAP analyst event in Singapore. Meetings with SAP global and regional executives and a large number of detailed breakout sessions over the 1½-day event all clearly indicate that SAP is continuing to try and reposition itself as a true generalized application platform player.

At the core of (almost all) initiatives is the HANA in-memory database technology. Whatever the problem, HANA will solve it (said with tongue planted very firmly in cheek). While the technology clearly has immediate performance benefits, particularly for existing SAP clients, net-new customers will likely need to compare the value of SAP’s offerings with others much more seriously.

As with any vendor, SAP has a few distinct advantages — and a few disadvantages — that go beyond the underlying technology. With its future balancing on a pivot of a change in technology focus from back-office applications to the front office and highly differentiated consumer-oriented applications (including mobility), the future for SAP is not entirely certain. But in terms of the APAC region specifically, SAPs performance to date has been nothing short of impressive. Whether SAP has the right solutions or not, and whether it provides good value for money or not, is not really in question here. SAPs strengths in the region have been to capitalize on previous sales successes and turn the old adage of “no one has ever been fired for buying IBM” into “many people will be hired when buying SAP.”

So there are a couple of key issues to take into account when looking at SAP’s future, particularly in the APAC region, and the likelihood that it can successfully reposition itself as a real platform player here. These include:

  • The high penetration of SAP solutions already in the APAC market. SAP has managed to sell into most regions within APAC quite successfully — even in emerging markets. As in other parts of the world, this gives it a large potential user base to broaden its offerings and deepen customers’ reliance on SAP technology.
  • The enthusiasm of channel partners. SAP’s ability to take the value of a deal from a 5% margin to 80% or more has become almost legendary. In highly competitive markets within APAC, the allure of greater services revenue, more margin on licensing revenue, and greater leverage have future potential sales and channel partners well and truly salivating. HANA’s “silver bullet” marketing pitch is also very compelling for partners, because it provides a number of new entry points for them to now sell into.
  • The early wins that SAP mobility solutions have already had. SAP has managed to win some early and large-scale deals for both mobile enterprise application platform (MEAP) and mobile device management (MDM) solutions. This gives it some credibility in the consumer and employee-facing mobile applications space, even though its offerings may not necessarily be competitive or complete. With a few large deals under their belt, SAP is seen by others to have the credibility and capability even when competitive offerings might be better suited.

Where SAP is still trying to gain traction in APAC is with independent software vendors (ISVs). Though they do have large (and leading) players supporting the platform in APAC, these partners are rarely, if ever, tied exclusively to SAP. In fact, to this point, most are still hedging their bets. Smaller players that create multiple competing offerings in the same solution space may ultimately end up confusing the market. Worse still, they may dilute the value proposition that SAP originally bought to its customers (i.e., industry best practices and a collection of predefined application templates, data structures, and process definitions).

SAP risks becoming another “we do everything” company — yet with a platform that is neither integrated nor complete. Whereas SAP has benefited from its customers’ own organizational complexity in the past (e.g., when implementing ERP, CRM, HR, SCM, and other enterprise applications), its own technology platform complexities may now ultimately work against it. It is a big call for organizations to commit to spending even more on broadening their SAP footprint when, in some cases, they have already spent up to three-quarters of their market-capitalized value on implementing a core and "basic" SAP implementation just for finance.

So the real question is: Will organizations simply remain a customer of SAP and its core applications, or will they fully commit and make the move to “SaaP(SAP-as-a-Platform)?

At this point, I remain fairly convinced that SAP will be successful in APAC, whether it deserves to be or not. Even where currency exchange rate and weaker economic conditions may preclude other major vendors from penetrating, SAP seems to thrive, not just survive.

SAP is increasingly a “solution looking for a problem” — but then, as our clients tell us, they often have many, many, many, problems that do need to be addressed.       

Will your organization find SAP more attractive as a generalized enterprise software platform provider? Will you be making the leap from SAP to SaaP?