How SAP is doing more in the SME market than you might imagine
8 min read
03 January 2018
While many businesses may look to software company SAP and think it’s only for blue-chip corporations, this is a myth the company is looking to shatter.
Business software, and the multiple forms it now comes in, are critical tools for growth-stage companies throughout the world. Each service provides a way of automating an out of date process, speeding operations up and boosting productivity.
SAP, a German software business that now has customers in 120 countries, is right in the middle of this movement and provides services ranging from ERP systems to employee onboarding.
During a visit to SAP’s new Hudson Yards office in New York, Real Business met with a number of its senior executives to discuss the role SAP plays in the small and medium-sized business (SME) space.
Hernan Marino, COO for global marketing at SAP, said the unknown reality is that eight out of the company’s ten customers are SMEs – some 300,000 globally.
“Our top three industries for SMEs are retail, professional services and small manufacturing. Small businesses are able to benefit from big business innovation,” he added.
While SAP has a rather generous classification for an SME (anything up to $1bn in turnover) it has made efforts to provide tailored products for this market segment.
In a piece of research carried out by SAP, 80 per cent of SMEs were found to value trust over cost when choosing a technology partner. An increasing number of technology vendors, the survey discovered, are being used by business leaders for consultation (76 per cent), insight and advice (79 per cent) and an to anticipate needs and risks (76 per cent).
Participants cited collaboration (70 per cent), honesty (81 perc ent) and open communication (78 per cent) about what is and isn’t working as crucial factors in selecting an IT or technology partner to do business with.
Avan Jassawalla, a professor at SUNY Geneseo, led the research and said there now exists a psychological contract, one with unwritten expectations.
“The more a vendor can work those out, meet them and provide empathy, the more a customer will feel a connection and trust – and then commit to a long-term relationship,” she added.
“When psychological contracts are fulfilled, there is reciprocity. All the secondary research we have on trust shows it is the glue in any relationship.”
The SAP approach
So what is SAP providing to its customers, particularly SMEs, that it sees as a USP? Rodolpho Cardenuto, president for global partner operations at SAP, believes SMEs are facing two key issues in today’s economy. The first is managing inventory, with the second being dealing with customers.
“Retailers want to work out how to reduce costs and treat customers better. Professional services organisations need to keep track of people in the field and make sure their interactions are good,” he told Real Business.
“It’s all about giving small businesses the same tools and services that large organisations have – levelling the playing field. Before, technologies were dividing as it came down to affordability.”
SAP’s sell here, Cardenuto alluded to, is it’s ability to invest heavily to keep up with innovation. SMEs, he believes, are not after the cheapest option but rather the best services that are ultimately deemed affordable.
Travis Ryals, director of information technology at Texas-based Seno Medical Instruments, is a user of SAP products and said engaging with the software provider served as a “levelling action” – bringing it into the playing field of larger enterprises.
“We have various sales models, some of which we do ourselves and some by others. Without the ability to bring everything together it wasn’t affordable. It’s about accelerating your journey to market,” he added.
“When we chose a product, one of the driving factors was the maturity of SAP. It was bringing in 40 years worth of knowledge verses some startup with new technology. We had trust in them that they’d be there next year.”
Joe Leimer is helping build a very different business kind of business to Ryals. Design Resources, based in Kansas City, is in the apparel space and works with companies including Nike to produce branded merchandise.
Using SAP, Design Resources has been able to develop integrations between its divisions to make a “high-touch, service-orientated offering smarter”.
“For IT, it’s about how we streamline those processes – as they are very friction-based. We look for partners that have the capacity for us as we scale and grow,” he said.
“Our challenge is to streamline our processes. It starts early on – some of our retailer orders are still done in Excel.”
Innovating with friends
Taking up an entire floor at SAP’s Hudson Yards development is its Leonardo Center – gazing out over familiar sights such as the Empire State Building, Madison Square Gardens and the Hudson River. Bringing together startups, corporations, partners and universities, it’s billed as a hotbed for “digital inspiration and co-innovation”.
SAP Leonardo showcases with IoT, machine learning, blockchain, big data, analytics, data intelligence and cloud as “key ingredients” for digital transformation, making digital “tangible”.
Our tour around the 48th floor of the Hudson Yards building, where the innovation unit is housed, seemed to back up SAPs claim that one of its unique selling points is its ability to innovate quickly and provide smaller businesses with the technology and tools that were once the reserve of big corporations.
While there was something distinctly un-SME about the Hudson Yards set-up (it’s contained within the largest private real estate project in the US), the feeling SAP is providing a very different offering for smaller businesses was evident throughout our visit there.
As another SME customer told us over lunch: “I had worked for a large software vendor before and didn’t want us to be a small fish in a big pond.” It seems SAP is banking on some of these goldfish becoming sharks.