SAP has actively seeking new resellers to help it reach the burgeoning SME (small and medium enterprise) sector, typically with cloud-based offerings.
Rich Philips, head of partner management for SAP EMEA, says the pervasiveness of cloud and mobility means that customers expect to be in touch with companies all the time – and SMEs are in a good position to deliver on this.
“SMEs can appear to be a lot bigger, and customers could engage more with a small company that happens to have a very good IT platform. You don’t need to be a multi-million rand organisation to have that any more.
“The cloud allows IT-level software to be consumed by anyone, so SMEs can compete with the bigger organisations, and they can compete very aggressively.”
Today, SMEs don’t have to stay small, Philips adds; because they have access to everything they need from an IT department they can scale very quickly.
“In the South African economy you have a lot of these SMEs that have the potential to grow very quickly – probably more than any other country in the world.”
He ascribes the potential in this market to a level of energy that is hard to find in more established markets. “It’s about how people make decisions. If I compare doing business in South Africa compared to many other places, you do it quickly.”
SAP isn’t a newcomer to the SME market, but the relatively new cloud technologies have given the company a new impetus into this segment.
And now, it is actively recruiting new partners who are able to take advantage of the product offerings, add their own IP and roll them out quickly to a volume market.
“We’ve had to change our messaging,” Philips says. One thing it hasn’t had to change is its expertise in the software market, where it is an undoubted market leader.
“We have the knowledge of enterprise complexity. Large companies rely on SAP because we know what needs to be done. And the problems faced by small fast-growing companies are not that different to those faced by an enterprise.”
Of course, an African or South African SME is a very different company to one in Europe or the US, but Philips believes the differences are less than might be imagined.
In Germany, for example, there are literally hundreds of medium-sized companies involved in various manufacturing endeavours, and these companies export their products around the world.
“There is nothing to stop and SME in Africa from doing the same thing,” Philips says. “And we can start working with very small companies – even the one- or two-man operations.”
By using software in the cloud, the burden of running an IT operation goes away, and allows SMEs to focus on what they do well.
“As an SME you are doing what you do,” Philips says. “You are probably not an IT expert, you don’t want to be an IT expert, and you don’t want to spend the money on getting IT expertise.
“With a cloud solution, all the SME needs to worry about is running his business. Someone else worries about the data centre.
“For instance, the SMEs that use SAP By Design really don’t care where the data centre is. Their access is via an iPhone or a laptop, and the IT burden is about as close to zero as it’s possible to get.”
There are already about 250 000 SMEs around the world that run SAP software – but the potential market opportunity is much bigger.
“This is our challenge, and we are very focused on building new relationships with partners who can offer SMEs solutions that are easy to contract and easy to deploy,” Philips says.
To address this market, though, a new breed of partner is needed, who understands the cloud model and is able to roll it out to customers at speed and with scale.
The traditional SAP partners are very good at offering consulting and deployment services to large organisations, but they are not particularly good at engaging with SMEs.
The new-look reseller would be able to provide a platform rather than a specific product set, and offer SAP software as well as its own IP as a service.
“We are inviting a new breed of partner to work with us, partners who are able to develop these platforms and bring new ideas to African SMEs.”
In July, SAP introduced a Master VAR programme where it enabled its three top value-added resellers (VARs) to start developing platforms relevant for the local market.
It is also looking at new routes to market such as telecommunications companies and banks, that already have relationships with SME customers.
The end user customers are ready for the new dispensation, Philips says. “In my experience, South African and African companies are quick to consume new technology. A lot of companies here will take up new technology and lot earlier than their counterparts in other places.”
A potential stumbling block could be skills. It takes highly-qualified developers to bring new products and solutions to market, and South Africa might lack the depth of skill required.
SAP recognises the challenge and accepts that it has a responsibility to help develop those skills which is why it is investing heavily in skills development in Africa and South Africa.
Overall, though, there are massive opportunities available for South African SMEs and the SAP partners that opt to address this growing market.
“There is absolutely the capability in South Africa to do this,” Philips says. “If you are a partner organisation or software developer, there are huge opportunities both locally and in terms of export.
“There are a plethora of ideas in this market, and the relative cost of developing those ideas into products is dramatically lower than most other countries. There is nothing to stop enterprising South African organisations from developing world-leading applications.
“And, at SAP, we will help companies to grasp the opportunities.”
Simon Raeburn-Ward, who heads up partner recruitment and expansion for EMEA, explains that cloud services have made their way into every consumer’s life through things like Netflix, Spotify and Adobe.
And customers are starting to bring these kind of solutions into their businesses, he says.
The potential for the South African market – for just subscription revenue – is R1,6-billion, according to Gartner. And it’s expected to grow to R2,4-billion by 2018.
“That’s why we want our existing partners to move to cloud; and new partners to jump into cloud,” he says. “We can show you what the addressable market is for you – and help you deliver on the return.”
SAP itself is aiming for revenues of between E26-billion and E28-billion by 2020, and is confident that up to 75% of this will be through services and cloud subscriptions.
Cloud is around different innovations and deployment methods, Raeburn-Ward says. It offers fast deployment, more frequent innovation updates, agile development, configuration and integration; and lower capex with faster time to value.
For partners, this means that their customers need to understand what digital transformation means. The IT focus has to move from process to business models.
Partners can either lead their customers to digital transformation, Raeburn-Ward says. “And to do that you need to transform your business as well.”
So why should resellers consider cloud. “Your business is about profitability, revenue and growth.
“With cloud the gross profit is actually higher and you can increase productivity and growth.”
What this really means, he adds, is that the company valuation is much higher – up to four times higher, in fact.
The fundamentals of cloud economics means the business has to change.
“You have to think about customer acquisition costs. You have to identify how you can reduce them, and how you can scale them.
“Once you install a base solution, you need to look at the additional elements you can sell a customer. So what can you do about building IP; what add-ons will add to the incremental value?”
This also means the sales cycle changes, Raeburn-Ward adds, and resellers need to be talking to customers all the time.
“You need to look at the lifetime value of the customer. And this means you have to add value all the time.”
This ultimately adds value for both the reseller and his end user customer, Raeburn-Ward says. “There is a huge opportunity for partners.”
Currently, there are about 65-million SMEs in the world, and they are responsible for about 65% of the total spend on public cloud. About 295 000 of these SMEs are currently SAP customers, so there is massive potential opportunity in this market.
Raeburn-Ward believes there are some compelling reasons to partner with SAP. First and foremost is the strong brand that SAP brings to the party.
“We’ve been around for the last 40 years, and we have recently evolved to make it easier for partners to do business with us.”
The company is a proven market leader, he adds, and offers technology across solutions, industries and customers.
This means the partners can offer increased customer satisfaction while quickly establishing credibility. “With SAP, partners can reduce risks and accelerate sales cycles.”
In addition, there are very clear rules of engagement in the SAP model, with 100% of the SME business going through the channel.
SAP’s partner programme, PartnerEdge, lets resellers enter the programme at the bottom and work their way up the tiers depending upon the skills and specialisations.
Benefits of partnering with SAP include building skills, driving demand, expanding reach, earning rewards, and improving economics.
This gives partners the opportunity to sell more, learn more, improve their bottom line, improve their cash flow, and build wealth.
“SAP has a partner-focused go-to-market strategy,” Raeburn-Ward says. “General business and SME all goes through the channel. And there is a massive opportunity for partners here in South Africa.”
The SAP PartnerEdge Cloud Choice is part of SAP’s plan to accelerate cloud adoption with partners. The model will help partners who have concentrated on traditional on-premise solutions — as well as new partners — to establish and maintain a profitable cloud business.
It removes the financial liability and risk from partners, allowing them to focus on driving cloud adoption across their organisation and customer landscapes. Partners should now be able to realize a steady revenue stream that’s locked in for the life of the customer and partner relationship.
“We are 100% committed to working with our partners in the cloud space,” says Rodolpho Cardenuto, president: global channels and general business at SAP. “That’s why we are taking a cloud-first approach. It removes the guesswork and immediately gives partners the opportunity to earn a revenue share on contracts, as well as over the life of the relationship.
“As a key cloud player, SAP must rely on our network of partners to tap into this expanding market and help our mutual customers succeed on the path to digital transformation.”
The profit option of SAP PartnerEdge Cloud Choice allows partners to choose how they want to engage with SAP based on their individual capabilities, resources and expertise. The option eases the transition from on-premise to cloud environments. Unlike the traditional models where partners manage every aspect of the transaction, the new model and profit option supplement the partners’ activities with elements such as contracting, invoicing and collections.
Additionally, SAP will offer a larger, more predictable revenue stream that may go directly toward partners’ bottom lines with the aim of increasing the revenue-share percentage for partners selling cloud solutions from SAP over the total lifetime of the contract.