The Challenge Facing the Russian SMB Market

The third SAP congress took place in the Radisson-Slavyanskaya hotel in Moscow under the motto “From Order in Business – To Intellectual Management”. The large number of participants was encouraging. Around 1100 people from CIS countries, Latvia, Lithuania, and Estonia attended the first day of the event. Even the second day saw approximately 800 people in attendance. Congress agenda included over 30 presentations and round table meetings. Last year SAP celebrated two anniversaries: 30 years of operations worldwide and 10 years of presence in CIS and Baltic markets.
The jubilee year 2002 was marked by significant growth of sales of SAP business solutions in CIS and Baltic states, which was registered at 34 percent as compared to the previous year. According to IDC, the market share of SAP in Russia made up 48 percent in 2002. For the first time, SAP, in conjunction with Russian business partners, presented the SBM solutions mySAP All-in-One and SAP Business One in a separate SMB section of the Congress. The talks about SAP SMB solutions were met with great interest from the participants. In well-attended talks, Alexander Antipov, Business Director SMB, SAP CIS and Baltic States, explained SAP’s SMB strategy for the Russian market and presented the first business partners for mySAP All-in-One.

The country needs new partners

One of the business partners is Tops Business Integrator. The Russian SAP Business Partner already develops solutions for Toyota Car Dealer and a service provider. And what better proof can you get of the quality of SAP’s SMB solutions than the fact that Tops Business Integrator itself uses a mySAP All-in-One solution for internal company operations.
Itelligence, a Global Service Partner of SAP, has also recently taken an active role on the Russian market. With its IT Trade Solution, the company has been offering a localized retail solution for the Russian market since August. Itelligences’s product range already contains 12 solutions based on mySAP All-in-One which it intends to gradually localize for the Russian market. Adapting internal accounting systems (Finance and Managerial Accounting) to the complex situation in Russia presented a particularly difficult challenge to the SAP partner. As a result of Russia’s high inflation, it is very difficult to incorporate internal company valuations. In order to deal with this problem, an IT solution must support a variety of currencies so that it can perform a clear evaluation on the basis of a stable foreign currency. The majority of Russian companies have recently started to use the Euro in place of the US Dollar for this purpose. In 2003, SAP CIS and Baltic States expects to get a further five to eight partners on board who will be active in the mySAP All-in-One environment.
A Russian version of SAP Business One is not yet available, but should be completed in March 2004. This means that the next SAP CIS Congress in September 2004 might well see the launch of SAP Business One in Russia.

A large market with its own rules

In the course of the event, Market-Visio presented a study on the special characteristics and challenges of the Russian SMB market. One of the facts that emerged was that up to 50% of the Russian enterprise solution market consists of small and midsize customers. Russian software solutions are originally developed for midsize or even small businesses. But the software vendors generally promote their products as solutions for large companies. One of the reasons for this may lie in the corporate structure of the Russian market in the 1990s where large companies played a much bigger role and the SMB market was just emerging. Despite the difficult economic situation, the Russian market still offers significant business potential.

Different structures

There are a few special characteristics which separate the Russian SMB market and key account market when it comes to solution implementation. Small and midsize businesses in Russia have relatively simple organizational structures and, as a result, less complex business processes. For this reason, tried and tested business processes from other countries cannot be adopted for the Russian market. However, this low level of formalization also guarantees that Russian companies can easily adapt to changing business conditions. In the past, this was often a guarantee of economic survival. Given this situation, it is little wonder that average IT costs are also very low. Russian SMBs are looking for standardized IT solutions which do not demand high outlay in terms of implementation, training and support. At the same time, many SMBs are not prepared to bear costs for implementation, customization and even hardware that far exceed the licensing fees. This is because Russian SMBs must be able to adapt in order to survive in difficult economic conditions. A further complication is that the legal framework is also subject to substantial fluctuations.

Opportunities for SAP

Despite the difficulties involved, the Russian market presents SAP with excellent opportunities. Around two million small and midsize businesses and thus potential customers in Russia are waiting for the right ERP solution. Due to the progressive formalization and standardization of business processes, solutions offered by international suppliers such as SAP are becoming increasingly interesting to Russian SMBs. SAP can score points here, particularly in terms of its range of functions and quality.