“Become the iTunes of Business”

Eric Duffaut, SAP Executive

How did you perceive SAP and its ecosystem when you joined SAP in 2005?

Eric Duffaut: Well first of all, partners always have been very important for SAP’s success, since the beginning. Just listen to the stories from the early days, and you will see what I mean!

Still, when I joined SAP, we were an ERP company addressing large companies in a very direct manner and leveraging partners mostly for implementation.

When  a company is like we were years ago – only addressing one primary market  it won’t talk about co-innovation, because it fundamentally owns all development, and it won’t talk about partners as a route-to-market, because it controls go to market entirely. So in that sense, the role of partners was limited back then.

And today?

Eric: Well, SAP has evolved a lot, and today we are much more than an ERP and large-enterprise-focused company. For example, almost 80% of our customers are small and midsize companies, did you know that?

And of course, innovation is back big time at SAP: Looking at mobile, cloud, analytics, applications and HANA – we operate in 5 market categories and have a much more robust offering today, relevant to customers of all sizes, in all industries and in all geographies. And we can’t cover all these markets and opportunities on our own anymore. This is why we now have a “multi-channel” go-to-market model – we not only sell directly, we also partner with VARs (value added resellers), OEMs (original equipment manufacturers), hardware vendors and service partners, and with our software solution providers, of course. This translates into higher growth for SAP and of course great opportunities for our partners.

Does this show in the numbers?

Eric: Yes for sure. About six years ago, partners contributed not even 15% to our software revenue. Now, more than 30% of total SAP software revenue comes from partners. So that’s a big, big evolution, because when you look at the past few years, our revenue through and with partners grew even faster than SAP overall and hence acted as an engine of accelerated growth for the company.

What does the 30% mainly consist of?

Eric: There are two main components in this 30% partner revenue contribution. Partners reselling our software – we call that indirect channel, both in the SME business and the large enterprise segment. And partners adding solutions to the SAP portfolio – we call that third-party software or solution extensions.

In both areas we have significantly expanded our ecosystem, and have more and more specialized partners whose business extends way beyond implementing ERP software. So again, partners have realized that partnering with SAP is a winning formula. And this grows both our business and their business.

Now let’s look forward. Can you explain what our goals are towards 2015 and what we need to do to get there?

Eric: Sure, there are three main areas we need to focus on that cover the whole lifecycle from build to sell and then implement and run our solutions: Accelerating co-innovation with our partners, expanding all our routes-to-market, and ensuring high quality-services capacity for all markets we operate in.

Let me start with the area of co-innovation. As mentioned before, we used to be a pure business applications company, where most of the solution extensions that we had were linked to our ERP solution.

Today we are also a platform company, actually a business innovation platform company. Database and technology and HANA, mobile, cloud – I mean these are all platforms. And these platforms are nothing without applications and industry-specific business content.

So one way for us to continue to grow is to engage with partners to complement and to build on the new platforms we have. SAP must become the iTunes for business.

What does that mean?

Eric: To win the platform game, you have to drive proliferation of applications. That’s how Apple won its market – measured by that wide variety of applications you can now find on iTunes.

Think of the mobile apps developed on our mobile platform or of extreme apps powered by SAP HANA. We want 10,000 packaged applications from our partners on our platforms by 2015. Only with our ecosystem of partners can we offer our customers solutions to their specific business needs through tailored applications and industry know-how. This is the only way to scale, fast!

Equally important, we will work with our open ecosystem of hardware, technology, and software partners to provide our customers the choice they want and not lock them into a proprietary IT “stack.” This is at the core of SAP’s strategy … and will be game changing for us and the industry. Again, we have chosen to be an open innovator and to partner with the best to provide unmatched value to our customers.

And the second area, expansion of routes-to-market?

Eric: Indeed, the second imperative for us is the continued expansion of all our channels and partners as a route to market. By 2015 we want more than 40% of our software revenue to come from partners, up from the 30%-plus today. We can only do this by accelerating growth for all routes to market.

Let me start with the SME segment, where we already today are very relevant and our partners are clearly the preferred route to market. Indeed, we want our SME business to be 100% indirect.

By the way, we are more relevant than ever in this market segment as we are now bringing our key innovations and new products into our SME solutions portfolio: For example, we already have a dedicated solution called SAP HANA, Edge edition, tailored to SME customers. We are also making ASE the preferred database for new SAP Business All-in-One customers. And finally, we will offer SAP Business One both on premise as well as in the cloud.

Inside Sales also plays a critical role in the SME segment: most of our ISEs are fully responsible for the territory coverage in this space. Inside Sales drive management of volume opportunities through partners and engage with the field to support the partner in closing complex deals.

Just to put this in perspective: In 2006, we opened our first ever Inside Sales center in Barcelona. In 2011, this was a €350 million business for SAP, and a fast growing one that will certainly pass €400 million this year.

How about the enterprise segment?

Eric: In the enterprise segment, we build on specialized partners as a complement to our own sales force to optimize coverage and customer touch points. This allows us to achieve scale and time-to-market  we cannot reach with our direct approach alone. We have an initiative underway called “extended enterprise sales” to further expand our specialized reselling partner ecosystem and accelerate solution adoption in the enterprise segment;  the progress we’ve made here is extremely promising.

Let me also mention OEM as one of the key contributors to our growth aspirations. Think about the following example: We need to find ways to bring the platform elements I mentioned earlier into other solutions. Just like Intel did it with “Intel Inside,” managing to put their processor in every single machine. Imagine the day a company will embed SAP HANA and sell SAP HANA in everything they do. Think about SAP embedding its technology in many types of applications or hardware solutions that others will sell for us. That gives you scale, that gives you reach, that gives you a real boost in terms of revenue.

Which leaves us with the third area, the services capacity.

Eric: The third imperative is indeed the expansion of our ecosystem’s services capacity to support license growth. For that we want to grow the number of trained partner consultants from more than 230,000 today to more than 400,000 partner consultants by 2015, trained on SAP, able to deliver on our solutions anywhere, anytime.

While it has always been SAP’s approach, this is more relevant and important than ever before, as we want customer success for each solution and each market we operate in, not just in our traditional applications and ERP market.

Is this especially important for winning in the fast growth markets?

Eric: Absolutely. Very often we lack capacity and sometimes capability and talent to grab the market opportunities in countries such as China, Brazil, Russia or the Middle East. And here you have two choices: Either you build the capacity yourself or you partner – and the benefit of partnering is the much quicker time to market.

For all our fast growth markets, scaling up the services bench and the feet on the street of our entire partner ecosystem is one of the critical elements for success.

So, co-innovation, expansion of routes to market, and expansion of our service bench through partners are three imperatives for SAP’s overall success. And they are even more critical to the success of SAP in the fast growth markets and to our way of accelerating and sustaining growth there.