Bill McDermott on SAP in Russia

SAP Co-CEO Bill McDermott (Photo: SAP)
SAP co-CEO Bill McDermott (Photo: SAP)

SAP is showing an increasing interest in the Russian market. In the first quarter of 2013, Russia became one of the top SAP revenue growth generators. In his interview for Russian newspaper Vedomosti, Bill McDermott explained that he would like SAP to participate more actively in the deployment of IT projects for Russian government institutions and urged businesses to use crises as an opportunity to modernize their IT.

Are you satisfied with the first quarter results? When you presented those results, you mentioned that Russia was one of the best markets. Can you elaborate on this?

Bill McDermott: SAP software business has already seen thirteen quarters of double-digit growth in a row. This quarter, the sales revenue growth from SAP HANA (real-time analytics database), mobile and cloud solutions stands out – all three have shown triple-digit growth. We are quite satisfied with the overall quarter results, but our special thanks go to Russia where SAP business has been growing twice as fast as in Central and Eastern Europe. Among our Russian customers is, for instance, M.VIDEO, which uses our innovative tools (SAP HANA, CRM and business analytics) to expand its market presence and offer its customers a variety of service channels. Eldorado and St. Petersburg State University are great customers, too. Generally, Russia is a great consumer of innovations. I admire the knowledge and talent of Russian people, engineers and mathematicians, for example, as they have great experience and skills. The results speak for themselves. So thank you, Russia!

So SAP business in Russia has grown twice as fast as in Central and Eastern Europe. Does that mean the share of Russia in SAP revenue has increased as well?

Today, Russia ranks 10th or so in terms of contribution to our consolidated revenue. We expect software sales in Russia to reach €1 billion by 2015. And Russia is steadily moving towards this goal. I expect Russia will soon become one of the most important markets for SAP. As you might remember, in May 2012 we doubled our investments in Russia; actually, we invested in Russia even more than in China.

Next page: Top customers in Russia

And where exactly did this money go?

We brought together all CIS states and Russia, and got one of the largest SAP regional divisions, which can even compete with Germany (one of the most important regions for SAP in the world) in terms of resources and skilled and talented employees who serve our customers. What we create is not just another product but significant added value, so we must invest in people, in their education and training to better meet market requirements. That’s what we are doing.

Which Russian industries are “top customers” for SAP solutions? Can you compare demand structure in Russia with the global one, for example, with that of BRICS countries?

We can distinguish utility providers, the oil and gas industry, banks (Sberbank, for example), retailers (we collaborate with X5 Group), Aeroflot, Russian Railways… SAP works in twenty-four Russian industries and covers virtually everything.

A while ago, there were rumors that Russia’s leadership was considering moving its entire records management to SAP software.

Those rumors are very impressive (laughs). I’d like them to become reality. Of course, I would be glad to help standardize the country’s IT infrastructure.

In Russia, there is a serious competitor to SAP – 1C. To what extent does SAP notice the presence of this local player in the country’s business software market?

I welcome competition, because it helps the competing companies show their best qualities. SAP offers a global approach and forty years of experience in developing business software. If any of our competitors in the local market really wants to succeed, I’d suggest they use our data management platform SAP HANA. We don’t mind how they go about developing their business here; the main thing is that customers are satisfied. And SAP HANA is the best way to achieve this.

Next page: Performing well, in good and bad times

Do you believe in large-scale IT infrastructure projects initiated and promoted by governments, such as Skolkovo in Russia? Do you know of any similar successful projects elsewhere in the world?

I think that the main factor for success is public-private collaboration. Governments have an important role in preparing a country’s market for innovation and encouraging companies to innovate and create new opportunities for individuals and for society as a whole. This becomes especially important in a global economy.

Economic crises usually force companies to think about improving their efficiency and implement solutions that will help them run their businesses better. This was the case, for example, in 2008-2009, when demand for IT systems increased among banks. Do you expect the events in Cyprus to have a similar effect?

I am absolutely sure they will. It will be an important growth factor for SAP. We are already seeing this, as the financial services industry is becoming SAP’s fastest growing sector. Banks are being forced to establish closer relationships with their customers and to provide them with additional services, including those related to analytics. And customers, in turn, are increasingly interested in mobile banking. Another important factor is that the interaction between banks and their customers needs to become more transparent. Governments have the right to expect that banks will ensure compliance with certain standards and rules. And the only way to improve transparency is to use information technology, specifically software. At least to get financial statements in real time.

So crises can be good for SAP’s business?

In general, yes. Our business is unique in that it performs well both in good and in bad times. When demand falls, companies start to cut costs, they use software to automate certain procedures and minimize manual labor. In situations such as the one in Cyprus right now, companies use software to run their businesses better. When the economy is growing, they also need software to enter new markets and evaluate different scenarios. That is why our company has had forty-one years of growth (laughs).

Next page: The importance of tablets, smartphones and mobile apps

Mobile devices – tablets and smart phones – are becoming even more common around the world. How does this affect business processes in the global economy?

Today there are more mobile devices than toothbrushes. It’s incredible how important mobile devices are to people all over the world. Kenya is a striking example. People there economize on food so they can afford to use mobile phones. In a sense, I think that the proliferation of mobile devices helps low-income groups move up to the middle class. A 10% expansion in the mobile network in an emerging economy is the equivalent of 1% growth in that country’s economic output. A remarkable example is that of Standard Bank in South Africa. It’s using mobile technology to get 10 million customers into the banking system. This will significantly reduce the number of unbanked people. Every day, 7,000 new accounts are opened with the help of mobile devices and SAP solutions. It takes less than six minutes to open an account. These are game-changing innovations.

Most software developers believe mobile apps are the future. How fast is SAP going mobile?

Today, I do my business using a mobile app for iPad from SAP. We provide our partners and customers a platform to create apps like this. Of course, we develop the apps that are critical to business process management ourselves. We ensure that such mobile apps can be used securely. Many companies provide mobile apps, but far from all of them think about security.

What changes has the iPad brought to business?

An iPad can already be used to solve business tasks, and this confirms our belief that mobile devices will soon be used as fully functional workstations. Recognizing the potential of mobile devices forced us to focus more on them and make them part of our growth strategy. The potential of iPads and the advantages of mobile technology are what made us acquire Sybase in 2010. 18,000 SAP employees use iPads in their work. SAP HANA gives me an overview of what is going on in the company in real time on my iPad – anywhere and at any time. These devices have not only changed how we work, they have even changed how we make decisions. Today, we put mobile first. Our apps should not only look good; they have to be easy to use on any mobile device as well.

Next page: Focus on small and midsize enterprises

Relatively recently, SAP decided to focus more on small and midsize enterprises. How successful has your expansion into this market been?

The SME sector has already proved to be very successful for us. Small and midsize businesses account for about 65% of SAP’s customer base. Otherwise we would not have reached 200,000 customers. I think that the release of SAP Business One on SAP HANA will bring fundamental changes. It will be a huge change for Russia.

A few years ago Oracle filed an intellectual property lawsuit against SAP. What can you say about this trial? Doesn’t it affect your customers?

The trial will run its course. But, as you rightly point out, customers may encounter problems. And in this situation, it’s Oracle who suffers the most. As Oracle has focused more on hardware, its business model has been severely affected. The fragmented approach to application development has also affected their users. That’s made things easier for us.

Some former SAP employees accused the company of being too hierarchical. In particular, we are talking about local managers who do not have enough authority to make important decisions. Do you agree with this criticism?

We believe in putting the customer at the center of our business, and we empower our employees to better meet the needs of our customers. We have complete trust in our employees. That’s something that is not typical of the market as a whole. Business runs better when we focus on our customers and their needs, and customers are served by empowered employees.

What do you do in your spare time?

I love basketball. Maybe someday I shall arrange a match in Russia. I also enjoy deep sea fishing. But I never take my catch with me.

This translation is based on the interview with Bill McDermott “Russia to become one of SAP’s most important markets,” Vedomosti newspaper 06/20/2013, by Valery Kodachigov and Igor Tzukanov.