SAP Sapphire: Not Your Father's SAP

As SAP welcomes thousands of partners and customers to its annual SAP Sapphire conference being held simultaneously in Orlando, Fla. and Frankfurt, Germany this week, it marks a channel inflection point that is paying off in big midmarket sales gains for SAP partners.

The $15.3 billion software giant, which had only about one third of its sales coming from partners several years ago, hit the 50 percent mark in 2009 and is slated to hit 54 percent this year, said Patricia Hume, senior vice president of Global Indirect Sales Organization for SAP. Not only that but the SAP Board of Directors has given the channel organization a mandate to move 100 percent of the Small Medium Enterprise (SME) sales through partners, said Hume.

Hume and the channel team have spent the the last two years bringing channel discipline to a direct sales culture that at one time showed little regard for its partners. That has changed with SAP making a major midmarket push that has been hastened by the economic downturn. Hume and her team have worked hand-in-hand with partners to develop software sales skills aimed specifically at the SME market.

Those SME customers years ago more than likely would not have even considered SAP because of the high price tag and a rollout schedule that regularly took 18 months or more for its high end, complex ERP software. Now SME partners are rolling out $100,000 SAP All In One solutions in a few weeks. "This is not your Father's SAP," boasts Hume.

As if to demonstrate just how far it has come on its partner journey, SAP this week unveiled at Sapphire a new version of its SAP Business ByDesign specifically for midsize companies along with an aggressive partner strategy focused on what the company is calling "a variety of engagement opportunities" for solution providers and resellers. Even SAP's new co-CEO's, Bill McDermott and Jim Hagemann Snabe, just off their first 100 days in office, are talking up the partner ecosystem.

And the partner march is likely to accelerate with the planned $5.8 billion acquisition of Sybase which is aimed squarely at moving SAP's ERP solution into the smartphone game.

Elliott Garofalo, senior vice president SME Market for Optimal Solutions Integration, Irving, Texas, the largest pure play SAP integrator in the country, credits the change in the channel commitment at the software giant as a key in Optimal's robust 40 percent sales growth in the midmarket in 2009. Optimal hired over 200 people last year in the midst of the recession that has wreaked havoc and reshaped the technology landscape.

SAP realized that in order to continue to grow it needed to aggressively go after the SME market, said Garofalo, and it needed to find a group of "go to" solution providers. "They finally made a commitment to the indirect business," he said.

Optimal, for its part, put together an SME business plan with a separate business unit in 2008 and closed on $100 million in private equity financing. Garofalo says starting from scratch with a separate P and L (Profit and Loss) statement gave the company the ability to avoid the mistakes rivals made as they attempted to move downmarket with an enterprise solutions model. "We changed our model to focus and drive into the midmarket," says Garofalo. "Those buyers are a completely different animal."

Next: Optimal Takes A Long-Term Strategy

The Optimal SAP push came as SME companies were experiencing a "seismic shift" in how they purchased ERP solutions, said Garofalo. "We had to change the way we sell and implemented SAP," he said. "We had to take a long-term strategy."

That "long-term strategy" required a maniacal focus on "executing perfectly" as Optimal brought lower priced and rapid implementations of SAP Business All In One to customers, said Garofalo. "We have changed how we attack this market and are ahead of competitors who are still selling the way they did four or five years ago," he said.

Garofalo says Optimal did a "good job" aligning with SAP as it made the midmarket march. "We put our money where our mouth is," he said, noting that Optimal put in its own SAP solution last year to run its business. "We needed a platform to grow our business as well so we implemented our own All In One Business solution." That's the kind of commitment SAP is looking for from channel partners.

Garofalo isn't the only partner seeing the SAP difference. Peter Illari, a principal at Accelbus Systems, a national SAP Buiness One partner with offices in Philadelphia, Pa. and Orlando, Fla. says he views SAP as one of the "most channel friendly vendors" since the company's move last year to give channel partners near exclusive rights to sell SAP Business One, SAP Business All-in-One and SAP Business Objects software to SMEs. With the exception of a few named accounts assigned to SAP's direct sales force, customers in the U.S. with annual sales of $300 million or less are left exclusively for solution providers.

"When you have a hard stop on dollars (for sales that go direct) and you are still paying internal sales people then you are removing that conflict that exists between the channel and the internal sales team," says Illari. "Then you really are working as a team to win deals.SAP has come a long way with the channel." Illari says the margins on the SAP business are strong and the company works hard on every deal to make sure its partners are profitable.

What's more, Illari said, he's heartened by the addition of new Vice President of North America Channel Kevin Gilroy and Mike Colman, who has been tapped to manage volume channels in the US. Illari said he is already seeing the impact in the US from the new channel leadership.

Chris Clinton, global vice president of multi-channel programs and marketing for SAP, says the groundwork for the SAP channel renaissance took place with a lot of internal channel education over the last two years by the SAP channel team. "Now we're at a channel inflection point," he says. He says SAP has moved from Channel 101 to Channel 300 class proslyetizing inside the company. That internal championing has SAP's top executives talking the channel talk.

Clinton says that 2009 was a critical year as SAP used the downturn to hone its channel effort building the partner relationships that are paying off in midmarket sales gains. SAP spent that time in the channel trenches providing partners sales and marketing enablement. "We targeted several partners in each region and spent time teaching them how to fish and drive demand on their own," he said.

Next: The Sybase Game Changer

Now, the SAP channel team is getting ready for another big channel "game changer" with the planned acquisition of Sybase, says Clinton.

"Every partner out there can now bring a complete toolset to put an entire organization's business and infrastructure on a smartphone," he says. "Talk about creating an agile organization. Now you can have an employee in an airport on a mobile phone running financials and going into CRM on the fly, talking back to inside sales management," he said. "That's real time business happening in nanoseconds. That is huge. It takes the cloud phenomenon to a whole new level."

Garofalo, for his part, also sees the Sybase deal as a game changer. "This is a fantastic opportunity," says Garofalo. "The future is mobile computing with sales guys with an iPhone able to run and execute ERP business transactions in real time." In fact, Optimal, which acquired Budgetec, a Fort Lauderdale, Fla.-based SAP consulting firm, in March, is excited about future sales growth prospects. "We are very happy with our relationship with SAP," he said. "We see that relationship blossoming into other avenues with SAP. We feel like we are positioned to be a very important factor in t heir growth."

Garofalo says one of the things he loves about the SAP culture is they are never satisfied. "That's the same approach we have," he says. "We are always looking at making implementations quicker at lower price points." His view of the future with SAP: "The possibilities are endless. We are looking to dominate the world."