All-purpose IT vendors not fast, innovative enough

Co-CEO Jim Hagemann Snabe is adamant SAP won't need to enter the hardware business to stay competitive as long as it stays nimble and its software remains cutting-edge innovative.
Written by Kevin Kwang, Contributor

German enterprise software giant SAP will not be entering the hardware business anytime soon, as its co-CEO Jim Hagemann Snabe believes dabbling in the entire IT stack will result in the loss of startup-like nimbleness and innovative edge.

Speaking to ZDNet Asia in a phone interview Wednesday, Snabe said SAP's rise from a fledgling company in 1972 to become one of the world's top enterprise software vendors today stems from its startup mentality.

It was able to disrupt the industry because it was fast, nimble and innovative, as most startups typically are, and it aims to maintain these traits to become "the biggest startup in the world", he said.

As testament to the company being nimble and innovative, Snabe said it cut down by some 50 percent the time needed to bring a product to market from its development stage. The executive said SAP is bringing products to market in seven-and-a-half weeks in 2012, compared to the 15 weeks it took in 2010.

SAP's heritage and desire to be at the forefront of innovation in the software space were reasons why Snabe said the German company will not follow in Oracle's footsteps and acquire hardware manufacturer such as Sun Microsystems to provide the whole stack of IT products and services.

"Why buy another Sun? The sun is shining on us already!" he proclaimed.

"I have not met a customer who has said he wants all IT products from one vendor. Customers want products to be perfectly integrated, yes, but they also want choice when it comes to picking the vendor to work with," he added.

He also believes by playing across the entire IT stack, the company will not be able do as well in each of the segments and be as innovative if it focuses only on one area.

The SAP executive's opinions run counter to views put forward by Cisco Systems CEO John Chambers on Tuesday, who said as many as half of the top six enterprise tech vendors--Cisco, Microsoft, IBM, Hewlett-Packard, Oracle and SAP--could fade out of the top rankings over the next five years due to industry disruptions. Companies that remain at the forefront will likely have software, silicon and software capabilities, Chambers added.

He said the integrated package of hardware, software and silicon was necessary for IT vendors to move quickly in a fast-changing enterprise space. "If you have just software, you won't be able to move fast enough," he noted.

Snabe, though, used SAP's HANA in-memory computing appliance software to counter Chambers' argument.

He told ZDNet Asia the company took a long time to develop and introduce the product because it wanted to "specify the hardware requirements for running the program to the 'nth degree'".

However, it still provided choice for its customers because 10 hardware makers met SAP's requirements, and companies can choose vendors they want to partner to run SAP's analytics software.

The German company's strategy appears to be bearing fruit. In its third-quarter 2012 earnings announced Wednesday, SAP reported profits of 618 million euros (US$802 million), while software and software-related service revenue came up to 3.2 billion euros (US$4.2 billion).

It also showed strong growth in key technology areas such as cloud services, HANA and mobile technology, with cloud-based subscriptions and adoption seeing the largest growth--rising from 4 million euros (US$5.2 million) in third-quarter 2011 to 63 million euros (US$81 million) this quarter.

SMBs, startups top focus in Asia
As for the Asia-Pacific, including Japan, Snabe believes the region will continue to be the company's fastest-growing given the large number of small and midsize businesses (SMBs) and startups here. These companies have lots of room for growth as they look to scale and globalize their businesses, he explained.

The challenge, though, continues to be monetizing the sizeable market opportunities available.

Snabe noted that SMBs formed 80 percent of SAP's overall business in Asia, but only 20 percent of its revenues came from this market demographic.

This is why the company is focused on building out its sales channel ecosystem and growing its indirect channels business, he said.

The other strategy would be to "catch companies early" and provide strategic platforms for "co-innovation".

He pointed to SAP's Startup Forum initiative, launched in March this year, as an example of a platform to widen its reach as well as brand appeal to young companies, and empower them with the HANA software to create new business tools.

The Forum, which was held in Singapore, India, China and Australia, educates companies from all verticals on what HANA can do for their businesses, and gives them the opportunity to create tools which manage big data in real-time.

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