SAP eyes further growth in Brazil
SAP Brazil appears largely unharmed by the country's recession as it becomes more attractive to clients from the small and medium enterprise (SME) segment and prepares to woo local customers with Leonardo, its treasure trove of next-generation technologies.
The Brazilian subsidiary has reasons to be cheerful: increasing user maturity resulted in a twofold increase in sales of cloud-based products in the first quarter of 2017 and a larger client portfolio during the period, with a 50 percent increase in new accounts.
According to the firm's president for Brazil, Cristina Palmaka, one of the factors driving the positive performance has been investment to cater for local clients, which include "tropicalizing" products to meet local demands, particularly around the country's complex legal and tax system.
"SAP Brazil has transformed its business along with the local market and clients. Today, we have a lot of products that cater for specific needs of Brazilian businesses," Palmaka says.
Brazil is also home to one of the firm's 15 innovation labs, where products such as the agribusiness global offering are developed. Staffed by about 1,000 coders, the facility based in São Leopoldo in the southern region is one of the examples cited by Palmaka to illustrate SAP's ongoing investment commitment to the country.
"We have capital coming from abroad which allows us to drive a strong investment strategy in Brazil. We create jobs at our main operation and what we do in São Leopoldo could have been done in any other South American country, but the lab is based in Brazil and will continue to grow," Palmaka says.
"We also have a channel network of over 400 partners as well as about 20,000 SAP consultants, all of whom benefit from our local presence," she adds.
"As the president of the Brazilian operation, it is my job to not only focus on our client base, but also ensure that we are doing our part to ensure the development of the country."
Weathering the recession
According to Palmaka, SAP's pervasiveness as a core vendor to companies across 25 industry sectors has also helped the Brazilian operation weather the economic downturn that has been affecting the country for the last couple of years.
"We have been dealing with the last three quarters of general instability. Our approach has been to understand how clients will face any adversity and how we are able to help - but many sectors have been doing well," the executive says.
"Agribusiness, financial services, manufacturing, consumer goods and utilities are all sectors that remain strong both in general market terms but also in their business relationships with us."
According to Palmaka, other sectors such as retail have been badly hit by the recession, but even in that space companies have not stopped to invest in SAP products as a means to increase efficiency and reduce cost.
A client cited by the executive within that segment is French chain Carrefour, who has made a comeback to e-commerce in Brazil and built all of its new digital platform with SAP over the last 18 months. "Some companies are waiting to see how this instability will affect them but many are using this moment to prepare and upgrade themselves technologically to be ready for when the economy bounces back."
However, Palmaka is keen to stress that it's not the fact that some sectors have performed better than others that has supported SAP's bullish performance in Brazil, but the volume of the current project portfolio.
"The way we achieve good results has changed. We used to have very large, long-term projects that used to be the anchor of the business. Now, it's all about smaller solutions, cloud projects, growth in the small and medium enterprise segment."
Approaching smaller clients
With cloud-based offerings such as the Business One channel, SAP has been focusing on client acquisition within the SME segment, where companies have been traditionally loyal to Totvs, a Brazilian ERP vendor.
"We have reformatted our portfolio and have become more accessible and SMEs have been changing their perception about us and now see us as an option that is no longer associated with a huge upfront investment, " Palmaka says.
"SMEs need simplification, since they are different to large companies where there is a technology department with a CIO and often only have one person to run IT," she adds.
"These companies don't want to worry about the complexity and cost of running infrastructure and so on - they just want the benefit of using SAP, which is why the subscription model is interesting."
Without citing targets, Palmaka says that the expansion of SAP Brazil within the SME space is one of her key priorities this year: "We don't have specific revenue or volume goals but we want to remain close to these companies that are becoming more professional in the way they are managed. We are breaking barriers," she says.
"There are many Brazilian companies that don't have anything in terms of of ERP yet and use very basic management tools. Brazil is huge and there is a lot of space for us and our competitors to keep on growing."
Driving strategic innovation
Brazil's economic conditions have prompted many companies to alter their IT strategy as a reflection of changes in market share, revenue and need to adopt different business models. According to Palmaka, getting to know these factors is key to building an effective business case for the sales pitch.
However, with the client base becoming larger and more diverse, the executive needs to be selective when it comes to which relationships and commercial deals she will get personally involved.
"I often work very close to the team especially when getting to know the client and devising the strategy at the beginning as I need to ensure the team has all the elements needed to provide great service," Palmaka says.
"[My involvement] depends on the proximity of the relationship. I have been working in technology for a long time and therefore I know many of our clients. So I get involved not according to the size of the project, but whether it is strategic to us,"she adds.
A strategic client, according to Palmaka, is one that brings innovation possibilities. And this goes hand in hand with another top priority for the Brazilian executive: the local promotion of digital innovation platform SAP Leonardo.
"I put a great deal of time into understanding how technologies such as blockchain, machine learning, artificial intelligence and analytics translate to the realities of our clients in Brazil," she says.
"My mission is to explain the value of these innovations and introduce that in the high-level conversations I have with CEOs about how they can use technology to prepare their business for the next five to 10 years."
Cloud evolution
This is Palmaka's second term at SAP, who worked at the German vendor for a year in 2009 and got re-hired to lead its local operations in 2013. According to the company's president, both SAP and Brazilian users have changed enormously since her return.
"Over the last seven years our portfolio has become a lot more focused on cloud and in the last couple of years, the Brazilian market has changed significantly when it comes to cloud readiness," Palmaka says.
"When you talk about cloud in meetings of any level at companies of any size, you don't see any of the fear, insecurity and doubt we had to deal with before," she adds.
"This happened in other markets before, about three to four years ago, but the real turning point in Brazil came about a year and a half ago."
According to the executive, many Brazilian clients who currently run SAP tools on-premise are now considering to adopt cloud-based equivalents as a result of this relatively recent maturity.
"It is all about simplifying the approach to data at organizations from being something purely transactional to something that is more analytics-based, ultimately enabling better service to their customers."
Gender issues
One of the few women occupying senior positions within technology in Brazil, Palmaka tries to instill a better gender balance within her employer: about 35 percent of all employees in the country are female, 25 percent of which in senior roles.
"Gender is something that we look at, it is easy to measure and we tackle that we several projects such as a female business network and I personally do a lot of mentoring," she says.
"But you also have to ensure the creation to an inclusive environment in other aspects too: we look at age, are part of LGBT committees and also focus on hiring people with autism,"she adds.
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"The diversity debate needs to be wider than gender, which is of course an important issue. It definitely can't be something that is applied only to the leader: it needs to be pervasive across the entire organization."
Personally, the executive is on a high. Having recently returned from the vendor's annual conference Sapphire, to which more than 150 Brazilian clients and prospects got invited, Palmaka is excited about the company's business opportunities in the country.
"Within a few years, we will look back and see ourselves right in the middle of the digital transformations every company has been talking about," she says.
"The current moment is quite peculiar and I am very excited about the legacy we are building for organizations across Brazil: it's a time of massive change that is very magical indeed."