SAP reaping China rewards

Software giant sees growing adoption of mobile and in-memory products in China boost second-quarter revenue growth, which in turn improves overall Asia-Pacific showing.
Written by Ryan Huang, Contributor on

SAP is now reaping the benefits of furthering investments in China, as strong growth in the adoption of mobility and HANA in-memory helps boost country's contributions to company's overall revenue in the second quarter.

Stephen Watts, SAP's president for Asia-Pacific including Japan, told ZDNet Asia in an interview Tuesday, the company recorded its strongest second quarter in China, with over 30 percent growth in revenue over the same period last year. This, he added, was partly a sign of its recent investments paying off.

Last November, the company pledged to invest US$2 billion in China through to 2015 to expand its businesses and double its workforce there.

Watts said the country saw strong growth in the adoption of mobility and HANA in-memory database offerings. Retail and banking verticals, in particular, "came to the fore" and helped the German software company achieve double-digit revenue growth in applications, database, mobile, and analytics, he said.

"We're seeing people want choice, and they want mobility to do their work where they want to," he said, adding it was very important to give that power to the customer.

China, along with South Korea, was still lagging in public cloud adoption though when compared with other regional markets such as Australia, Japan, India, and Hong Kong, the executive noted.

In order for public cloud adoption to take off, companies need to be willing to share their infrastructure and data with third parties, he pointed out, noting that this was still lacking in China.

Rising cost, wage pressures
Watts acknowledged that while SAP will continue to ramp up its operations in China, there are cost and wage pressures, which are rising. Additionally, growth in China could dip slightly for the rest of the year in line with an expected moderation in the wider global economy's growth.

However, he was not overly concerned as the company is bullish over the market's long-term potential.

The Chinese market's strong performance--which was one of the company's best performing in the region--also helped the Asia-Pacific, including Japan, region achieve its best ever second-quarter revenue growth of 25 percent, the executive said. The region's contribution to SAP's group revenue went up to 25 percent too, some 8 percentage points higher than the same period last year.

There was especially strong uptake in cloud products by customers in the manufacturing and process industries across the region, he revealed.

The Asia-Pacific president was also optimistic the recent expansion of its distribution program for resellers, PartnerEdge, would help boost long-term growth for the regional market. He identified this as a "critical enabler" for extending its reach to small and midsized businesses (SMBs).

SAP last month announced it would expand the program to help its partners peddle BusinessObjects business intelligence tools.

Watts also downplayed reports stating the software maker was looking to squeeze costs to reach its internal goal of an operating profit of more than 5.3 billion euros (US$6.49 billion) by end-2012.

He maintained that the company was "operating from a very sensible business plan", and the current economic environment is not one that would force it to constrain its business by cutting back on investments.

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