SAP is dropping its requirement that solution providers pay 50 percent of software license purchases up front and the company has instituted a "comp-neutral" compensation model for its sales representatives to eliminate channel conflict.
The giant software vendor also is committed to spending the equivalent of 10 percent of this year's channel sales on channel marketing initiatives. And the channel will take the lead in going after 4,600 "large enterprise" prospective customers in North America, a change from SAP's current practice of largely restricting resellers to small and midsize customers.
Those and other new policies unveiled at this week's SAP Channel Partner Summit in Savannah, Ga., are the latest evidence that SAP, which until recently emphasized direct sales with little channel participation, has been aggressively stepping up its channel efforts.
"To me this is a direct indication of how SAP is serious about working with its partners," said Prashant Jain, senior vice president at Sparta Consulting, a Santa Clara, Calif.-based gold partner in the SAP PartnerEdge program, specifically referring to the new comp-neutral plan and other organizational changes he said will help partners work with SAP sales and staff. "Now the mandate is very simple: Everything flows through the partner. That's huge and an indicator of a long-range change."
The latest changes follow the company's decision in August to drive 100 percent of its small and midsize enterprise (SME) sales through solution providers. They also follow significant changes in SAP's management ranks, including the appointment of Robert Courteau as president of SAP North America and the appointment of Eric Duffaut as president of global ecosystem and channels -- elevating channel management to the president level for the first time within the company.
Today the channel accounts for about 20 percent of SAP sales in North America and the company hopes to double that to 40 percent within a few years. "We've set out some really aggressive goals as a company and we want to grow our channel, and we're putting those goals on our general managers," said Courteau, who was named president of SAP North America last month, in an interview.
In keynote speeches and interviews at the partner conference, attended by more than 560 solution providers, SAP executives repeatedly spoke of the need to leverage channel partners to expand SAP's customer base at both large businesses and fast-growing small companies.
Next: Improving Channel Partner Cash Flow
SAP recently had a meeting for its sales representatives in Las Vegas where Courteau emphasized that expanding partner sales is an executive priority. "What we're seeing right now is a big opportunity for business transformation," Courteau said in a keynote speech. "For us it's about getting to new customers. And that's why the channel is so important."
That theme echoed throughout this week's Channel Partner Summit. "We're looking to more than double the number of net-new customers on an annual basis," said John Schweitzer, senior vice president of business analytics, in a keynote speech focusing on SAP's business analytics product plans. "We are committed to transforming our business and we're going to start with business analytics. The channel strategy is key for us long term."
Channel partners applauded the elimination of the 50 percent down payment that was required for software purchases up until just last week. Under the old policy resellers had to pay SAP 50 percent of a software purchase order when they signed a contract with a customer. That meant the reseller had to ask customers for the money upfront or pay it out of their own pocket and take a hit to their cash flow.
"We identified that as a choke point to growth," said Kevin Gilroy, senior vice president of ecosystems and channels for SAP America, in an interview. He said that generating $1 of growth requires between $1.20 and $1.25 of working capital and the 50 percent requirement was hindering partner efforts to expand.
"We're happy not to have to take the cash flow hit," said Nir Orbach, CEO of Illumiti, a Richmond Hill, Ontario-based SAP gold partner, in an interview at the conference. "It's helping us to free up cash flow and helping us to grow the business." The money can now go to marketing efforts and developing new services and training programs for customers, he said.
"It's only logical that SAP show some trust in their partners," said Yves Neron, vice president of sales and marketing for Forgestik, a Outremont, Quebec-based SAP gold partner. He recounted being in the uncomfortable position of signing customers to new contracts, then immediately having to ask for a check to cover SAP's 50-percent requirement.
Orbach also praised new marketing and demand generation services SAP will roll out for partners in the second quarter, including online marketing and volume telemarketing assistance. SAP America is also committed to spending 10 percent of North America channel revenue on those and other marketing efforts, said Michele Weber, vice president of ecosystems and channels marketing for SAP North America, in a conference keynote speech.
Another goal of that initiative is to get partners to invest more resources in their own marketing and demand generation efforts, Gilroy said, adding that some partners are "under-invested in marketing."
Next: Opening Up Large Accounts To Resellers
The new "greenfield" initiative that lets channel partners take the lead in trying to sell to 4,600 potential large-account customers (3,600 in the U.S. and 1,000 in Canada) where it currently has no presence.
SAP defines SME customers as those with annual sales below $500 million and customers with sales above that threshold as large enterprise or "LE" accounts. SAP has traditionally limited partner activity to SME accounts, although some exceptions are made for partners who resell SAP's BusinessObjects business analytics software to big companies.
Starting last August SAP has reserved all new SME account sales exclusively for the channel.
Executives at the conference made it clear that while SAP sales reps will help close those deals, they want SAP partners -- particularly those that resell BusinessObjects software -- to take the lead in trying to win over the 4,600 potential large accounts and hold the customer contracts. Going hand-in-hand with that effort is the new comp-neutral policy, which took effect in January and encourages SAP sales representatives to work with partners.
"I think this is a great opportunity for us," said Marty Carney, CEO of WCI Consulting, a Dallas-based solution provider that specializes in business analytics and resells BusinessObjects. He intends to work with SAP on a marketing campaign to go after the new LE accounts.
SAP executives said partner sales to the 4,600 LE prospects could be extended beyond business analytics to other SAP products. And the 4,600 prospects isn't necessarily a ceiling on channel partner sales, indicating that SAP might rely on the channel for even more large-company sales in the future.
SAP has a goal of having a global installed base of 1 billion users by 2015. "And the only way to get there is through the channel," Gilroy said in his keynote. "There has never, ever been a better time to be a partner with SAP."