SAP Doubles Down To Dominate SME Market Opportunity

SAP is doubling down on its small and medium enterprise offensive, recruiting new partners in a bid to create a new class of solution provider millionaires delivering SME-focused solutions to millennial-run businesses.

"We are doubling, tripling and quadrupling down going after SME in a very big way around the world," said SAP Senior Vice President & General Manager, Global Small and Midsize Enterprise Segment & Indirect Channels Kevin Gilroy in an interview at CRN parent The Channel Company's headquarters in Framingham, Mass. "We already have a beachhead. No supplier in our space has more than single-digit market share in SME. It is very fragmented. We think we can take market share in a very large way."

Gilroy, a channel veteran who has led partners to big profits in a number of treacherous market transitions over the past several decades, expects the SME offensive to drive double-digit compounded annual growth rates, creating a new class of SAP SME-focused solution provider millionaires in the process.

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"We think we are going to make a lot of channel partners extremely wealthy over the next five years," said Gilroy. "As we double this business every two and a half or three years, there will be channel partners that get on board with our portfolio of cloud, mobility, big data, database and ERP products, and the valuations of their businesses are going to double and triple. With cloud and recurring revenue, valuations are going to go through the roof. Channel partners that are on board with us are going to be absolutely delighted."

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SAP already has 203,500 customers in the SME market segment. But now it is investing even more resources to bring new partners on board and providing lucrative marketing MDFs for partners to use to win new customers.

The new SAP SME offensive on what it sees as an $88 billion market opportunity comes after the company has bulked up over the past several years with a new class of SME cloud and SME on-premise-based solutions. SAP acquired commerce software maker Hybris last year, and in 2012 made two blockbuster deals, acquiring human resources cloud software maker Success Factors for $3.4 billion and ecommerce cloud software provider Ariba for $4.3 billion.

Those deals and internally developed SME-focused products such as SAP Business All In One have changed the character of the company, once considered purely an ERP software giant for Fortune 1000 companies. All of the SAP cloud and SME product activity have more than doubled SAP's addressable market in the SME segment, said Gilroy.

NEXT:SAP Targets Millennials To Drive SME Sales Growth

The SAP offensive also is being fueled by a generation of millennials running and influencing SME purchases. "Millennials look at technology as a top-line enabler," said Gilroy. "They don't look at technology as a cost-cutter like the older generation. Millennials are very comfortable with technology and are adopting technology at a faster rate. They see technology as a way to break down geography boundaries and level the playing field."

SAP recruited about 500 partners in 2013 and expects to continue to add partners to its ranks of 11,000 partners worldwide with 1,000 partners in the U.S. "Our growth rates will require us to recruit at a high clip," said Gilroy. "We are going to continue to grow the channel at double digits and a faster rate than competitors. But we are very selective on who we recruit. We are picking partners who have the vision and balance sheet to scale and who really want to get on board with a company that is growing at a solid rate and will be around for the next 50 years."

SAP is backing up its SME offensive with an innovative new SAP Marketing University training and education initiative that has generated nearly $1 billion in lead generation pipeline to SAP solution providers, said SAP Global Head of Marketing for Ecosystem, Channels & Routes​ Hernan Marino.

The SAP Marketing University, a partnership with universities providing marketing education and training in virtual classroom environments, has powered a big marketing transformation at SAP partners, said Marino. In fact, he said, SAP solution providers doing their own marketing demand generation has soared from 18 percent two years ago to 52 percent today.

"These Marketing University programs are really helping partners realize they should be training someone to do marketing rather than using a receptionist or a manager to run a whole marketing strategy," said Marino. "As soon as partners get marketing-enabled, we open up all our marketing assets to them. They have access to our marketing programs and collateral. Everything that we do from a direct standpoint we open it up to partners."

SAP has even aligned its global advertising and marketing campaigns with partners, allowing partners to advertise their own SAP prowess in local markets with a 100 percent MDF reimbursable plan. That program, which was launched in December, allows partners to plug in their logos and value proposition as if it were their own advertising, said Marino.

NEXT: SAP Partners Make Grab For MDF Reimbursable Advertising Funds

More than 200 partners jumped on the MDF advertising opportunity in the first 90 days in more than 35 countries, generating more than $100 million in sales pipeline, said Marino. "This is a big deal for partners," he said. "It was our most successful program last year. I knew the channel was going to jump into this, but I didn't expect it to be that quickly."

Itelligence, a 100 percent SAP-focused solution provider based in Cincinnati and owned by $15 billion NTT Data, the sixth largest IT services company in the world, has experienced double-digit sales growth over theplast decade by teaming with SAP and expects that trend to continue as SAP doubles down on SME with a rapidly expanding cloud portfolio, said Steve Niesman, U.S. president and CEO of itelligence.

"With the added product portfolio that SAP is giving us the opportunity to be a part of, our business plan calls for and we expect to continue consistent double-digit growth in revenue and profitability," said Niesman.

SAP's expanding SME portfolio has opened the door to fuel growth in both cloud-based solutions and on premise-solutions in the SME market. "We will not only see growth in cloud, which is a new revenue stream for us, but also on-premise," he said. "We are expanding our big data solutions with SAP. We have new ecommerce solutions. We have database solutions from HANA -- all of that is additive and accretive to our business."

The SAP portfolio has given SME customers the flexibility to choose on-premise or off-premise, cloud, ERP, big data and database. "Think of the depth and breadth that we can offer," Niesman said. "That is fueling the growth. The challenge and the opportunity for us is to find our competence in several of these areas and expand our growth. I have the affordability and luxury of betting on a technology leader providing a terrific portfolio of great solutions that will fuel that double-digit growth."

Just as importan as SAP's technology leadership, said Niesman, is the channel talent it has brought on board to make sure it is successful as it moves to drive big channel sales gains. "SAP is putting their money where their mouth is," he said. "They are making the investments in people and processes to make sure they are successful in the channel. They have brought in channel thought leaders like Kevin Gilroy. That is a great example of their dedication and commitment to this market. SAP has set up the foundation. It is now up to us to execute on the opportunity."