Supply chain pipeline hotting up

Day breaks a little brighter for SAP bosses after closing a couple of major local deals and registering strong customer-base interest in supply chain management and customer relationship management software modules.

While Chris Bennett, managing director and CEO of SAP Australia and New Zealand, declined to name these "major deal" sites, he said: "We're seeing a lot of opportunities today in replacement of i2 (SCM), and we're now getting customers [with SAP ERP] saying, 'you have demand planning and optimisation software that does everything that i2 does, why should I run with multiple vendors'."

He added that he was aware of a major Sydney i2 project that has "just stopped" but declined to name that site. SAP has also achieved strong growth with its mid market ‘sales plays', with recent wins such as Alsco (a supplier of workwear garment rental, hospitality and catering linen and hygiene services). Another mid-market win was Vigil Tech, an IT systems integrator which "used to run on MYOB". According to Bennet, Vigil Tech installed SAP's Smart Business Solutions front and back office systems in five weeks.

"The $500 million turnover companies come from $100 million turnover [mid market] companies, so it's a question of ‘do I buy a tier 1 solution or do I stick with a tier 2 product'," Bennett said.

According to Bennett and Hans Peter Klaey, president, SAP Asia Pacific, SAP is a "clear number 1" in SCM and a number 2 in CRM. Klaey says that these two lines of business now account for some 40 per cent of the SAP's licence revenue. Products include mySAP SCM and mySAP CRM software.

According to a recent Frost and Sullivan study of the Asia Pacific CRM software market, CRM revenues in the region are expected to reach $US808.4 million by 2004,while business intelligence was forecast to reach $US151.5 million over the same period. The study tipped that Japan would emerge as the largest CRM market with revenues of $US111.9 million in 2001, to be followed by Australia with revenues standing at $US52.7 million by 2004.

Frost and Sullivan also said that in 2001 SAP achieved "the number two spot in several key Asian countries with a market share of 18.1 per cent in the region".

Klaey said that in terms of "market vitality" the Asia-Pacific region was looking very healthy by being close to the "65 per cent sales to existing customer base to 35 per cent new business" sales revenue split he was looking for.

Klaey pointed out that due to the differing levels of market maturity in the region, North Asia and China were still very much ERP markets not ready to consider CRM; Southern Asia was a "mixed bag", while Australia and New Zealand were "very sophisticated" and ready for integrated SCM, CRM and ERP solutions. He claimed local companies have moved on from experiments like putting in various solutions and then hooking them up, to wanting integrated solutions from trusted partners.

SAP lists its major CRM regional customer wins in 2001 as includeing FAW-Volkswagon (China), Jones Lang La Salle (Australia), Shanghai SVA (China), China Light and Power (Hong Kong), San Miguel (Philippines), LG Siltron (Korea), Siam City Cement (Thailand), Cheil Jedang (Korea), and Haitian Machinery (China).

While Bennett says that SAP is best of breed in many instances, US analysts such as Cheryl Kingstone of Yankee Group, recently said that "If your key requirement for CRM is to build off your ERP system, then SAP is fine, but what happens to companies that don't have a back-end system and just need a customer-facing solution?"

Last month SAP reported that its EMEA (Europe, the Middle East and Africa) region increased second quarter revenue by 1 per cent to €976 million from €962 million a year ago. However, it also reported that second quarter revenue declined 3.8 per cent worldwide to €1.78 billion ($US1.77 billion) in the second quarter of 2002 from €1.85 billion in the previous corresponding period. In July, SAP posted a net loss of €232 million in the second quarter, in part due to €409 million write-downs on minority investments, including its 20 percent holding in Commerce One.