
Why has SAP America grown so rapidly?
What challenges have been created by
the company’s explosive growth?

What are the critical features of the
Company's approach to partnering? What
role has partnering played in the
company’s success?

What is your evaluation of the new
organization? What problems was it
designed to solve?

Market Forces
› Great Timing
 Industry was shifting from Mainframes to client server
computing.
 Rise of re-engineering and business process redesign.
Great Timing
› R/3 was developed for distributed computing
environment.
 Provided companies with the needed boost to shift to
client server architecture.
 SAP offered assistance through needed expertise and
consulting resources to ensure successful transition.
› Sudden popularity of reengineering.
 R/3 was build around process orientation with
embedded set of business practices, making business
processes easier.

Strategic Decisions
› Decision to be a product Company
 No need to add large no. of people for service
provision
 Continuous attention to product technical superiority
and shorter learning cycles
 Strong Focus on Market penetration
› Lucrative role for Partners
 Left 80% of implementation revenues with consulting
partners (KPMG, PWC, Cap Gemini).
 Did not back integrate to hardware
› Focus on Limited set of industries and primarily
multinationals
 Industry Centers of Expertise (ICOES) six industries: all
manufacturing related
 Large deals, huge license revenues. Large users  More
Revenues

Organizational Factors
› De-centralized approach
 No centralized controls
 Focus on Sales
 Entrepreneurial approach  make things
happen
› Few items were standardized
 Licensing Fees and allowable discounts
 Contract terms
 R/3 was 80% standardized and 20%
custimozable
› Organized around the Initial Sale

SUMMARY
Organizational Factors
Strategic Decisions
Market Forces

Loss of Control
› No infrastructure for administrative systems
› Regional managers and ICOES operated with
enormous discretion with no consistency. Wide
range of labor practice coexisted within the
company

Inefficient Use of Resources
› Learning was not shared across regions. Same
problems were solved several times by different
people.
› Utilization rates of consultants and training
center were highly valuable
› No attention to hiring and staffing.

Costly Time consuming implementations
› Consultants increased implementation time to
raise revenue. Created a backlash for R/3 Brand.
› SAP’s own consultants were largely trained on
the job. No time to focus on cost control.

Little Human Resource Strategy
› Could not retain skilled people especially for
consultants.
› SAP being a product company showed no
tangible career path for consultants.
Unaddressed until 1995. But saturation
and competition made problems salient.
 Sensitivity to costs
 Recognition for infrastructure
 Formalizing human resource policies.
 Shift to a more formal professional
organization.

› Hired Human Resource Director.
› Shift in focus from Acquiring new accounts to
farming them.

SUMMARY
Organizational Factors
Strategic Decisions
Market Forces
Loss of Control
Inefficient use of Resources
Costly and Time consuming
implementations
Little Human resource Strategy

Distinctive approaches to partnering, sales
and consulting. They pioneered the
concept of consulting forms implementing
their product (R/3)

Helped SAP to grow rapidly without
worrying about hiring in-house consultants.
Did not have to worry about
› Avoided additional resource commitments
› Compatibility with hardware and software
› Staff commitments

The SAP-ecosystem comprised of
› Consulting firms
› Hardware and OS
› Complimentary software firms

Certification Process by competency centers and
independent ratings of customer satisfaction that ensured
quality and compatibility of partner’s offerings

Training System that kept partners up to date on latest R/3
releases and updates.

Widespread information about technology and business
plans.

Cooperative planning based on trust, long term
relationships and legal agreements.
Consulting Firms:
Implementations
Complimentary
Software:
Database, OS etc
SAP
Product
R/3
Certification
Training
Updates
Technology and business plans
Long term relationships
Certification
Training
Updates
Technology and business plans
Long term relationships
Certification
Training
Updates
Technology and business plans
Long term relationships
Hardware Firms

To ensure Ecosystem prospers and there is a win-win
strategy, the following guidelines were enforced.
› SAP wont compete with its customers form implementations
› SAP has no interest in backward integration towards hardware
and OS.
› SAP Shared its forecasts with partners, allowing them to
anticipate and plan for growth. Since R/3 was the de facto
standard their forecasts were accurate.
› Partners were managed by individual partner managers at SAP
America.
› Partners can be dismissed if they fail on customer ratings.
› SAP Does not try top profit from training activities Sees this as
activity to keep the various members of the ecosystems involved.

The entire system was geared towards meeting
demands
› Minimum controls on assurance, compatibility
› Little attempt to regulate partner’s behavior.

Partners may have different goals than SAP
› SAP wanted quick implementations
› Partners stretched the implementation time.
› Long implementation time Made SAP R/3 look more
expensive than it was.

SAP had loose and limited control over Partners
› Apart from certification there was not much of
control on Partners.
Signs of problems on emerging markets:
SMES, new multinationals
 New vendors emerging: PeopleSoft and
Oracle
 Consulting was only for getting R/e up
and running

› Not using the system to its fullest potential or
building a large base of users over time.
› SAP’s consultants were de motivated as they
did not have a future, stretched quite thin
and spend more time at client site.

External Threats
› Increase in Competition from Oracle, Baan.
Willingness to compete aggressively through
price and competition.
› Growing market perception that R/3 is
expensive and time-consuming to
implement.
› A need to move downstream toward the
small and medium enterprises. If you help
SMEs grow, then when the become large
firms they may stick with your systems.

Internal Threats
› Increased Fragmentation: Districts, Regions,
ICOEs operating largely autonomously
› Little attention to cost and efficiency
› Growing need to shift from entrepreneurial to a
more professional style of management, with
greater attention to systems and infrastructure in
order to handle SAP America’s vastly increased
size and complexity
› Change in framework from generating new
customers to farming old ones while generating
new ones. Be partner to clients’ growth

Breaks powers of the Regional Barons, yet
does not introduce a vertical market
structure
› Sales, Consulting and Training became separate
lines of business with separate profit and loss
accounts
› Mid-market and global accounts were
separated.
› The existing ICOE came under a new director of
industry marketing. Those in emerging markets
(SMES and service based industries) has
separate lines of business under a different VP.

Advantages
› SAP America became a “one Company”

Possible Disadvantages
› Since Sales, Consulting and Training become
separate P&L, they might compete with each
other. E.g., Consulting may be slower to
increased its bottom-line thereby affecting
repeat sales. Also coordinating issues.
› Remains largely sales driven. Marketing was still a
sideline. Marketing reports to product
development teams in Germany.

Professionalizing the management: Building
up SAP America’s infrastructure, especially
in the area of Human Resources.
› Assessed each region's consulting activities using
the same criteria.
› Utilized consultant’s billable hours as a
measurement of utilization and efficiency and
then established targets.
› Formalized career paths and differentiated
consulting roles as well as clear set of
management assignments.
› Uniformity of promotion practices.

Developing implementation strategy for
mid-tier market.
› A new rapid implementation methodology
called accelerated SAP
› Much more upfront work with clients so that
they have a clear sense of the project scale
and scope.
› Efforts to rein in partners’ activities that
extend in implementation time and costs.
› Similar practice was introduced in large
global accounts

Consultants may bridle at being so closely monitored.

SAP partners may object being so closely monitored,
in particular they made huge profits extending
implementation and installation projects

Internally consultants may try to resist the campaign
against productivity

Consultants and Partners may build a case with
clients for longer implementation times. They may
even recommend a product from Baan, oracle or
PeopleSoft, instead.