SAP looking at distribution, broadening channel play

Published: May 19th, 2010

Orlando – In an interview with Computer Dealer News at SAP AG‘s (NYSE: SAP) Sapphire user conference, worldwide channel chief, Pat Hume, said the software vendor is looking to open more of the market to channel partners and hinted at a pending deal to make SAP’s ERP portfolio available through broadline and value distribution.

A former channel chief of IBM Corp. (NYSE: IBM), Hume joined SAP about two-and-a-half years ago to transform the once direct-first business software vendor to one that puts the channel at its core. Under her watch, SAP has overhauled its PartnerEdge partner program, allocated the small-and-medium-sized business market under $500 million as the channel’s domain, and brought on a number of veteran channel executives including former Hewlett-Packard Co. (NASDAQ: HPQ) channel chief Kevin Gilroy, who joined SAP earlier this year to lead North American channels.

North America is a particular challenge for SAP, said Hume, as it lags behind the other regions when it comes to channel centricity. Gilroy was brought on board to turn that around.

(Hear more from Hume on SAP’s channel plans in this CDN video report:)

While channel veterans such as Hume and Gilroy lead the channel organization, building the channel DNA at SAP, a company with strong direct roots, remains a challenge. Hume said three “catalytic events” in recent years though have helped speed SAP’s channel evolution.

One was the acquisition of Business Objects, a company that does have the channel in its DNA and showed SAP how the channel can be leveraged effectively and successfully. Second was the downturn, when declining budgets made the channel more attractive as a way to profitably add capacity and acquire net new customers. And third, changing customer buying behaviour means customers increasingly want to buy from local suppliers with feet on the ground, and that means channel partners.

While SAP’s channel play has been primarily focused on the SME, that may be changing. As it looks to add capacity, Hume said SAP will be encouraging partners to take on more of its portfolio, starting with the Business Objects offerings, and will also consider opening the enterprise portfolio and market to the channel on a market-by-market basis, where it needs additional capacity.

The evolution is reflected in Hume’s new title, which was recently changed from senior vice-president of worldwide SME channels to senior vice-president, global indirect sales organization.

“We have a volume business. We do in fact sell through volume resellers and broadline distributors,” said Hume, mainly with the Crystal Reports product line today. “We’re finding when you’re dealing with broadline distributors they’re used to selling SOHO to large enterprise (as were Business Objects partners). We took a decision that we really needed to open up our channel to be able to help us not just in the SME space, but across all market segments.”

Hume hinted an expansion of the products SAP moves through distribution may be coming, as the vendor looks to new ways of building capacity. Financing is one area Hume wants SAP to improve its channel support, and Hume said she met last week with distributor Tech Data (NASDAQ: TECD).

“Tech Data has a lot to offer. One thing is they do is manage credit and capitalization for their channel. So if we can leverage some of these best practices of partners that aren’t traditionally in the SAP ecosystem, if we can bring them in and really leverage the power of what they do, they can help us help our partners,” said Hume.

Asked if that meant SAP was considering moving ERP offerings through distribution, Hume was coy.

“Not today. Not today. That’s what I’ll say,” said Hume. “But we’re having some conversations around what could we do. What would make sense. So watch this space.”

Deepening SAP’s relationship with distributors such as Tech Data and Ingram Micro is likely a response to rival Oracle Corp.‘s (NASDAQ: ORCL) integrated stack approach, particularly the hardware and software integration enabled by Oracle’s acquisition of Sun Microsystems said Sebastien Ruest, vice-president, services and technology research, IDC Canada.

“I think they have to (work with distribution),” said Ruest. “SAP doesn’t benefit from a hardware platform yet, but it could be a response. In the SME, if you have an appliance that comes per-configured with the SAP environment it’s a lot easier.”

Ruest added that working with distribution would allow SAP to penetrate further downmarket in the SME, reaching partners they couldn’t otherwise reach.

As for SAP’s move to open more of its market, particularly the enterprise space, to channel partners, Ruest said it’s likely SAP will seek new partners in that space rather than asking SME partners to make the investment of moving up-market. Particularly in the SME, he said partners are focused on specialization and owning market niches.

While Hume wants SAP to do better on financing, not all SAP partners see it as a priority area the vendor needs to address. Nir Orbach, CEO of Markham, Ont.-based SAP partner Illumiti Inc., said he’s had very few customers express interest in financing. It’s been important to be able to provide them with options, but most have opted to finance on their own in the end.

Orbach said the prospect of SAP letting him move up-market from Illumiti’s current Business All in One base is attractive though because the company already has a services division focused on servicing a lot of large existing SAP enterprise clients.

“We already have the services piece, so we’re happy to scale that as SAP opens up the market and increases the market we can play in,” said Orbach. “I think the Business Objects portfolio is the one we’re the most keen on, and we’re positioning it as part of every deal. Not just because it’s another tool to sell, but it’s really complementary to the tools already in Business All in One, and offers great value for executives and users.”

Follow Jeff Jedras on Twitter! @JeffJedrasCDN


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