Newsmaker Interview with SAPs Bill McDermott

By  Marc Millstein — July 27, 2006

SAP is renowned worldwide for its sweeping ERP solution. But its much heralded entry in the U.S. retail market several years ago turned out to be more of a big bust than a big bang solution. Since then, SAP has intently refined both its vision and solution set specifically for retail. RIS recently interviewed Bill McDermott, President and CEO, SAP Americas, and Corporate Officer, SAP AG, about the changes at SAP and its position in retail. This interview is the first in what is a new monthly President/CEO Newsmaker Q&A interview that you can look forward to in every issue of RIS News.

Talk about your current position of SAP in retail.

Bill: SAP is the largest business management software company in the world, with 62 percent of the market. The next closest, even after $20 billion in acquisitions, has just 16 percent of the market. We have a strategy centered on organic growth without getting into risky [acquisition] situations. In retail, we have over 3,200 customers worldwide and have added 750 customers in the last 12 months, including The Home Depot, Limited Brands, Exxon Mobils retail division, Sobeys and The Body Shop. Retail is absolutely our number one focus.

Can you elaborate on changes in your retail offering? You have clearly moved away from the big bang approach.

Bill: SAP has integrated a suite of business software that deals with enterprise resource planning, customer relationship, supply chain and human capital management. These solutions come integrated out of the box and are tailored specifically to retail. Beyond that, many retailers have already built their own solutions or bought different packaged solutions over time and now need to harmonize and integrate SAP and non-SAP offerings. Our platform enables them to do that. We have the only services oriented architecture shipping today all over the world. These things are here today. They are not empty promises as some others are pitching. Some vendors are saying theyll have a similar platform in 2008. Well, in 2008, I will be two years older. If I am a CEO, I have to execute today.

How do you view your competitive edge versus your biggest competitors, such as Oracle?

Bill: Oracles core competency is its database. Our core competency is business software solutions. That is one differentiator. If you look at Oracles progress in business software and you the prior year actuals of the companies they have acquired, they are the owner of $20 billion in impaired assets. They have negative 50 percent year over year growth when you the prior year actuals of the companies they bought. That is one problem. They also took their eye off their core business, which is now suffering. And they face tremendous competition from IBM and Microsoft.

Getting back to SAP, how does Triversity, which primarily targets small companies, and KhiMetrics, fit in with SAP?

Bill: This supports our large accounts but also supports our middle market strategy. We are reaching out to customers in the $300 million to the billion-and-a-half space. If you think about Triversity, it is a great fill-in acquisition. It facilitates our end-to-end solutions strategy. KhiMetrics also is a tremendous acquisition for us for demand forecasting across the entire retail suite and beyond. It also goes into CPG and financial services. We like these companies a lot. They also are small and dont create a digestive problem.

What do you see as your biggest challenges in retail?

Bill: The grocery segment, which is underinvested in technology. But there are very big companies forcing traditional grocers to rethink their strategy. They have to make changes and replace these systems and turn them in to strategic weapons. Our challenge is to create awareness that were not just a big-bang approach. If we can do that, we will be stunningly successful in the space.

How is SAP for Retail positioned differently in Europe compared with the U.S.?

Bill: We dominate retail in Europe. The key message here, though, is that the traction we have in the U.S. is unbelievable. It is on fire. It is clearly our number one priority. When you see people like Robert Nardelli and Bob DeRhodes of Home Depot basically deciding that SAP is their strategic vendor for retail that says a lot.

Anything else you see as a major trend in retail?

Bill: Yes, there is a big story involving the systems integration community, which has assets that need to be utilized so when retailers want to get out of the legacy and software development games they can turn to these players. If you look at all the big systems integrators, you find they are disproportionately moving resources to the SAP practice because it is growing so quickly.

If your products are integrated fairly easily, wouldnt that lessen the need for systems integrators?

Bill: No. There are hundreds and thousands of accounts that have to make the move to our platform to begin with. A large number of retailers have problems, especially with legacy and antiquated systems, including hardware, software, services, hosting and outsourcing. Dont forget, only eight percent of eligible retail clients out there have made the move to large scale packaged software solutions. Retailers are behind. Way behind. The other thing you will see is that as services-enabled business processes becomes the rage, systems integrators will have the intellectual capacity and know-how, beyond just the integration piece, to bring to the party.

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