Coming Down to Size: SAP Users Include Many in Midmarket

The German software giant -- renowned for its complexity and cost -- is making surprising inroads among smaller businesses.

OK, let's get the ugly stuff out of the way. SAP is too big, too expensive, too complex, too robust, too rigid and, yes, too German, with its Walldorf headquarters seemingly too far away for U.S. customers. That's what you still hear from some grizzled SAP users.

You can find guys who say their first marriages fell apart while they were logging hours during a global R/3 upgrade, reading complicated licensing agreements late into the night. They share a pain and a language unique to those who have entered into a relationship with the world's third largest independent software company: Does 5-1-2 help us out? Should we skip version 4.6C? What about Enterprise? And of course: What the hell is NetWeaver, anyway?

No doubt about it, SAP AG once had a reputation for finding itself in situations messier than melted chocolate. Yes, you can still find wiseacres who mention Hershey Foods in any conversation about SAP. It was 1999 when a CEO at the world-famous candymaker told analysts that trouble with his new enterprise software system would mean a scary Halloween for stockholders.

The fact, the fiction, the myth, the legend: SAP carried it all into the midmarket in 2003. That's when it set about the sizable task of recasting itself as the friendly giant, one strong enough to carry the workload of the largest global customers but flexible enough to fold into the smallest of shops.

Turns out SAP may have the last laugh. The punch line: It's working. Not only is Hershey's a customer reference these days, but a growing number of small and midsized shops are sweet on the notion that SAP -- with $10 billion in annual revenue, it's the established market leader in enterprise resource planning (ERP) software -- has the clout and know-how to help them grow and compete in the new global economy.

The company that runs $8.8-billion Adidas also takes care of business at well-known smaller companies like Jo-Ann Stores Inc., with annual revenue of less than $2 billion; companies like Tumi Inc., a luggage maker aiming to beat the $600-million mark with a European expansion plan; and changing companies like The Seattle Times Co., a newspaper business with less than $500 million in revenue looking to tap new revenue streams. Even further down the food chain, SAP helped Soy Basics LLC, started by a guy with a little seed money and a recipe for making candles out of soybeans, grow revenue from $1 million to $20 million in five years.

In June, SAP announced a milestone: It had 10,000 Business One customers, buyers of its preconfigured software for customers with fewer than 250 employees. By August the company had added another 800 to the list. Business One, however, is just part of SAP's strategy to win what it calls the small and midsized enterprise (SME) market. SAP also offers All-in-One, a collection of preconfigured, vertically designed software packages for companies with less than $1 billion in annual revenue. Like the full-blown mySAP offering used by the world's largest companies, All-in-One packages are built around SAP's core R/3 architecture. Its chief selling points are that it's simplified and customized for the unique requirements of particular industries -- from cosmetics to semiconductors. To date, SAP has acquired 8,300 All-in-One customers. And of course, the mySAP Business Suite, SAP's premier product, is one it aims to sell to any customer at the higher end of the small and medium-sized (SMB) space.

This was first published in September 2006

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