Enterprise software giant SAP plans huge thrust on Lankan SME mid-market

Following are the excerpts from an interview Mirror Business conducted with Sajith Simon, SAP Head – General Business, India Subcontinent, at SAP India (Pvt.) Ltd, on the enterprise software giant’s operations in Sri Lanka and its future plans for the market. SAP entered the Sri Lankan market about 20 years ago and since then has a strong customer base in multiple sectors including apparel, manufacturing, automotive and agro-processing.

I was told that SAP recently had a user group summit in Colombo. What was the objective of it?

The user group meetings happen at least once a quarter. So, what we wanted to do with the Intelligent Enterprise Summit was to open up the Sri Lankan user group to the larger community, who are using SAP products. So, we had a couple of customers come and talk about their experience, how they got on board and so on. 

There were customers who had been using SAP for the past 15-20 years. There were customers who came on-board with SAP during the last two years and their experience had been different from others. So, we brought them to share their experience of what they had done with SAP, what digital transformation they had experienced and so on. 

It was all about sharing your experience—the big transition to Cloud, how they had managed the transition to Cloud, what came in their way, etc. so that even other customers can also look at them and learn from their experiences. In fact, this was the first time we opened up the summit for others. The user group actually did the summit even for those who are not SAP customers. So, that’s why this time’s summit was different.

‘‘I think overall the Cloud adoption in the last two to three years has picked up very well. There are some technologies that are well defined for Cloud. If I talk about the customer engagements side, most solutions are available on Cloud because innovation is happening in those areas at a rapid pace. If you talk about HR, there also most of the solutions will only be on Cloud

So, there is a SAP user group in Sri Lanka. What exactly is the model SAP operates in Sri Lanka?

We have a user group board that’s created where all the SAP local users have become members. They’ve elected a board amongst themselves and they meet on a regular basis. There is somebody—an independent person from SAP— who is also working with them.

So this person is based in Sri Lanka?

No, he’s based in Singapore and he basically helps run user groups across countries. We have user group chapters across different cities. We have a user group in Sri Lanka here in Colombo. Then we have ones based in Bangalore, Chennai and Mumbai and so on. So, it’s basically all these people coming together. He facilitates the interface between the user group and SAP. It could be the product development, it could be the support team—he facilitates the link between the two parties.

You don’t have anybody on the ground from SAP in Sri Lanka?

We have one person representing SAP local market here. She’s been here with us for about a year-and-a-half now. Beyond that operation, we have broadly been operating through partners locally in Colombo.

Who are SAP’s customers in Sri Lanka and what are the sectors they are involved in?

I would say, if you look at the top 25 businesses in Sri Lanka, about 11 of them are already on-board with SAP. Most of them are conglomerates. They are into manufacturing, retail, agro-processing, apparel and many other things. We have customers representing industries across the board. I would say apparel is a strong area. When we look at retail, it’s also pretty strong. Manufacturing, automotive customer base in Sri Lanka is also very strong. These are the sectors that we have traditionally been in. What’s changed over time is that by virtue of our acquisition of products and expansion in our portfolio, we are not just focusing on the back office. 

The employee engagement on the HR side has seen a huge transformation. There are customers who are using alternate platforms today embracing HR technology from SAP to do their employee engagement function. Some of the larger corporations in Sri Lanka are using our services in the HR space to drive solutions.

How long has SAP been operating in Sri Lanka?

We probably got our first customer close to about 20 years back.

So, since then, what is the change that you’ve seen in the business climate in Sri Lanka in terms of adopting to Cloud and other technological developments in that space?
I think what’s changed over time is that the world economy is now more open. Many of the businesses that are here in Colombo are also looking at opportunities outside the country unlike maybe 20 years ago when everything was focused around what could happen within the island. That I think has opened up opportunities for customers here in terms of what they can do here and what they can do in other markets. 

In that sense, it is important how you use technology and a platform that can support you for your global growth. I was talking to a couple of companies yesterday in Colombo and they were talking about setting up power plants in Africa. We are talking about building businesses outside of the country and having a platform that can support that. You could be a small operation but trust me all these companies are growing at an average of 50 to 80 percent year-on-year. 

So, you need a solution that is scalable; something that can support you across multiple geographies. So, what it was 20 years ago to what it is today is completely different and I would say when we started off earlier, SAP would get to cater to probably the top 10 or 20 customers and that’s how we were perceived to be. 

Today, I think it’s a good mix of both. Honestly speaking if we look at not only in Sri Lanka but also across the globe, 80 percent of our customers are on the mid-market space. So, in that sense, I am saying that our ability to provide a platform or solutions and what customers are looking for is something that’s a win-win for both parties.

How is Cloud adoption in Asia, with special emphasis to the Sri Lankan context?

I think overall the Cloud adoption in the last two to three years has picked up very well. There are some technologies that are well defined for Cloud. If I talk about the customer engagements side, most solutions are available on Cloud because innovation is happening in those areas at a rapid pace. If you talk about HR, there also most of the solutions will only be on Cloud. The reasons are few. 

What do you see across industries, practices will be common and innovations are high. Innovations can be best delivered to a customer on Cloud and not on premise. So, the usual practice is that we have a release for all the products on Cloud once in three months. So, you have a new release, upgraded features, all those are available. 
HR also—if you look at what are the challenges faced by organisations today— I think we are lucky to be part of a generation where you see people who have not touched technology at all and on the other side people are growing up with technology from their childhood. That’s the spectrum of the workforce that we have. 

For example, if you look at any big corporation here, you would have a person who is just 20 years of age working for you and another person at the age of 55 or even 60. You have to engage the entire workforce to keep them committed to your organisation. 

I think it calls for an engagement at different levels and different things and that’s where I think being able to provide a platform and the technology that can engage with that entire spectrum of workforce is what can make a difference.

Will you be able to share some of the figures with regard to SAP’s operations in Sri Lanka? Your market share and the type of customers you have.

Market share would be very difficult to speak about but I think at least from a customer base point of view, we have close to about 110 customers. In that 110, I would say 25 to 30 would be conglomerates and large business houses. The rest would be mid-market. So, we have a good mix across conglomerates and mid-markets.

What is exciting happening at SAP these days?We’ve heard a lot from your competitors lately, specially about the integration of AI, machine learning and IoT into their product offerings.

We are talking about an intelligence suite or an intelligent enterprise. Typically customers have been using information in silos, processes in silos, so there’s a huge amount of data by virtue of the systems and technologies that we use today. While earlier everybody used to walk to a terminal to punch in data and punch in a transaction, today all those things are possible with even mobile devices. 

While an operating system is something in the back-end that supports it, we are talking about how the data that you generate and what you do on a day-to-day basis can be used effectively to drive business decisions and outcomes. 

So, the systems that we are designing today are using state-of-the-art artificial intelligence, machine learning and a host of other capabilities to make sense of the data that you are putting into the system on a day-to-day basis to give you far better outcomes than that you yourself could possibly do.

 
So, back-office systems are no more back-office systems, as the data that you generate is what helps you to drive your business and take decisions. That’s why we are talking about an intelligent enterprise starting with an intelligent suite. So, the digital core is the beginning, where the data resides, you use all your AI and ML capability to give you predictability or predictions to decide how you want to run your business better. 

And if you look at the new generation ERP that we talk on S/4HANA, most of our customers, whether you are a CFO or whoever, it is when you log into your system, it gives you intuitively the areas that need actions. It’s not a dumb system, which just holds your data but it also gives intuitively what’s expected to do in terms of action or outcomes because they are measured against a certain set of KPIs that you have defined and that’s how it’s intelligent. Added on top of that you have a whole set of solutions, which are beyond that helps you on the customer side in terms of customer engagement, in terms of the suppliers side of the supply chain.

All these solutions are integrated and that makes us an integrated suite that helps you run your business better. So, visibility into your supply chain, visibility into your customer side in terms of whether your ability to fulfil a task for a customer and say what is the timeline that you could deliver, all of these things is what makes a difference. That I think has been the biggest shift for us, from being a typical ERP system or a transactional system to the way how customers can leverage technology in a very intelligent fashion to drive outcomes.

What’s the biggest change you see now when it comes to business, compared to 10 to 15 years ago?

I think the pace of change has been dramatic. I have been with SAP now for eight years. If I look back, like say 2010, 2011 or even 2012, everybody was speaking about incremental change. Today changes are never incremental; the changes are far-reaching and they could be very dramatic as well. Businesses, which have actually leveraged technology to transform the way they are dealing with customers, offer better services and a larger portfolio of products generate more revenue. 

As opposed to this, the traditional approach to things would be, ‘okay I am in a certain product line and built that incrementally over a period of time and maybe record a 20 percent growth’. So, if businesses are not able to leverage, technology effectively, I don’t think they’ll be able to even grow or keep pace with the disruption that is happening in the market place.

What is Asia Pacific region’s contribution to SAP’s top line?

I think it should be about 20 to 25 percent.  Asia Pacific is one of the fastest growing regions from an overall SAP standpoint. Asia Pacific and Japan (APJ) has been a huge growth engine for SAP. 

Do you find it easier to convince a business in our part of the world to embrace new technologies you are talking about, compared to the companies in matured economies?
As I see it, in this part of the world, openness to leverage technology is much higher.

‘‘There’s a huge lopsided view of the customer base that we have here. We’ve also thrived by virtue of our initial entry into the large enterprise space. There’s going to be a huge thrust on the mid-market because today if you look at the number of SMEs, it is massive

What is the reason for that?

Unlike in the matured economies, where you have a huge base of enterprise companies, which are big, in the growth economies, we have small companies, which are growing at a very fast pace. Now, these are the companies, which adopt technologies much faster. So, if you look at the net new acquisition of customers, which is a big engine for any company’s measure of success, I would say these net new acquisitions are happening in the growth markets. 

When you acquire new companies, most of them will be adopting the latest in technology, which is why I’m saying that people in our part of the world are more open to leveraging the latest in technology because they are on a fast growth path and they will be more willing to look at things because they are not constrained by hundreds of other things they’ve done over several years, which is the reason why you see adoption of new technology is very high in the mid-market space and then in the growth markets.

So, in terms of Sri Lanka, what are SAP’s plans in the next 5-10 years?

There’s a huge lopsided view of the customer base that we have here. We’ve also thrived by virtue of our initial entry into the large enterprise space. There’s going to be a huge thrust on the mid-market because today if you look at the number of SMEs, it is massive. 

We are also looking to expand our partner network and strengthen our user community so that there is strong cross-referencing of people. There are people who led the change here. There are organisations, which stand out as examples of leveraging technology. They’re very open to share their experience to the larger community and which is why we want to re-establish the user group so they can rub off their experiences with smaller companies. That is something that we want to encourage.

Also, building skill sets locally in the market I think is very critical. There is some tendency even today to get skilled resources from outside of the country to deliver some projects here, which I think is a dependency. So, we will start off a university alliance programme. We currently have about four universities tied up already but we would like to expand that so that we are able to get more skill in the market.

Can you elaborate a little more on the university alliance programme you just mentioned?

We have a university alliance programme where the curriculum for people during the course of their academic period to get exposed to new technologies. Not only ERP but also things like IoT, machine learning, AI are baked into the overall curriculum. Some universities make it as part of their base curriculum. Some people keep it as an elective that they can choose and then build over time. That’s what we’re trying to do.

So, that there is at least a base that gets build. Companies that are investing in technology also have at least a skill base that they can hire form. The next phase that we would want to do is to create a platform where the companies can directly recruit talent from the universities.

How much of an impact do the current global headwinds, stemming largely from the US-China trade tensions, have on SAP’s business?

Well, I think some of the global players may be wondering about investments that they want to do and expansions potentially lined up. But broadly speaking, while this rhetoric keeps going on around the word, I don’t think it’s impacted too much on the ground because people who have the fundamentals right and want to expand are expanding. 

People are using this time to strengthen their positions. For example, businesses, which wanted to expand their manufacturing bases, are doing that effectively irrespective of those issues you mentioned. Maybe with some new investments, in terms of getting into new territories, businesses may act extra cautiously. But other than that, I don’t think it has had a major impact. I don’t know about China’s market since I am not exposed to that market.