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SAP Shoots for the Moon: Striving for a Billion Points of Light

by Joshua Greenbaum | insiderPROFILES

July 1, 2010

SAP wants to do what no enterprise software company has done before — achieve a user population of one billion. Explore this ambitious goal in more detail, including other contenders, the motives behind the goal, and what SAP needs to do to achieve it.
 

One of the main themes of the new SAP, the one run since February by co-CEOs Bill McDermott and Jim Hagemann Snabe, is the goal of achieving a user population of one billion. It’s one of those “moon shots” that CEOs like to talk about, the kind that galvanizes employees and customers and strikes fear into the hearts of the competition.

It’s also an idea that makes sense for SAP — and might even become a reality, provided that SAP doesn’t make the kinds of changes that have the opposite effect: that is, strike fear into the hearts of employees while galvanizing the competition.

Who Really Has a Billion Users?

Reaching a goal of one billion users does sound very lofty. While plenty of product companies profess to have a billion “users,” none have achieved this feat by selling enterprise software. The closest may be Microsoft, which claims that its customer support services help one billion users per year — though most of these support calls are regarding problems with desktop software, not enterprise software. IBM probably has over one billion users, but that includes its hardware users as well.

The rest of the contenders for the billion-users club are solidly in the consumer world, and they include companies such as Nokia, which claims to have one billion active cell phone users, and Procter & Gamble, which boasts of selling its products to four billion consumers worldwide.

Meanwhile, SAP, the largest enterprise applications company in the world, claims a customer base of 95,000. Assuming that all of the available licenses for SAP’s products are being fully utilized at these customer sites, this translates to an estimated user base of around 40 million.

The first order of business for SAP is to make a name for itself in the consumer world.

Why Does SAP Want to Boldly Go Where No Software Company Has Gone Before?

The answer can be found at the intersection of opportunity and necessity. The opportunity that one billion users represents should be relatively obvious: If SAP can multiply its user base several times over, then its revenues stand to increase significantly also.

Importantly, such an expansion would carry the prospects for growth that other members of the billion-users club would kill for. In many industries — like the mobile phone industry, for example — the first sale to the customer is often for the highest-priced product in the portfolio. Once the customer has bought the phone and a contract, the upsell opportunities are measured in nickels and dimes, not dollars. However, the software industry differs. While the first piece of software bought by the 250-millionth user is likely to be small and lightweight, the second piece could be much more substantial — more like a traditional ERP product — and carry a much higher price tag.

If opportunity is the yin of the question, then necessity is the yang. While SAP doesn’t necessarily need a total of one billion users in order to survive and prosper, it does need to dramatically increase its user base in order to avoid acquisition down the road. Bear in mind that SAP is the only large, standalone enterprise software company left, now that Oracle owns Sun.

Every other multi-billion dollar enterprise software vendor also sells hardware and middleware, and all for the same reasons: the opportunity to greatly expand its user base and provide a ready market for upsell and cross-sell purposes. If SAP can’t do this on its own — by finding more buyers for its software — then it will have to either swallow up other companies or be acquired in turn. There’s really not a lot of room for evolutionary stasis in the software industry.

How Can SAP Reach Its Goal?

So, with opportunity and necessity as the drivers, what does SAP have to do to attain one billion users? The obvious answer is to create more products to sell to more people, but that’s only the beginning. SAP also has to change how its brand is perceived both outside and inside the company, and how it develops and delivers its intellectual property to its customer base.

As a consumer company, SAP has minimal brand identity outside of enterprise software and IT. This is largely because most everyday consumers simply don’t understand what SAP does. Members of the SAP community probably face the same challenge when describing what their company does to friends and relatives who are outside the technology world.

This is the first order of business for SAP — to make a name for itself in the consumer world. Second is to change how SAP products are sold and consumed. Third is to rethink the concept of software shelf-life. And finally, the company needs to alter the “SAP DNA.”

1 Establish a Name in the Consumer World

This means coming up with products that consumers care about and expanding awareness of what SAP is already doing for consumers. Neither is as far off as it seems. A number of initiatives now underway will bring SAP into closer intersection with the consumer world in areas such as smart meters and social/collaboration software. And SAP software already runs one of the most popular online consumer sites in the world — iTunes, home to over 200 million iPod users worldwide.

2 Change the Way Software Is Sold

This is where SAP’s software-as-a-service (SaaS) initiatives are going to pay off immensely. Consumer products need to be easy to buy and easy to use — or at least perceived as easy to use — and SaaS is the perfect platform for fulfilling this requirement.

Consumer products also need to be inexpensive. While there are a few $6,000 items for sale on Amazon.com, the very vast majority of products sell for under $100. Again, SAP’s SaaS platform will be ideal for building and selling smaller, discrete applications and services that are more consumer-focused in terms of functionality and price.

3 Rethink the Software Shelf-Life

SAP’s consumer software has to be more like consumer electronics: fast to market and equally fast to end of life. Trendiness isn’t necessarily a hallmark of enterprise software. But the only way to reach one billion users is to tempt its consumers with the latest and greatest: This is no place for conservative, back-office software thinking.

4 Alter the SAP DNA

The final point is that getting one billion users excited means changing not just SAP’s image, but some of the company’s DNA as well. This is where the old-school mentality of SAP as the king of the back-office process will have to change. I think the new leaders at SAP understand the problem well. But one of their biggest tasks will be to make sure everyone at SAP has an equal understanding of what is at stake.

Reaching New Heights

More than a few companies may prefer to leave the lofty goal of achieving one billion users to others, but SAP may not have a choice: Shooting for the moon is risky business, but failing to try to reach new heights may be even riskier.

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