SAP now aiming for midmarket jackpot

Like its enterprise applications vendor rivals, SAP AG is looking to the midmarket to help pump up flagging revenues.

Hoping to remedy its historically weak midmarket sales operation, the enterprise resource planning (ERP) and business applications firm on Monday said it would expand its efforts there by shifting some accounts to channel partners.

According to SAP executives, partners will now handle all accounts worth US$500 million or less, leaving the SAP internal sales force free to focus on the higher-end market and sell SAP's new customer relationship management and supply chain products. Currently, channel partners handle accounts worth just $200 million or less, with SAP's internal sales force handling all larger companies and their subsidiaries.

The new channel program kicks off Jan. 1, and SAP said it will be working to gradually move the existing accounts worth less than $500 million to its seven partners, who will receive special certification to handle software implementations at the larger companies. SAP also plans to add new vertical offerings for the automotive and high-tech sectors, among others.

Although the under-$500 million market category provides SAP with 58 percent of its revenue, the company hasn't in the past specifically targeted the middle market as strategic growth area.

"The midmarket is the next battleground for tier one players coming down and tier two and three players coming up," said Allen Brault, senior vice president of the company's domestic small and medium business group.

Brault denied that sinking revenue is behind the move, although SAP warned last month that it was facing a drop in cash and possible layoffs.

SAP is by no means alone in moving to the middle market: Oracle Corp. and Pleasanton, Calif.-based PeopleSoft Inc. have already been actively courting that segment. Indeed, PeopleSoft claims that with 1,000 midsize customers, the middle market is one of its fastest-growing segments.

One analyst noted that SAP's U.S. channel has been a "major weak point" for its midmarket strategy, and giving its partners more accounts probably won't close more deals. For the most part, SAP hasn't been a player in the U.S. midmarket among companies that aren't either subsidiaries or affiliates of top-tier SAP customers, said Joshua Greenbaum, an analyst at Daly City, Calif.-based Enterprise Applications Consulting.

"There are some notable exceptions, but most midmarket companies I talk to say that SAP was either a no-show at the bid or simply didn't put forth the effort to be responsive," said Greenbaum. He noted, however, that this is indeed a time "when the midmarket represents a tremendous growth opportunity for large enterprise vendors."

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