SAP America president and CEO Bill McDermott made human capital management (HCM) applications a priority when he took the helm in early 2003, and this week he recorded a big win when SAP sealed a $35 million deal with the U.S. Postal Service.
The USPS, which has more than 700,000 employees -- one-third of the civilian workforce of the federal government -- will be replacing its homegrown legacy software with SAP's HCM module as part of the mySAP Business Suite.
"Human capital is the essence of their business because there are so many workers and they have such an important service to the country," said McDermott.
Currently, PeopleSoft Inc. has a firm grip on 70% of the U.S. market for HCM applications, according to Boston-based Yankee Group, though McDermott disputes that figure.
"I personally don't believe the numbers," McDermott said. "We believe that making HCM a priority was a great move because we have found that many customers in the past, who chose the best-of-breed HR application, neglected the importance of human capital -- and today many of those enterprises have huge integration challenges and huge project cost overruns."
McDermott said the USPS deal shows that SAP HCM is a robust product. SAP, which has a firm grip on the financial applications market, has been developing its HCM applications over the last five years and is looking to grab market share from PeopleSoft.
"We have more than any other company in the industry and sold value to our customers," McDermott said. "Our customers are not interested in buying technology; they're interested in innovating and transforming business processes in the company in a product linked to a real return on investment."
On its company Web site, PeopleSoft alleges that SAP gives customers huge discounts on initial licenses, but the costs of maintenance and implementation costs more in the long run. McDermott disputed this, saying that SAP's customers "validate in very simple terms that they are getting more value from SAP."
"SAP has invested an awful lot of time and energy building their own HCM applications and it's finally paying off," said Michael Dominy, director of enterprise services with The Yankee Group.
The USPS said it chose SAP after a multi-year evaluation. The software is currently being installed and tested and a phased rollout is expected in the fall.
SAP's sales figures have surged in the U.S. this year. McDermott pointed to several large customer wins in recent months as proof that SAP is winning against competitors PeopleSoft and Oracle Corp.
PepsiCo Inc. selected SAP's full mySAP Business Suite in June to streamline its distribution and delivery processes, improve planning and forecasting, and give better visibility to its global supply chain. Tyson Foods Inc., one of the largest producers of chicken, beef and pork products, chose the business suite in May to move its multiple legacy back-end systems, by standardizing its software with SAP.
"I see a very steady stream of growth in all applications within our suite and I'm bullish on HCM," McDermott said. "We've got a robust business in the U.S. and in particular among many midmarket customers that are standardizing their application suite and that's a high growth market for us."