Twenty Questions: SAP Labs India

Our interview with Clas Neumann, President of SAP Labs India, turned up all kinds of revelations about SAP's Indian R&D priorities, salary growth, code development, and culture.

We recently caught up with Clas Neumann, President of SAP Labs India, to ask about SAP's development footprint in India. The interview turned up all kinds of revelations about SAP's Indian R&D priorities, salary growth, code development, and culture. Neumann was candid and informative, and everyone from people interested in working for SAP Labs India to software industry onlookers should be interested in the details he provided.
Can you begin by telling us about your professional background and what brought you to SAP Labs India?

Clas Neumann:
I started at SAP twelve years ago, in development. I spent most of time in engineering even though I was an MBA by qualification. I started to do localization work pertaining to China, Hong Kong, and Taiwan. I became an assistant to the Executive Board. I was taking care of APAC [Asia-Pacific]. Then I moved to India in 2000 to set up operations with 100 people. Three years ago I gave up the Managing Director post here for the development center. I moved into our mid-sized offering, Business By Design. Eight months ago, SAP decided to have a President established for each of the larger labs—Palo Alto, Shanghai, Israel, India. I had development experience and I was here, so it was decided that I would lead as President.
How quickly has SAP's footprint grown in India over the past few years in terms of adding new development resources?

Clas Neumann:
We have grown by 50 percent every year until 2007, when we grew at about 30 percent. We have a total headcount of 3,900 people.
Why has SAP made such a strong commitment to India?

Clas Neumann:
We came to India for the talent pool. Cost did not really matter at SAP. The global development heads were free to build up resources wherever they wanted. Our early experience showed that India had the same quality and speed as other locations, which convinced senior managers in development that India is a good place to build software!
Can you give us a preview of future plans for expansion?

Clas Neumann:
We think that a lower double-digit growth rate going forward is sustainable. Growth is also linked to R&D spending. We put 13 to 14 percent of total revenues into R&D, and we like to keep that ratio.
Which SAP products owe their existence to code coming out of India?

Clas Neumann:
In 1999-2000, we started with localization. We also specialized in CRM, specifically mobile CRM. Now we do industry solutions such as oil and gas, and also apparel and footwear. The oil and gas team has 150 people on it. The new CRM 2007 5.1, 5.2 comes from here. We do about eighty percent of Business By Design. We also do lots of work in mobile applications.
What is the corporate culture of SAP Labs India? How does it compare to the culture in Waldorf?

Clas Neumann:
Our average employee is 27.5 years old. In Walldorf, it's 40. The culture of German engineering isn't found in India. Our Indian colleagues are extremely ambitious and interested in management. In Walldorf, lots of German colleagues find it okay that they're still in core development after 15 years, and they don't have people responsibilities. Our Indian colleagues are eager and ambitious. There's nothing wrong with that, it just has to be managed in the right way. There is another cultural difference. The German perception of time is completely different from the Indian perception of time. So we enforce a code of conduct in which meetings start punctually and deadlines are deadlines.
How does SAP Labs India recruit employees?

Clas Neumann:
We receive up to 150,000 applications a year. We try to filter these to find the best people. Half of our new hires come through internal referrals. Oftentimes, engineers share flats and live in communities together, they know each other really well. So there isn't such a huge potential for a mismatch of expectations when referred hires come in. They already know what to expect.
Media reports over the past few years have lamented the fact that India is not producing enough properly-trained graduates to keep handling the current volume of IT and BPO work. Is there a so-called talent shortage in India?

Clas Neumann:
There is a demand-supply gap. Some of the larger companies have hired as many as 50,000 people in one year—30,000 new hires and 20,000 to replace attrition. If you need that many skilled people, shortages can always be a problem. Since we're not that large, we still get a sufficient number of people to fulfill our growth plans.
How many people are in each of your organizational divisions?

Clas Neumann:
15% in research and breakthrough analysis, another 50% in core product development, 35% in global services and support. The breakthrough analysis is research on futuristic things, technologies that are not in the market or just getting introduced. Core product development works on ERP, CRM, industry solutions. Global services and support isn't a call center. It's developers who develop customer requests and work on certain customer-driven projects.
What is SAP Labs India's role in serving China and other Asian economies and customers?

Clas Neumann:
We do localization for APAC.
Are there many Non-Resident Indians [NRIs] and foreigners working in SAP Labs India? In other words, is India exerting an international pull?

Clas Neumann:
Yes, we even hire in California! With salary levels increasing, it's attractive for NRIs to come back to India. Many people who come from the U.S. are engineers and senior managers with global experience. But the cultural integration of these people, especially if they have been abroad for 15-20 years, is not as easy as you might think. People who have grown up in India expect NRIs to behave like Indians, but the NRIs might feel themselves to be Americans.
Are Indian tech salaries going up by significant amounts each year?

Clas Neumann:
This year it will be 15-16%. Next year, the same rate is anticipated. This is the fifth year of double-digit salary increases. Salary increases at the junior level are stronger, maybe 20% or above. At the senior level, it's in the single digits.
Do tech salary increases constitute a potential threat to India's comparative advantage as a low-cost geography?

Clas Neumann:
We are observing salary increases with some caution, but we never came here because of costs. This is a core development center.
Is talent turnover a problem? If so, how does SAP Labs India manage it?

Clas Neumann:
Turnover is more of a problem for the companies who hire tens of thousands of people.
What are typical promotion paths for employees to move up in the organization?

Clas Neumann:
Project management and people management. We also encourage colleagues to become software architects. In this society, it is important to have a manager title. It increases your value in the marriage market, for example!
What are some hot technical skills for aspiring employees to have?

Clas Neumann:
For middle and senior managers, we look for project management experience in software and product development. At the entry level, we look for deep technical understanding, good engineering skills, and communication skills. Communication is very important. Engineers in India speak daily to Germany and other locations. We have to teach them intercultural skills—how to work with Germans. The technical skills are mainly taught in our six-month induction program.
How does SAP Labs India ensure that its employees continue to learn and grow after starting on the job?

Clas Neumann:
Last year, we won the Golden Peacock award for having the best managed training operations of any company in India. We have lots of formal training both inside and outside the country. Last year he had 5,000 flights out of Bangalore. Indian colleagues go to places like Germany, the U.S., INSEAD in Singapore, and the London Business School to polish their skills. Many skills are also acquired on the job. As far as business processes go, we send colleagues to experience how business processes actually run. They'll see the expectations of Nike, Reebok, Budweiser. What are the key things that they need from the software that runs their business?
How does SAP Labs India go beyond code to offer consulting and other value-added services?

Clas Neumann:
Through the global services and support division.
Does SAP Labs India get formal support from the national or local government?

Clas Neumann:
When we came here, we got an offer for a ten-year tax break and were allotted land, at a discounted rate, on which to build our campus. There were some benefits initially but now we don't get any special treatment.
What is it like to live and work in Bangalore?

Clas Neumann:
It is a vibrant city, never boring. Something happens all the time. For people coming from abroad with families, schooling is very good and you can connect with other families and have your own social network. For single people who want to have fun every night, keep in mind that the bars all close at 11:30 PM. There aren't too many concerts either. So it might not be the best place to be if you like those things.

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