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SAP addresses midmarket challenges

NEW YORK -- SAP is launching a program to better track and manage its selling partners in the midmarket and tweaking its sales model to improve incentives and bolster its sales force, according to an executive overseeing the changes. Michael Sotnick, senior vice president of small and midsize businesses said SAP is battling Microsoft and Oracle for sales among Small and Midsize Businesses. And SAP is seeing double digit success, Sotnick said. In 2005, year over year growth of channel partners increased 38% to more than 1,800 partners. SAP also saw a 50% rise in sales of its All-in-one and Business One software with a combined customer base of nearly 17,000 customers. In an interview with, Sotnick lays out SAP's midmarket strategy. He explains how the channel network is being strengthened and whether potential customers will see any changes when dealing with value added resellers (VARS).

We're trying to help partners understand the investment that is required to be able to successfully sell SAP in the market.
Michael Sotnick
senior vice president, small and midsize businessSAP America Inc.

Is SAP steering away from Microsoft in the midmarket?
That is not the case. There are two areas to look at, first is with Business One and right now the lion share of the new partners that we are bringing in to the Business One landscape are also a Microsoft partner and have a relationship with one of their business application assets. They can be selling Business One alongside a Microsoft product?
That's exactly right. Rarely do we see the Great Plains but more Navision. The reason for that is Business One is an end to end business management solution -- front office integration combined with back office integration and centralization of that data. And it really is a different value proposition than an accounting package. The customers looking for an accounting package will get eliminated pretty early on unless we're able to open their eyes to a different way of looking at their solution. Is the All-in-one program being sold similarly?
There you get into a separation. For All-in-one our competitive landscape looks different. Clearly there is a financial implication to the customer. To do a Business One implementation I see customers spending on average about $30,000 to $40,000 on software only. Customers in mySAP All-in-one are spending $200,000 to $225,000 on software only.

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What challenges existed that forced SAP to switch to this hybrid sales model?
It was less about addressing challenges to the business and more about expanding the opportunity base. The single highest priority in our embracing of the hybrid model is to collaboratively with partners expand the number of opportunities that we gain access to. That is far and away where our focus is. But you went in there and had to develop a channel network on your own, compared to Microsoft, that acquired its channel network.
The challenge that you hit on is better classified as an enablement challenge. We're trying to help partners understand the investment that is required to be able to successfully sell SAP in the market – demand generation activity, executing a sale cycle, presales resources, understanding the value engineering discipline that we're bringing.

SAP based on the success in the marketplace has a big following of partners and the challenge is less about growing on our own and more about taking partners that understand SAP and working with them to open their eyes to the realities of investing in a reselling practice. All of these partners may have five or six years of implementation of SAP but a very short time in selling SAP. Is there a way for a prospective company to determine whether an SAP partner is a good partner versus a partner that they shouldn't be doing business with?
You're right on a critical point in channel execution. One of the strongest internal values we have within SAP is accountability and we extend that accountability to our partners. How do you do extend that accountability?
When we sign up a new partner we make it clear to them the types of resources they need, the training that is required, and we hold them accountable to that. We make a specific investment in every new partner to help them win two deals. We set objectives during the business planning stages before we accept them as a partner, based on real customers. After that they have to demonstrate their ability to do it themselves.

We have a program called Partner Edge that measures a partner's contribution in two areas -- revenue, where partners can earn points and reach higher levels of status and then we have separate category called value points. These points translate into Gold, Silver and Associate partners. Over time it's all cumulative so you would be able to achieve the highest level even if you are a small partner. This program is internally kicked off and I've got three quarters of data now on all of our partners so I can go in and create a master view of how partners are classified. We'll be rolling this out formally July 1 and we'll be training our partners this quarter on their responsibilities within the system. Is that a challenge for SAP to get customers to consider Business One, because it has no connection to NetWeaver and SAP's upper end products?
Absolutely, but what we are achieving every day is greater recognition that SAP is committed to leadership in the small enterprise at the same level we are executing a leadership position in the large enterprise. The customers that align with that message are the kinds of companies we want. They're small companies today that want to grow. They want to grow through organic means, acquisitions and mergers, expansion and areas that align well through the value proposition that we have for them.

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