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Multiyear SAP SME push pays off in impressive growth numbers

At SAP SME event, small, innovative companies were trotted out to extol the benefits of joining the SAP ecosystem -- including large enterprises that are potential customers.

SANTA CLARA, Calif. -- SAP may finally be ready to shed its image as an out-of-touch supplier of technology to the world's biggest companies.

Four years after the German software giant announced a strategy to strengthen its focus on the fast-growing world of startups, and then followed that up with a push to attract more small and medium-sized enterprises (SMEs), a sampling of the fruits of those efforts was on display here this week at Levi's Stadium, home of the San Francisco 49ers football team. 

During an event for an international gathering of journalists, SAP highlighted a handful of customers from both buckets, sending the clear message that its reach down market isn't just a money grab, and that it understands the challenges of establishing and building companies in the anytime, anywhere era.

Holding such a coming out party at the 49ers' home was apropos. Both SAP and the 49ers have seen the heights as established leaders in their industries, the 49ers having won five Super Bowls and SAP having long held the status as one of the big-three enterprise application vendors, along with Microsoft and Oracle. But both of them have also fallen from their perches by seeing other, more innovative competitors pass them by.

The 49ers were able to achieve a brief renaissance and returned to the Super Bowl four years ago. SAP, meanwhile, is looking for a more sustained resurgence. So far, indications are that it's succeeding.

High growth in SAP SME customers cited

The company said it has added 60,000 SMEs in the past three years, and Gartner predicts that SAP SME customers will account for more than 50% of the vendor's revenues by 2020. Scott Jones, head of general business at SAP North America, said that SAP SME users now make up 80% of the company's customer roster.

Equally dramatic is SAP's progress on the startup front. The vendor's Startup Focus program, which it established in 2012 as a sort of incubator that provides access to everything from technology and support to potential customers and private equity, attracted 400 startups in the U.S. by the end of that year. Today, it boasts 4,500 startups in 65 countries, and has resulted in 240 new applications developed by startups that use SAP technology.

A further indicator of SAP's rising reputation among smaller, younger companies is this: SAP said its cloud revenue for the most recent quarter grew by 30%, a surge it attributes in part to its growing number of smaller, innovative customers.

While it's easy for a software vendor to throw around such numbers, SAP SME customer panelists repeatedly lauded the vendor for its ability to help them establish themselves in their markets and grow in ways they never could alone.

Tim Horlick, CEO of Sensify, which provides internet of things asset-tracking technologies that run on the SAP HANA Cloud Platform, said partnering with SAP and having access to its resources is enabling the company to go after ever-bigger customers, greatly increasing its revenue-producing potential.

"SAP has 310,000 customers," Horlick said. "If we captured 1% of their customers, that's a billion-dollar business."

What's more, SAP's larger customers represent more than potential buyers of startups' technologies; they also represent possible avenues to establishing those technologies in the marketplace. Ryan Pamplin, vice president of sales and partnerships at augmented reality startup Meta, said SAP's ability to serve as a matchmaker linking innovations with companies that have the resources to establish them is something more big technology providers should consider doing.

"I don't think a lot of the crazy moon-shot types of technologies happen very much in large companies," Pamplin said. "If more companies in the valley do this, it will only help spur innovation around the world."

The seeds of SAP's growing down-market focus can be traced to Sapphire Ventures, the onetime venture arm of SAP that was spun off into an independent firm in 2011 and itself was the focus of a panel at this week's event. During that discussion, panelist Brad Brooks, chief marketing officer at DocuSign, whose software enables processes related to digital signatures and approvals, said that just as SAP's approach with young companies has been more focused on enablement than sales, Sapphire Ventures has long embraced the idea that relationships, not money, are the most important things it brings to the table.

"That is not something that is monetized. That's something that is really valuable," Brooks said, adding that through Sapphire Ventures, DocuSign has been given "access to sources in the marketplace that have been a big differentiator."

SAP SME appeal depends on better user experience

All back-slapping aside, there were signs at the event that this new wave of customers is well aware of SAP's past reputation. At one point, Njal Stabell, CIO and president of Neptune Software, suggested -- apologetically -- that SAP hasn't always been known for providing a good user experience. To which SAP's Jones deadpanned, "I've heard that."

With a growing roster of SAP SME and startup users likely to keep it closer to technology's cutting edge, SAP clearly hopes it won't be hearing comments like that for much longer.

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