SAP's U.S. plan may mean Microsoft war

A new feud is in the making as both software makers put more energy into aiming business applications at small and midsized companies. But SAP has been down this road before.

Alorie Gilbert Staff Writer, CNET News.com
Alorie Gilbert
writes about software, spy chips and the high-tech workplace.
Alorie Gilbert
3 min read
Business software maker SAP plans to boost its slumping U.S. sales by targeting smaller businesses, a move that will set up a showdown with rival Microsoft.

Leo Apotheker, who was named interim head of SAP's North America division last month, is assessing the unit and will determine a course of action next month, he told CNET News.com from SAP's e-business conference in Orlando, Fla. The conference, Sapphire '02, concludes Friday.

Apotheker declined to say what kind of organizational changes he might make in North America, but said SAP "fiercely denies" rumors that layoffs are in the works.

The United States was once SAP's fastest-growing unit but now lags behind the company's operations in other regions. SAP's goal is to make the U.S. market its largest source of revenue through a plan to target small and midsized businesses with a new set of applications by year's end.

But SAP has been down this road before. The company has launched several initiatives since the mid-1990s to repackage its notoriously complex software to appeal to midsized companies. So far, those initiatives have seen limited success in the United States. Apotheker, however, points to the large number of midsized SAP customers in Europe, and said he is confident the new products will make headway in North America.

"We have 18,000 customers in the world," Apotheker said. "There aren't 18,000 Fortune 500 companies, obviously. So we have sold quite a number of licenses to smaller organizations."

A new challenge on the horizon is Microsoft, which is also targeting small and midsized companies. Microsoft launched a business applications unit after acquiring accounting software company Great Plains last year. The software giant plans to expand its product line with new customer service applications through the acquisition of Danish software company Navision.

Apotheker said SAP isn't concerned about Microsoft just yet. "It's such a fragmented market I don't worry about it," he said.

He acknowledged that SAP faces challenges in the United States, where falling demand for business applications helped pull the company's overall software sales down 12 percent in the first quarter, compared with a year ago.

"The environment is reasonably tough," said Apotheker, a 14-year SAP veteran. "The buying patterns from our customers suggest they are pushing much more for a return on investment and getting value quickly."

Apotheker plans to apply the know-how he acquired while running the company's largest unit, which covers Europe, the Middle East and Africa. During his tenure, business grew 11 percent in the first quarter, compared with 5 percent growth in the Americas region, which includes Latin America.

But Apotheker plans to make his North America stint a short one. SAP is looking to fill the position soon, allowing the interim chief to focus on his other new post as the company's head of global sales.

SAP will consider both internal and external candidates for the position, said Apotheker, and hopes to find someone already in the United States. The former head of the division, Wolfgang Kemna, was named executive vice president, Global Initiatives, in May.