70% of SAP’s business will come from SMEs in next 2 years

Small and medium businesses, which already make up half of SAP India’s estimated annual revenue of Rs 7,500 crore, will account for 70% of sales in the next two years, managing director Ravi Chauhan said.

The aggressive push by SAP India, the wholly-owned subsidiary of the world’s biggest business software company, will focus on letting SMEs rent solutions delivered through the internet in what is known as a cloud-based service rather than the traditional method of on-premise computer infrastructure owned by companies.

“Today, we have very competent Rs 200-500-crore business houses who are doing cutting-edge work. We are going after this mid-market,” said Chauhan, who was appointed as head of SAP India last month.

SMEs’ share in the country’s gross domestic product is about 17% and the sector employs about 40% of the organised workforce. SAP India, which counts conglomerates Reliance, Mahindra & Mahindra and Essar as its clients, also counts thousands of small businesses among its customers.

Although the Indian economy has under-performed in recent years, Chauhan said companies across industries invest substantially in IT infrastructure as they try to boost efficiency, thereby helping providers like SAP scale up their presence. “I don’t have data (on market share) but if I see the recent wins, there has been substantial investment made by customers in technology,” said Chauhan, specifically referring to the automobile industry.

Chauhan said hosting applications on the cloud has many advantages as small businesses need not invest in people and money to set up infrastructure to manage their IT requirements. “It would take 9-24 months to start seeing time to value if you are rolling out SAP in the traditional way. In cloud, you are up and running in weeks. (This is) very relevant to large section of market,” Chauhan told ET in an interview.

Getting business on the cloud in India is a strategy that mirrors the company’s global push as SAP booked 758 million euro (Rs 6,300 crore) in sales from cloud subscriptions and support in 2013, more than double it did in 2012, while sales of traditional software for installation on computers was essentially unchanged.

“Finally, the headache of managing this huge IT infrastructure is not your own. If you are a car parts manufacturer, you concentrate on your business,” said Chauhan. The wrinkle in the SAP story in India is the slow migration of many of its customers to its realtime analytics platform, HANA that is the fastest product in the company’s history to generate $1 billion in revenue.

“It’s a new technology….You look at the pros and cons and move at a pace where they are comfortable. We don’t expect these shifts to happen in a hurry,” said Chauhan.

Early on Monday, SAP executive board member, Vishal Sikka, who is credited with developing HANA, resigned citing personal reasons. Sikka, who joined the company in 2002 and was brought on SAP’s executive board in 2010, led the development of HANA, and was a key executive in bringing the product to market. The company said Sikka was not available for a comment.

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