Despite being the largest ERP (enterprise resource planning) software company by market share globally and in India, German technology company SAP isn’t resting easy on its laurels. It is aware that new-age technologies such as artificial intelligence and machine learning can not only disrupt traditional product and services firms but technology companies themselves.
Keeping this in mind, SAP launched a Cloud-based ERP offering in India on Wednesday, the S/4HANA Cloud, with built-in machine learning and artificial intelligence capabilities. The product can help business managers with pre-emptive decision-making is also powered with a voice-based digital assistant called CoPilot, which functions on the lines of Google’s Alexa and Amazon’s Echo.
In an interview with Fortune India ahead of the launch, Deb Deep Sengupta, president and managing director of SAP’s business in the Indian sub-continent, said that the recent implantation of GST in India will spur his company’s business as more businesses in the unorganised sector will be compelled to enter the formal economy, aided by technology. “Around 50% of taxes paid to the government post implementation of GST are SAP customers,” Sengupta said.
Small and medium enterprises (SME) already account for 80% of SAP’s customers in India, and with more firms likely to join this bucket, SAP is innovating on ways to make its offerings more affordable and value accretive for enterprises.
Excerpts from the interview:
What are the major factors influencing SAP’s business in India in terms of opportunities and challenges?
SAP has been in India for more than two decades. From the customers’ standpoint, initially there was a lot of focus on standardisation of processes, best practices, and business process reengineering, which led to the foundation of ERP. In the second wave, insights and analytics became important; and the third wave unfolding currently revolves around Cloud and mobile. By 2020, India will be among the top Cloud markets in the Asia Pacific region.
The most important challenges before CEOs are to take care of growth, improve productivity and ensure employee engagement. Technology is involved in all these processes. In this context, SAP’s strategy stands on three pillars; to offer an intelligent enterprise suite that integrates the organisation from the back office to the front office; a data platform which deals with analytics, and embedding intelligent technologies like machine learning and artificial intelligence into each of our products.
What has been SAP’s experience of working with customers post-GST, especially in the SME segment?
GST has been a great enabler. More than a tax reform, it is a technology play. Not only does it bring the informal sector into the mainstream economy, it also entails a technological shift. Companies may choose to develop these technologies in-house or outsource it to a specialist organisation, but the adoption of services like Cloud will increase significantly.
We began working on our GST readiness 18 months before the legislation was passed. We created awareness among customers through 22 centres across tier 2 and tier 3 cities. We also created a digital compliance app on the Cloud for our customers to use as they geared up to be GST-compliant.
What about the cost burden that this new technology is likely to put on small companies?
Around 80% of our customer base in India comprises SMEs. A decade-and-a-half back there was a perception that SAP was expensive and SMEs would not be able to afford it. But we have grown this business over the years, and today, companies with a turnover of less than Rs 1.5 crore are our customers. Partly this has been a function of shifting services to the Cloud and adopting a pay-as-you-use model.
But mostly we have focused on optimising the total cost of ownership of the software for the organisation, including the implementation cost and lifecycle cost. A lot of products that compete with our offerings may have a lower upfront cost, but with our integrated suite of offerings, we enable customers to use the same software for different purposes, rather than forcing them to resort to buying multiple products.
As you get into areas like Cloud computing and data analytics, SAP is competing with many other companies like Alphabet, IBM and Amazon. How will you deal with such competition?
Our basic mission is to leverage technology to solve challenges for our customers. We have been technology-agnostic and partner with all these companies that you mention and more. It is more of collaboration than competition. These companies produce the technology, and we use that technology to build applications and frameworks to solve business challenges.
I get a lot of questions on why SAP doesn’t have a data centre of its own in India. But we aren’t missing out by not having one. Our strategy is to partner with hyper-scale players like Amazon, Microsoft and Google, who have a presence in India.
What is the split of revenues between SAP’s ERP and non-ERP business globally and in India? What is the trend likely to be going forward in India?
Globally, more than 70% of our business comes from non-ERP offerings. In India, it is 50:50. The aim in India is to grow both segments since India is still a big market for ERP software with many enterprises getting added each year across private and public sectors.
SAP came under the scanner in South Africa for alleged impropriety in securing some government business, following which the company decided to stop paying sales commissions for government business in countries with poor graft ratings. What is the situation in India?
We have taken that action in India around a decade ago. Most of our public sector clients deal with us directly, and there is no third party involved. Even for projects related to e-governance and smart cities, we only deal with certified system integrators who have a good track record.