The end of case study – SAP China business (part5)

SAP China’s current failure verified the importance of the 3 factors above
Since SAP globally changed its style from a stable and steady company to an sales-oriented company in 2007, SAP China experienced great changes. SAP China CEO were changed for 3 times in the 3 years, nearly all of top and middle level managers left SAP China, and even all the sales were changed. Many new employees came from Oracle whose work style was very different and contrary to SAP culture.
Without culture and believing, now SAP employee only thinks how to survive. Sales will try to take a deal by fair means or foul, they don’t care what negative results would be to the company in the future, and also they don’t want to do more developing and nurturing future market instead of the current year projects because they don’t know if they could survive in the company next year. Under the culture and style, sales not only had produced serious consequences external to the market and customers, they also caused grave consequences internal to the company. For example some VPs forced sales to do sales forecast skulduggery, so that the VP and sales could have longer time to survive. Team’s decay makes the company going down quickly.
SAP Brand was destroyed in China, many SAP customers stopped to extend their further SAP deployment, they turned other selection if there is, and more than 50% of SAP China customers refused to pay SAP maintenance fee before the end of 2009. SAP China’s decline gave its competitor Oracle chance to develop. In the new competition, especially in major state-owned companies Oracle won most of the new projects, even at SAP traditional advantage field like mining and steel industry.
To make a great team and a great company, belief is the key, it is not a slogan, but thoughts in each employee brain. In the past ten years, every SAP China employee believed that they could bring and create values to customers, but now they don’t although SAP China made a lot of sales and solution selling training, they just think that is a tool for sales.

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Case study – SAP China business (part4)

3. Building great team in China
As introduced above, SAP China had very good name at the first 10 year development period because of its culture and working atmosphere, SAP attracted a lot of elites to join SAP. Different from western country, most of Chinese see their job as part of their life, just the loyalty from employees had great influence on the customers and partners. To build a healthy work atmosphere was not difficult, you simplified relationship between people, make it object-oriented and results-oriented.
Another effective way to build a great team is to authorize people. When Klaus Zimmer was SAP China CEO, he was very an open and make-things-simple person, he authorized managers, guided them and trusted them. Under his 10 years leadership, nearly all top and middle level managers of SAP China were local people. These managers understood China business environment, competitors, and customers’ specific requirements, so they could make quick decision, and took advantages in the competition with the competitors which most of their decision had to be made by Asia or even global organization. The typical case was that Klaus promoted a financial manager having no sales experience to be sales director responsible for a region business sales and development, he gave him the space and time, in the later years the sales director made a very good business, he built a strongest sales team in SAP China and achieved the highest performance results, and also he was promoted as senior VP.
Reserve and training of talents is another key to continuously build a great team. SAP China had good cooperation with universities like Tsinghua university, Shanghai Jiaotong university, etc. Also SAP China had a good internal talent development program, SAP China supported potential talents to further their study like MBA, oversea training and working abroad, this helped SAP could have continuous talent providing. SAP China encouraged internal promotion, this helped to stabilize team, and gave employee development space.

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Case study – SAP China business (part3)

2. Establish SAP brand in China
When SAP entered China in 1996, information construction in China was still at a low level, few companies understood ERP, and accepted it. The dominant ERP software companies in China were SSA, Fourthshift, TCM-EMS (bought by IFS), QAD. Although SAP had already had big name globally, but not recognized by China customers, especially because of her high software price, high implementation costs, complex of her applications, and shortage of professional resource for presales and implementation. Another big worry from China customers was if SAP solutions could work well in China because of local financial requirements, laws and regulations. SAP China had to educate and foster the market.
One of the most effective ways to establish brand is to establish successful reference. From 1998 to 2002, China made a program called “lighthouse” projects, that SAP China selected typical customers in each industry field to help them as SAP successful reference in the industry. The project promoted a lot of SAP customers like ChangHong, Dingxin, Lining, SinoChem, etc. Although they were not all successful, but successful ones proved that SAP solutions be suitable for China enterprises. Sinopec as the reference in oil/gas industry, SAP used 3 years to make Sinopec first 11 pilots successful, Sinopec’s success had great influence in other major oil/gas company, CNOOC and PetroChina, that was why CNOOC replaced Oracle (Oracle didn’t put efforts at CNOOC since they won the customer in 2001).
Another way to establish brand is to build loyalty and building loyalty from people, SAP employee, customers and partners. As a German company, in the first 10 years SAP China had very good name at high quality product, fine corporate culture, demands for perfection, pool of intellectual talents. This made SAP China a very attractive company, people were proud of being SAP employee, partners were proud of becoming SAP consultants, customers called SAP a professional partner while called Oracle a sales company. SAP China took 10 years to make SAP as the brightest brand at IT field, everyone wanted to be engaged in SAP field, sales, consulting service, R&D and ISV partners, including SAP customers and potential customers. This helped SAP China earned a very good name, and a stable business increase, it was a virtuous circle.
SAP was apotheosized in China. China is a developing country, most of her enterprises were at a developing stage, while they met puzzles and problems of business development and management. These enterprises were so eager to learn from western country to solve the issues. As the greatest brand of management solution companies, SAP seized the opportunity, SAP China promoted best practice as the difference with its competitors like Oracle and local ERP software companies. Most of the customers selected SAP because they wanted to take SAP solution to change their business and management, even many new graduates and partners took high priced SAP training as the entrance to management job.

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Case study – SAP China business (part 2)

How did SAP make a successful business in China?

  1. A stable management team:

I recalled, during one management meeting in 2005, one topics discussed was why SAP China could win Oracle in the past years. Nearly half of the present managers gave the answer, stabilization of SAP China was a key to win.

In the past years, SAP didn’t make big changes of top and middle level managers, while Oracle had shakeup of top and middle level managers from 2001-2003, and just in the 2 years, SAP China surpassed and left Oracle far behind.

Stabilization can make a business on the planned road. Generally you needn’t make a great plan, superior of your competitors, but keep a right direction, and execute. For a unstable organization, nobody worry the business in the next years, so they could use every method to get orders now, even at the cost of damaging the company’s credit and sacrificing the company’s long-term benefits. In the Art of War, Sun Tzu Said: The good fighters of old first put themselves beyond the possibility of defeat, and then waited for an opportunity of defeating the enemy. To secure ourselves against defeat lies in our own hands, but the opportunity of defeating the enemy is provided by the enemy himself. Reduce mistakes is the key of secure you against defeat, that need a dispassionate mind-set at your work, a stable organization do help this.

In SAP China, LE (Large Enterprise) business was ever best one, it occupied more than 80% of total software revenue. One key reason was the long-term business plan, especially at Oil/Gas/Mining industry, Utility industry, and steel industry. Take example, in 2001 SAP China had no advantage over Oracle in Oil/Gas industry, in 2001 SAP China got a pilot customer of Sinopec, Oracle took CNOOC; but in the next 4 years, SAP China had been strengthening its local oil/gas industry solution, supported Sinopec a successful reference, while Oracle just did sales by accounts because Oracle sales only cared the current year sales revenue that was the company’s appraisal. Then SAP China lead in both polls, in 2005, SAP China won all oil/gas customers in China, Sinopec, PetroChina, CNPC and even CNOOC that was ever Oracle customer.

A good contrary evidence also came from SAP China, from the middle of 2007, SAP China made big change of top and middle level managers, the business of SAP China began to slump down. SAP China lost its dominating advantage field like mining. SAP China customers’ satisfaction declined very much, that more than half of its customers refused to pay maintenance fee, and SAP China finally met its first deficit year in 2009. While Oracle had a big development in the 2 years, they won major accounts from SAP strong presence field, and nearly made the same volume of business as SAP China’s.

How did this happen? The answer came from one of SAP customers, the CIO told me that now SAP sales only cared themselves, the sales revenue, they could do any illogical, sounding ridiculous thing to achieve this, so the customers don’t care SAP anymore in turn.

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Case study – SAP China business (part 1)

Several facts about SAP China:
Since SAP entered China in 1996 when she built first wholly-owned subsidiaries in Beijing, SAP China spent about 5 years to stop deficits and began to make profit from 2001, and her software revenue grew from less than 1 million USD to several millions USD at the end of 2001, reached 80 millions USD (the exchange rate at that time) in 2008; while the number of employees grew from tens of people to around 4,000 people in 2008.
During the first several years before 2002, the competition between SAP China and Oracle China was quite evenly matched. But after 2002, SAP China had much faster growth than Oracle, until 2007, SAP China ERP business (including other application software like CRM, SCM, etc.) volume was 6 times higher than Oracle China’s.
From 2008, SAP China began to go downhill. First customer satisfaction went down hugely, that customers refused to pay software maintenance fee (more than 60% of SAP China customers didn’t pay maintenance fee at the end of 2009); business slumped a lot, few new business were developed. In these 2 years, nearly all software business came from previous customers by auditing or other methods; SAP China finally came back deficit in 2009, short cash flow even threatened her business operation; Oracle China won the major deals (state owned famous companies like China Coal, CNMC where was SAP dominating advantage fields), while SAP was losing her existing customers.
Next one is to analize the reasons

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