Dec 6, 2008

Business - Q&A SAP India CEO

Jessica Mehroin Irani & Santanu Mishra

MUMBAI: The global slowdown may have affected almost all industries. But SAP India CEO Ranjan Das told ET that it has no impact on the sales of enterprise products as companies continue to spend on IT. Excerpts:

How does the fourth quarter looks like for SAP India?

We all know there is a slowdown and it has impacted India. In third quarter, we grew by 46% in India alone, which is huge in itself. However, it is hard for me to predict how we will perform in Q4. I think in mid and long-term, India is expected to grow at a faster rate than other regions.

What impact will slowdown have on your licence sales?

There is a lot of credit crunch, but companies need to maintain their business processes. However, the revenue stream is drying up and has also lowered confidence. This will definitely impact IT spending if revenues go down. But software is less likely to get hit than hardware as replacing hardware systems can be put off for a while.

Also, CEOs want to know where they can invest their shrinking pool of funds, how can they cut costs without weakening their business and how they can defend their market share or increase it. So chances are less that license sales would come down significantly.

Are there any large SAP implementation deals that are happening?

This is a great time for companies who are planning transformations and to go ahead with it. Some companies have already realised this and more will follow up by January-February next year. Recently, a company which is shutting down some of its plants told us they wanted to implement SAP across all its existing systems.

Their IT systems were built 10 years ago and when they complete this transformation process, they will be able to compete better as their operating efficiency will be better. Companies in regulated space will also have to compete with global players by 2010. They too will have to undertake this transformation process.

Which industry has the potential for large-scale SAP implementation?

I think, the public sector has huge potential and is catching up steadily. There is immense need for automation and optimisation in utilities, government organisations and defence among others. The government companies have to invest in products like SAP on their own for better efficiency and if they don’t, citizens will force them to do so.

With many Indian IT companies looking at acquisitions in the SAP consulting space, do you feel threatened?

I think it is great as it validates our status in the market. Everybody expects us to have a bigger footprint and we have lots of customers.

In fact, this is not a threat to us since major chunk of our revenue comes from license sales and not from consulting practise. Many a times, the IT service companies partner with us during the course of such consulting.

Also, there is a real shortage on the number of people who can implement our software. If the IT players in India build SAP practice, it is great news for us as this would increase the number of people with expertise in SAP.

Would CEOs incur additional costs for SAP products to attract more customers when the demand itself has slowed down?

If you are going out of business, you will invest neither in IT nor in anything else. That is the case for some small and medium enterprises, but majority are still in business. They might be hunkering down during this storm, but this storm will recede. Though, nobody knows when.

IT spending will definitely go down, but it won’t go to zero. In times of crisis, you cut down on things, but you don’t entirely stop them

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