Case Study: SAP America

1. At the time of the case, why has SAP America grown so rapidly? What challenges have been created by the company’s explosive growth?

There were several reason for the rapid growth of SAP America during mid and late 90’s. Throughout the evolution, the parent company of SAP America, SAP AG, wishes to provide a better product based on the evolution of technology as well as based on the changing customer needs, and thus invested consistently on R&D activities. 20-25% of SAP AG’s gross revenue were re-invested in research and development. In fact, almost one quarter of the company’s employees were working on research & development activities. Adding to the point, they carried no debts over a period of time as well as they didn’t book revenues until product delivery to customers.

One important strategic decision that Besier, the CEO (who believed that his products should be sold heavily on American market that that of Europe), took was to move away from the German model in several aspects. One of the aggressive decision he took was to put the entire sales force team under commission sales plan as a result of which, Chevron, the first multimillion dollar sale of R/3, evidenced to be a turning point for SAP. As an outcome, SAP outperformed all of its competitors by 300-800%, the success opened up other large accounts to company.

In order to increase the sale and number of customer to the company, SAP America established autonomous regional Profit & Loss (P&L) center with their respective sales, consulting and training teams. This resulted in every regional office to work on their own sales and marketing strategy to improving the sales. In order to penetrate the market and build a base, they created an industry strategy called ICOE’s, who act as bridge between the customer and product development organizations.

When there is a growth there will always be hurdles and challenges. There were two major challenges for SAP America, one is within the organization (or) internal challenge, the other challenge is external (or) challenge from competitors. The autonomy of regional office led the company to have different approached for same problem, thus results in providing same solution 4 times for 1 problem. Thus seems that SAP America is not acting as a single company. Resource Utilization is also a key challenge to the company, as the training and development service offered by the company is not utilized up to the mark in one part of the region, however it is utilized more in other regions.