SAP: Record Software Revenue Amid Channel Expansion

Written by The VAR Guy 1
January 13, 2011

SAP insiders praise former Channel Chief Pat Hume. But instead of mourning Hume's recent resignation, SAP's channel team seems to be in a celebratory mood. Why's that? Most channel team members are now focused on record quarterly software sales, continued channel growth, cloud milestones, and new channel hires -- including Dell veteran Jim Reilly, who apparently joins the SAP channel team effective today. Here's the update.

SAP insiders praise former Channel Chief Pat Hume. But instead of mourning Hume’s recent resignation, SAP’s channel team seems to be in a celebratory mood. Why’s that? Most channel team members are now focused on record quarterly software sales, continued channel growth, cloud milestones, and new channel hires — including Dell veteran Jim Reilly, who apparently joins the SAP channel team effective today. Here’s the update.

First, let’s set the stage: Former SAP Channel Chief Pat Hume resigned earlier this month, and SAP has also been hounded by an ugly legal battle with Oracle. But heck, The VAR Guy and his readers know winning solves everything. And there are signs in the channel and across Wall Street that SAP is winning.

Earlier today, SAP disclosed record software sales for its quarter ended in December 2010. Meanwhile, Kevin Gilroy, VP of channel functions within SAP’s North American small and midsize business organization, sounds downright giddy.

Mooovin’ On Up

During a conversation with The VAR Guy earlier today, Gilroy noted a few key points:

1. SAP continues to expand its channel organization. The latest hire, apparently effective today, is Dell and Hewlett-Packard veteran Jim Reilly. And more channel hires are expected soon (hint, hint, wink, wink).

2. SAP listens: Annie Neubrech, VP of channel program operations, is focusing all of her energy on channel partner experience — everything from simplifying service contracts to speeding MDF fund payments. “She’s really listening and being empathetic to partners,” said Gilroy.

3. The cloud is taking hold: SAP’s cloud platform, Business ByDesign, had record performance in Q4, Gilroy claims. “I can’t disclose the figures but the cloud numbers continue to rise. In Q4 we knocked it out of the park,” said Gilroy.

SAP VP Doug Merritt recently explained the Business ByDesign cloud strategy in this TalkinCloud FastChat Video.

4. Channel sales are rising: By the end of 2011, SAP North America expects to drive 90 percent of its Small And Midsize sales through the channel, up from about 55 percent to 60 percent5 today. “Since August [2010], all new business in SME has been through the channel; there are only a few rare exceptions involving deals where we didn’t have partner coverage.”

Major Optimism, Major Competition

Admittedly, Gilroy tends to be Mr. Optimism during every phone call. But today’s call was particularly upbeat. “We’re being extremely predictable with partners, and we’re growing at 20+ percent in the channel,” says Gilroy. “Every dollar of [SAP] software revenue drives $3 to $8 of follow-up consulting and implementation services for our partners. That message is being heard.”

Hmmm… The VAR Guy wonders: Is SAP really on the rebound? And… um… is SAP taking market share from rivals like Oracle and Microsoft?

Both Microsoft and Oracle have been pretty darn optimistic in recent months. Just last week, Microsoft Channel Chief Jon Roskill said Microsoft Dynamics CRM sales were going gangbusters. So this may be a case of a rising tide (i.e., an improving economy) lifting the Oracle, SAP and Microsoft boats.

The VAR Guy hopes to get some answers from Oracle within the next few weeks. Oracle Channel Chief Judson Althoff and the Oracle team had been in a financial quiet period until quite recently. But it sounds like Oracle is planning a few partner briefings and more moves in late January or early February, The VAR Guy believes.

The Bigger Picture

Of course, The VAR Guy had to ask Gilroy for his perspective on former Channel Chief Pat Hume’s recent resignation. “Pat did a fabulous job here for a little over 3 years,” says Gilroy. “She set a real tone for partnering and channel partners. And she was great to work with. Having said that, the channel strategy will continue to be bigger than any single individual.”

Well said, Mr. Gilroy. The VAR Guy looks forward to your next update.

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