SAP Boom Here to Stay (Part One)

By Sam Sliman
President, Optimal Solutions Integration

The SAP implementation industry has been booming and many industry pundits, perhaps reflecting on the bygone heydays of the mid 90s, like to speculate about when the current run might end. It won’t. At least not in the foreseeable future, and for a number of verifiable, real-world reasons.

SAP professionals are in demand and command top-dollar today. According to a recent report from CT-based IT workforce research firm Foote Partners, SAP pros raked it in 2006, increasing their salaries 15.2 percent on average. During a recent podcast, David Foote, president of Foote Partners LLC, predicted a “tremendous opportunity over the next five years for SAP professionals.” Foote refined this prediction by observing that the current climate is especially favorable to corporate SAP pros looking to take the plunge into the consulting waters.

There are many factors contributing to a sustained robust environment for SAP consultants and system integrators. In part one of this two-part article, I outline a few observations that argue the current SAP boom is here to stay: SAP’s solid fiscal performance and market leadership; and the strong ERP market and large volume of pending SAP ERP upgrades.

SAP’s solid fiscal performance and market leadership

Stating the obvious, the present good fortune and future prosperity of SAP professionals are inextricably bound to the overall performance of SAP AG. Over the past few years SAP has surmounted numerous and formidable challenges-e.g., Oracle’s acquisition spree and lawsuit, the near saturation of the large-enterprise market, Agassi’s untimely departure, and the rollout of a radically new, SOA-ready, NetWeaver-based solution suite. One would expect issues in the face of such challenges. SAP, however, in typical SAP form, weathered the storm and stayed the course with nary a twitch.

SAP’s recently reported Q2 earnings paint a rosy present and promising future for the software stalwart-operating profit rose 10 percent from a year earlier and software license sales soared across all regions, clearly demonstrating that SAP’s new product cycles are resonating well with present and prospective customers. According to SAP Deputy Chief Executive Leo Apotheker, SAP expects continuing double-digit growth in the US through 2007. Other high-growth areas, according to Apotheker, include Asia and India.

SAP continues to dominate the market for enterprise software. According to company figures, SAP built its share of the $48 billion market for core enterprise applications to 26 percent in the last quarter from 23 percent a year earlier, compared with 15.5 percent for Oracle and 3.1 percent for Microsoft. SAP currently has more than 38,000 customers in over 120 countries.

In addition to being the worldwide leader in ERP (see below), SAP also tops the charts in supply chain management (SCM), customer relationship management (CRM), supplier relationship management (SRM), and product lifecycle management (PLM). SAP also has the fastest growing market share among all embedded business intelligence (BI) vendors.

• According to AMR research published in September 2006, SAP emerged as the top SCM vendor in terms of revenue, and outpaced the market with growth of 6 percent for the third straight year. • Forrester Research named SAP as a leader in The Forrester Wave™: Enterprise CRM Suites, Q1 2007 report, indicating that the SAP Customer Relationship Management (SAP CRM) application offers one of the most complete solution. • According to AMR Research published in September 2006, SAP remains the top SRM vendor in terms of revenue, and continues to grow at a double-digit rate. • According to CIMdata, based on software license revenue SAP is the top vendor worldwide in the non-CAD PLM market. AMR ranks SAP as the #2 PLM vendor worldwide in terms of total revenue share. • A recent Gartner Dataquest report entitled, "Market Share: Business Intelligence Platforms, Worldwide 2006," found that SAP grew its BI market share to 8.2 percent, and its sales increased 60 percent over last year, making SAP NetWeaver Business Intelligence (SAP NetWeaver BI) market share the fastest amongst all embedded (BI) platform vendors.

ERP market strong, SAP ERP upgrades abound

According to AMR Research, the market for ERP software will reach $47.7 billion by 2011. That's up from $28.8 billion last year-a compound annual growth rate of almost 11%. SAP is the undisputed worldwide market leader in ERP software and continues to make significant market share gains in multiple ERP categories such as financials and human capital management, according to 2006 reports from analyst firms Gartner and Forrester. AMR pegs SAP’s ERP market share for 2006 at 43 percent.

AMR also reports that SAP R/3 serves as the application backbone for more than 20,000 midsize and large companies worldwide. SAP anointing SAP ERP the “go to” release for these R/3 customers in 2006, and SAP CEO Kagermann predicts that seventy-five percent of SAP's 36,000 users will upgrade to SAP ERP by mid-2008. SAP has notched over 1,000 implementations of SAP ERP within just seven months of the product’s launch, making it the fastest adoption in SAP history.

With the maintenance window for SAP’s warhorse R/3 software rapidly closing, and awareness of the numerous functional enhancements included in SAP ERP rapidly growing, it is not a stretch to believe that SAP upgrade activity will be strong for at least the next few years. Striking a bit of a somber note, Gartner analyst Dan Sholler predicts that SAP upgrade activity will begin to tail off by the end of 2008. In the second quarter of 2007, however, ERP-related roles accounted for two of the best-paying IT jobs, according to the Yoh Index of Technology Wages released on July 23. SAP technical consultants and ERP functional consultants ranked first and second, respectively.