December 11, 2005

SAP Memories

Until the past couple of years, I didn’t have a lot of dealings with SAP. (That has now changed significantly.) But it seems that the things I do recall aren’t that widely known anymore.

I first heard of SAP in the 1980s. It was a smaller company than the then-leading mainframe application software vendors. Peter Zencke told me earlier this week that when he joined in 1983, the company had around 100 employees. From memory about MSA’s figures, I’d guess SAP’s revenue was somewhere in the $150-250,000 per employee range. Also from memory, I’d guess that MSA and M&D (McCormack & Dodge) were meaningfully bigger than SAP at that time. I also think that SAP combined financial and manufacturing applications earlier than the other mainframe vendors did, and hence probably got more revenue per client from a small number of clients. (MSA didn’t get into manufacturing apps until they bought Comserv, which if I recall correctly never broke the $20 million revenue mark on its own.)

SAP was almost unique among significant software vendors in being based outside the US, Software AG being the other obvious big example. There was no Business Objects then, of course. I don’t think that any of the UK companies that eventually made a modest impact — MicroFocus, LBMS, and much more recently Autonomy — were even active then. So it was pretty much off of people’s radar screens …

Indeed, at one point in the early 1990s I wrote to the effect of “Hey! There really are some important European software companies!” And spurred by that, my clients at Fidelity Investments invested in SAP. Too bad they were perennially stingy about compensation for good investment ideas …

Anyhow, the word on SAP from its competitors was that in the US at least, SAP focused tremendous sales effort on a small number of prospects, and in those accounts they were very hard to beat. These accounts seemed to be centered on the chemical and pharmaceutical industries, presumably because those industries were particularly strong in SAP’s home German market. Not coincidentally, SAP’s US operations were headquartered in Pennsylvania, near the New Jersey stronghold of those industries in the US. It’s natural to conjecture that SAP had superior functionality for process manufacturing industries, something that was pretty primitive in those days, but I don’t recall any direct mentions of this.

I learned more in the early 1990s when Jeremy Coote called up and introduced himself. He was the CFO of SAP’s US operations (he later went on to a big job at Siebel). It turned out that SAP had some contractual reason only to invest limited resources in the US. But that would change soon; one of the directors was coming over to run things in the US personally; and so on. Obviously, they lived up to that much more than I could possibly have envisioned at the time.

The story of how SAP’s rise dovetailed with the growth of the public accounting firms’ consulting practices is better known; I’ll leave the telling of that to another time.

Comments

4 Responses to “SAP Memories”

  1. Software Memories»Blog Archive » Prerelational financial app software vendors 1 — a quick overview on December 20th, 2006 4:31 pm

    […] SAP. I’ve already written up what I recall about SAP in the 1980s. […]

  2. Bonnie Whiteaker on November 6th, 2007 12:09 pm

    John,
    Don’t know if you remember me, but I was Director of World Wide Education and Training.
    I started in the Huntsville, Alabama office that M&D bought. After the acquisition by DBS, I went to DBS Tronto, Canada for a couple of years.
    I still have in my possesion an email I sent to the Huntsville President and the Development Manager (who will remain nameless). I notified them that sudently on all of sales situations we running up aganist 2 companies; 1 a German company named SAP; and the other a small west coast company named PeopleSoft. The response I received, was “don’t worry about them, they are fly by nights and will soon go away”.
    On occasions when I see these 2 dear friends, I remind them of the email and they jokingly ask how much I want for them.

  3. Curt Monash on January 9th, 2008 2:26 am

    LOL, Bonnie. :)

    Sorry for not seeing your comment before.

    SOME people at MSA and M&D were fairly clueful. I made a lot of money in American Management Systems stock because the first time I met with Doug McIntyre — when he was the first marketing VP at MSA — he ran through a lot of competitors and told me AMS was the only one MSA couldn’t beat.

    But SAP was also one of the toughest to beat, way back then.

    John Landry and Bob Weiler were also generally a lot more realistic about the market than their competitors were. Caustic, perhaps, but fairly realistic.

    CAM

  4. Ray Lane at HP | DBMS 2 : DataBase Management System Services on October 1st, 2010 8:39 am

    […] American Management Systems, under Charles Rossotti, did an ever better job with the same strategy earlier (albeit at a much smaller company). Otherwise, it was Ray who taught the industry how to succeed at it. […]

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