Berlin: Business software is expensive, but the price can be downright cheap compared to rebuilding your reputation.
Six month ago, SAP AG, the world's largest business software company, bought back the exclusive distribution rights for its software from SAP Arabia, a private Saudi Arabia-based company owned by the Enany Group.
Complaints about SAP Arabia's service and support were common. Two Saudi companies: Saudi Aramco, the world's largest oil company, and Al Marai, one of Saudi Arabia's largest dairies, both refused to deal with SAP Arabia.
Instead, both companies dealt only with SAP AG's European offices, even though they were still forced to pay SAP commission fees and user licenses.
The amount Al Marai had to pay to avoid SAP Arabia is undisclosed, but Fernando Sagayarajan, Al Marai's manager for infrastructure and technical, said the money "was well worth it."
Ranjit Rajan, an analyst with IDC in Dubai, said that while the company had not done any direct research on SAP end users, the general sentiment was that customers "are extremely happy that SAP AG has come into the region."
Sergio Maccotta, managing director for SAP Mena, the new name of SAP AG's regional subsidiary, said the reasons for company's entrance into the region where business-related.
"The reason SAP came into the region was to improve our footprint and have a direct presence in the region," Maccotta said.
SAP Arabia held the contractual rights to distribute SAP's software for 13 years prior to 2007, but under the terms of the agreement, it can no longer do business under the SAP name, Maccotta said. It is unclear whether the company is still operating under that name. Attempts to reach someone from the Enany Group where unsuccessful.
Since SAP AG decided to take control in the region, many companies seem to think things are on the mend. Sagayarajan, who was part of the consulting teams that help implement SAP's software in 2002, today describes himself as a very happy customer.
SAP Mena says there are not looking at the past, but to the future.
"There were many people who were holding off on making decisions, waiting to see whether SAP will truly make it and move into the Middle East," says Ayman Abouseif, a regional vice president. "We have many people who have been looking at SAP but maybe had moments of hesitation. That is all done."
Abouseif said the company gained more new customers in the last six months, including Al Khaleej Sugar and Emirates Steel, and they had customer who upgraded the software. Sergio Maccotta said the SAP Mena grew 45 per cent in the first quarter in a year-on-year comparison.
Transition
Not everyone is happy yet.
Petro Rabigh - a joint venture between Japan's Sumitomo Chemicals and Saudi Arabia's Aramco - originally signed on with SAP Arabia. Petro Rabigh is one of Saudi Arabia's largest integrated oil refineries and petrochemical production facilities.
The company went live with SAP in April of 2007, using the software to handle financial information, human resources and supply chain management.
Saudi Aramco had attempted to talk Petro Rabigh out of using SAP Arabia, but Nile Al Rushaid, a senior project manager, said that after looking around the market, most of the small and medium business were using SAP Arabia. Petro Rabigh decided to do the same.
The relation between Petro Rabigh and SAP Arabia was far from ideal. Al Rushaid said that as soon as the license agreement was signed, the level of support dropped.
Due to the time and investment into the software, Al Rushaid said switching to another software provider wasn't an option. In 2007, when SAP AG stepped in, Al Rushaid said communication between the two parties was so bad that Petro Rabigh wasn't even notified that SAP Arabia would not longer be supporting them. They saw it on the news.
Since then, things have improved, although Iftikhar Khan, Petro Rabigh's SAP project manager, said the SAP AG is still in transition mode in the Gulf Region.
"They are far from being perfect," he says. "The next two to four months will be key."
However, even as SAP AG is rebuilding in the Middle East, a global shortage of technical personnel has been hampering the region.
That's a problem for companies like Al Marai, which needs technical people to run their IT sector. Sagayarajan says he has been seeing more and more people at SAP conference around the region. While that might be good for SAP, Sagayarajan says he see this is a potential problem for his company, which will now have to compete harder for people to help support the software.
"There is a challenge of retaining the good talents and attracting the good talent in the biggest challenge," he say. The issue is particularly difficult in Saudi Arabia, where there are visa issues.
Maccotta said that since SAP AG established itself in the region, it has more than doubled the team. "And we still have to go for another doubling of the organisation before the end of the year," he says. The staff currently stands at about 90 people.
Kevin Scott, SAP Mena's chief operating officer, said the company is using all its available channels to bring in talented personal in the short term. That's necessary for the company's sustainability in the region.
"The small customers today are tomorrow's big companies," he says. "SAP wants to be there for a long-term relationship."
By Scott ShueyChief Business Reporter
Berlin Even as SAP AG is increasing its presence in the Middle East, the company is facing the issue of "unrealistic customer expectations."
The problem, according to Darryl Owen, an SAP vice-president in charge of trade industries, is that a large number of retail companies in the region that are shopping for business software just do not know what they need.
"None of them really have enough experience to make educated choices, so they're actually buying more based on brand that anything else unless they been clever enough to bring in a cheaper Information Officer from South Africa, or the UK or whatever," he says.
"So, some of the companies have a pretty structured process because they've brought guys in from the outside, but I've worked with a whole bunch of local UAE retailers and you're sitting there thinking 'how on earth are these guys making their decisions?' because it's nine-tenth intuition and emotion and one-tenth fact. And many of them are actually making some very strange decisions. You look at it and think, 'I'll see you again in six months because this isn't going to work'."
One company, which Owen declined to name, wanted a fully customised merchandise management system installed in only 14-weeks, far below the industry's normal lead time. A prepackaged system with no customisation usually takes 5 months.
"Putting merchandise management system into a retail company is like open heart surgery, it really is, but there are people who think we can do open-heart surgery in 15 minutes and then pop out for a coffee," he says.
To minimise the possibility that customers will get a system that won't work, Owen said SAP is bringing retail experts into the region who can show local retailers what has worked best for them. Owen said that want to make sure retailers have the systems that they want, because that helps build's SAP's reputation, which in turn will drive future sales.
"This is not just about making short-term license revenue," he says. "What we want is a situation where you actually have a reference that's selling on to the next guy, but it's kind of hard because you're trying to reset expectation over there which are wildly wrong."
