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CEO Henning Kagermann expects 45 percent of revenue to come from the mid-market by 2010.
April 6, 2006

SAP CEO Henning Kagermann set some long-terms goals for the company Thursday, saying the German business applications giant expects to get almost 45 percent of its revenue from the mid-sized market by the year 2010.

Mr. Kagermann made the comments during his keynote speech at SAP’s DKOM developer summit in Burlingame, California, which is the traditional yearly kickoff for the company’s developers from its eight labs around the world.

Mr. Kagermann and other directors of the Walldorf, Germany-based company were visiting Silicon Valley for a board meeting, reflecting the importance of Silicon Valley and the U.S. market for the German company.

Mr. Kagermann tried to stress the fact that SAP is a global company with a statistic that about 80 percent of the company’s sales comes from outside of Germany. The Valley, he said, “has not lost the innovation.”

“We are here because it’s a unique place because we find so many new ideas,” he said. “There are other places [such as Asia], but they are not where Silicon Valley is and Europe is behind most places.”

Stress on Mid Market

Just like most other software companies such as Microsoft and Oracle, SAP is also targeting the mid-market for growth—typically companies with between 100 and 1,000 employees.


Currently, 31 percent of the company’s $8.5 billion in annual sales come from mid-sized companies, Mr. Kagermann said, and he plans to increase the number to between 40 and 45 percent by 2010. The addressable market for SAP’s products by then will be $70 billion, he said.

He also predicted that SAP would have more than 100,000 customers in four years with about 50 percent of the company’s revenue coming from new products such as its NetWeaver platform. Currently, SAP has about 26,000 customers, making the target easier said than done.

“This is not too ambitious of a goal because we have done this in the past,” Mr. Kagermann said.

The fight to capture the mid-market will not be an easy one as SAP is faced by competition from Microsoft with its Dynamics platform, Oracle, the Sage Group, and smaller on-demand companies such as Salesforce.com which offers CRM software over the Internet and NetSuite which offers a complete ERP suite on demand.

Just a day earlier, San Mateo, California-based NetSuite announced a new version of its integrated ERP suite with NetSuite 11 which uses new technologies such as AJAX, can be customized for specific industries and specific functions.

But Mr. Kagermann said he did not feel threatened by the large players as SAP had gained market share in the mid-market against all of them in the last year.

As for the pure on-demand players, SAP executive board member Shai Agassi said the company’s offerings are different.

The Hybrid Model

“We’re not just looking at the on-demand model as a stand-alone business, we are looking at companies that want to go with the hybrid model that want some parts of their business on premise—usually mission-critical elements such as financials,” Mr. Agassi said.

While SAP has offered CRM software on demand recently (see SAP Launches On-Demand CRM), the company is still mum on whether it will start offering other ERP solutions such as financials or human resources on demand.

“Which parts of our code base we decide to move to the hybrid model, we’ll determine based on the demand we are seeing in the market,” Mr. Agassi said. “[It has to be] low-risk deployment such as CRM.”

When asked about whether SAP’s strategy to grow organically and make fewer and smaller acquisitions was the right one as opposed to Oracle CEO Larry Ellison’s, Mr. Kagermann said Mr. Ellison was wrong. “Otherwise we would do different things,” Mr. Kagermann said.


“We do it because we believe it’s a better strategy and we have a lot of good ideas,” he said. “There is no need to reach out and source the innovation.”

SAP rival Oracle has scooped up more than a dozen companies in the last 18 months spending about $18 billion to acquire them, including two large acquisitions PeopleSoft and Siebel Systems.


Mr. Agassi said Oracle “has missed the wave.”

“My belief is that they have declared the end of the world a bit too early,” he said.

This is a story about words we can’t print in this story.

You probably hear these words often, and more than ever before. But even though we can’t print them — we do have our standards — we can certainly ask: Are we living in an Age of Profanity?

Nearly three-quarters of Americans questioned last week — 74 percent — said they encounter profanity in public frequently or occasionally, according to an Associated Press-Ipsos poll. Two-thirds said they think people swear more than they did 20 years ago. And as for, well, the gold standard of foul words, a healthy 64 percent said they use the F-word — ranging from several times a day (8 percent) to a few times a year (15 percent).

Just ask Joe Cormack. Like any bartender, Cormack, of Fort Dodge, Iowa, hears a lot of talk. He’s not really offended by bad language — heck, he uses it himself every day. But sometimes, a customer will unleash the F-word so many times, Cormack just has to jump in.

“Do you have any idea how many times you’ve just said that?” he reports saying from time to time. “I mean, if I take that out of your vocabulary, you’ve got nothin!”’

And it’s not just at the bar. Or on TV. (Or on the Senate floor, for that matter, where Vice President Dick Cheney used the F-word in a heated argument two years ago.)

‘What we hear, it’s gross’
At the community college where Cormack studies journalism, students will occasionally inject foul language into classroom discussions. Irene Kramer, a grandmother in Scranton, Pa., gets her ears singed when passing by the high school near her home.

“What we hear, it’s gross,” says Kramer, 67. “I tell them, ‘I have a dictionary and a Roget’s Thesaurus, and I don’t see any of those words in there!’ I don’t understand why these parents allow it.”

For Kramer, a major culprit is television. “Do I have to be insulted right there in my own home?” she asks. “I’m not going to pay $54 a month for cable and listen to that garbage.” And yet she feels it’s not a lost cause. “If people say ‘Look, I don’t want you talking that way,’ if they demand it, it’s going to have to change.”

In that battle, Kramer has a willing comrade: Judith Martin, who writes the syndicated Miss Manners column.

“Is it inevitable?” Martin asked in a recent interview. “Well, if it were inevitable I wouldn’t be doing my job.” The problem, she says, is that people who are offended aren’t speaking up about it.

“Everybody is pretending they aren’t shocked,” Martin says, “and gradually people WON’T be shocked. And then those who want to be offensive will find another way.”

People divided by age, gender
Perhaps not surprisingly, profanity seems to divide people by age and by gender.

Younger people admit to using bad language more often than older people; they also encounter it more and are less bothered by it. The AP-Ipsos poll showed that 62 percent of 18 to 34-year-olds acknowledged swearing in conversation at least a few times a week, compared to 39 percent of those 35 and older.

More women than men said they encounter people swearing more now than 20 years ago — 75 percent, compared to 60 percent. Also, more women said they were bothered by profanity — 74 percent at least some of the time — than men (60 percent.) And more men admitted to swearing: 54 percent at least a few times a week, compared to 39 percent of women.

Wondering specifically about the F-word? (For the record, we needed special dispensation from our bosses just to say ‘F-word.’) Thirty-two percent of men said they used it at least a few times a week, compared to 23 percent of women.

“That word doesn’t even mean what it means anymore,” says Larry Riley of Warren, Mich. “It has just become part of the culture.” Riley admits to using the F-word a few times a week. And his wife? “She never swears.”

Have a good reason to swear
A striking common note among those interviewed, swearers or not: They don’t like it when people swear for no good reason.

Darla Ramirez, for example, says she hates hearing the F-word “when people are just having a plain old conversation.” The 40-year-old housewife from Arlington, Texas, will hear “people talking about their F-ing car, or their F-ing job. I’ll hear it walking down the street, or at the shopping mall, or at Wal-Mart.

“What they do it their own home is their business, but when I’m out I don’t need to hear people talking trashy,” Ramirez says. She admits to swearing about once a month — but not the F-word.

And Donnell Neal of Madison Lake, Minn., notes how she’ll hear the F-word used as a mere form of emphasis, as in: “That person scared the f--- out of me!” Neal, 26, who works with disabled adults, says she swears only in moments of extreme frustration, “like if someone cuts me off when I’m driving, or if I’m carrying something and someone shuts the door in my face.” Even then, she says, she’ll likely use “milder cuss words” — and never at work.

The AP poll questioned 1,001 adults on March 20-22, with a margin of error of plus or minus 3 percentage points.

For those who might find the results depressing, there’s possibly a silver lining: Many of those who swear think it’s wrong nonetheless.

Like Steven Price, a security guard in Tonawanda, N.Y., who admits to using swear words — including the F-word, several times a day — with colleagues or buddies, “like any old word.”

Price, 31, still gets mad at himself for doing it, worries about the impact of profanity (especially from TV) on his children, and regrets the way things have evolved since he was a kid.

“As I get older, the more things change,” says Price. “And I kind of wish they had stayed the same.”

© 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.