As of December 2006, SAP had 36,200 customers worldwide. That number is a testament to the company's position of dominance in the enterprise software industry. Yet, it's also emblematic of the company's biggest challenge going forward. CEO Henning Kagermann is on record with a stated goal of "100,000 customers by the end of the decade."
- 100,000 customers by the end of 2010
- 63,800 additional customers
- 15,950 new customers per year
- 1,329 new customers per month
- 44 new customers per day
- 1.8 new customers per hour
- 1 new customer every 33 minutes
Jokes aside, I think this little math exercise helps illustrate the significance of what's ahead for SAP. SAP was founded in 1972. It's taken the company 35 years to gain 36,000 customers and that's with industry-best growth and execution. Now it wants to add another 64,000 in four years.
For as talented as its sales organization may be [and it's talented through and through], SAP's stated goal of trebling its customer base won't come by either a) hiring 3x the current field sales force or b) raising quotas threefold. This is an efficient sales organization with a high win rate as it stands. SAP is only going to come close to matching its lofty goal through FUNDAMENTALLY CHANGING THE WAY IT DOES BUSINESS.
At the heart of its plan is an aggressive pursuit of the mid-market; which is going to come from its yet-to-be-released A1S product and its existing low end products (BusinessOne, for example). When I'm at Sapphire in two weeks as part of Blogger's Corner, I plan to really hone in on A1S and the opportunities and challenges it presents. Simply having a new product suite won't be good enough, and SAP knows that. It also must find a way to sell, implement and service customers in a much more efficient way. Can an organization with 38,000 employees shift on a dime like that? And assuming SAP does fall short of the 100,000 customer mark, how close does it need to get to satisfy its stakeholders? Remember, SAP's 300mm Euro bonus pool is tied to doubling the company's market cap by 2010. Absent significant organic customer additions, this would require – GASP – an aggressive M&A policy which belies SAP's history and stated plan of action.
Stay tuned; I know I am.
Note: This is not a
recommendation to buy or sell SAP or any other security, but is merely a
personal analysis to foster discussion for informational purposes only.
At the time of this writing, I and/or funds I maintain discretionary
control over, did not maintain a position (long or short) in SAP. We also may, at times, carry derivative options on underlying
positions as a hedge.
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