SAP is the leading enterprise ERP vendor worldwide. The company started in 1972 in Germany creating software for mainframe computers and since then it expanded into a comprehensive spectrum of products for SMBs, mid-market and enterprise customers. SAP went public in 1988 and now offers solutions in ERP, manufacturing, financials, SCM, HCM, CRM, commerce, data and analytics.
SAP has more than 110,000 employees, $37 billion in revenues (USD), from which 7% is services revenue, and approximately 27% in operating income. They have more than 425,000 customers in more than 180 countries, including more than 80% of the Fortune 500.
The company historically had on-prem offerings, but in 2017 they launched their S/4HANA Cloud product which continued its adoption and now is 11% of overall revenue (cloud revenue has grown to approximately 44% of SAP’s overall revenue). Similar to Adobe’s transformation into a cloud-first, recurring revenue company, SAP successfully continues to convert their business to a more predictable subscription revenue stream. Worldwide TAM for SAP’s platforms is around $500 billion.
Implementing SAP solutions requires customization and professional services. SAP, similar to other ISV platforms, wants to limit their exposure to professional services revenue to maintain a software-centric financial profile. Therefore, they have communicated they want to rely more on services partners to assist with their cloud revenue growth. Overall, SAP partners with comprehensive offerings are expected to generate up to $7 for every $1 of SAP revenue.
We wanted to learn more about the SAP services partner ecosystem and ran an analysis of what we could find from their public partner data. SAP has a mature partner program with approximately 2,960 partners, of which around 2,100 are services partners, employing more than 6,700,000 employees worldwide.
The above table summarizes the services partner data we collected. The regional data should be interpreted as to where the partner headquarters is located, and secondarily where the majority of their headcount is based. Regardless of the partner’s HQ location, notice the high percentage of Asian talent (75%) primarily driven by Indian-based employees of these services organizations. We can also see a high proportion of European-based partners, given SAP’s heritage.
In terms of partner size we can see that almost 1,000 partners have fewer han 50 employees, and 86% of worldwide partners (1,800+) have fewer than 500 employees. There is important fragmentation in smaller-sized SAP services partners.
At Alten Capital we invest in business and technology services companies. Supporting ISV ecosystems has proven to be a viable strategy to scale niche services organizations. Please reach out to us to explore partnership opportunities.