ATLANTA — While SAP Canada president and managing director Robert Courteau sees competing in a global economy as the biggest challenge facing Canadian companies, the German enterprise software developer is not without its own challenges in the Canadian market.
In an address to Canadian customers and partners at SAP’s annual Sapphire user conference in Atlanta Tuesday, Courteau warned the historical advantage Canadian companies have had in trading with the U.S. has disappeared. Both a rising dollar and the emergence of China as an economic power present challenges, he said, warning Canadian companies are falling behind globally in productivity.
“We’re only 78 per cent of the productivity of the U.S., and much of that can be attributed to (under-investment in ) technology,” said Courteau.
The answer though, he said, is not to squeeze more out of your business model. Noting that the competitive landscape is littered with companies that focused on productivity as a cost-cutting measure alone, Courteau said investments in IT must be directly tied to growing the business.
“IT must be accountable to the business, and companies can’t be successful without a sound strategic knowledge of IT,” said Courteau. “It’s about the integration of your business strategy into IT, and the leading companies do that better than the rest of the pack.”
In addition to investing in IT, Courteau said Canadian companies also need to increasingly look beyond our borders, and truly become global players. With global players entering our market, he said, to be successful we need to enter their markets as well.
“The world likes to work in Canada, and they like to work with Canadians. We can compete globally,” he said. “We need to take advantage of the fact people like to work with Canadians and collaborate globally.”
While SAP wants to help Canadian companies compete globally, within Canada Courteau said SAP has taken a vertical-specific approach to its sales strategy. While SAP faces competition from the same “two or three large ERP vendors” Courteau said increasingly smaller, vertical specific vendors are in the mix as well. All of SAP’s investments in Canada recently have been directed toward industry knowledge, he said, noting SAP has developed solutions for 28 different industries.
The Canadian market is a challenging one for SAP though, said Michael O’Neil, managing director of research firm Info-Tech Indaba in Toronto. O’Neil said the Canadian environment is different from many other developed economies in that we have a few large companies, not many mid-sized companies, and many small companies.
“It’s a real challenge for SAP in Canada to cost-effectively get to a mid-market and lower market audience that frankly isn’t really inclined to buy SAP products,” said O’Neil. “SAP has built products for the SMB space but they’re still viewed largely as an enterprise software provider.”
Getting into that SMB space requires a pretty extensive partner network, something O’Neil said SAP hasn’t developed in Canada to the extent of companies like Microsoft. Also, he said SAP has some pretty complicated technology, which means a longer dialogue and education process by partners with clients as part of the sales cycle.
“It’s hard to economically sustain a long dialogue with a company that doesn’t represent a large dollar purchase on the backend,” said O’Neil.
SAP is finding success though with companies like Spin Master Ltd., a Toronto-based toy manufacturer which announced Tuesday it had expanded its SAP ERP implementation to its U.K. sales and distribution centre.
Iain Kennedy, Spin Master’s chief operating officer, said the company turned to SAP because it needed more visibility into its business, on demand, and a consistent and reliable source of business information. Having outgrown its IT infrastructure by “a significant amount” Kennedy said Spin Master needed to find a way to better integrate its business processes and facilitate coordination across business lines.
“We knew we were poised for significant growth,” said Kennedy. “We needed something that was flexible, adaptable, and had the scalability we need to support our growth.”
Spin Master succeeded in increasing inventory turns by 50 per cent and reducing inventory carrying costs by 20 per cent, and Kennedy said they’ve recently launched a second phase SAP implementation which will include a business warehouse, supplier portals, workflow enablement and analytics.
“It’s amazing to see our sales guys when they ask a question that would have taken days before and you get it on the SAP screen in 10 seconds,” he said.