Q: How do you see the market developing in 2010 and how does SAP plan to respond?
A: There’s no doubt that 2009 was a challenging year. Even though China managed to produce healthy GDP growth, we know that the government played a big role in that. But we still see companies that we serve taking advantage of the difficult environment to strengthen their management and operations. So we actually had some exciting times as well this year. On the one hand, business is not easy to come by and everybody has to work harder. On the other, some companies are taking this time to revisit their whole business model, which matches very well with what we are doing in this market. And so, going into 2010, we believe we will continue to see companies focusing on and revisiting their management to drive towards becoming what we call "clear enterprises".
Q: What do you mean by "clear enterprise"?
A: A "clear enterprise" is a campaign theme that SAP is starting to preach. We believe that every company, every modern enterprise needs to have the following characteristics. First, they understand every part of their business. Second, they have all the information they need to make decisions, and third, they execute well on that information according to a coherent strategy. We believe that if enterprises need to stay competitive, they need to become clear enterprises. We see that being a trend, because if you look at the last decade or so, many companies here in China moved so fast they didn’t have time to sit back and think about their operations and their model and their management. Now is a good time, and that is positive for us and for them. We are also paying attention to the new focus on domestic consumption, especially in retail and transportation. These industries should enjoy good growth next year. At the same time, we will also see large domestic firms, especially the state-owned enterprises [SOEs] going global, going for international mergers and acquisitions, as well as going through more consolidation within the SOE arena. With these changes happening, this will drive more discussion about how their IT and business processes can support these changes.
Q: What is the policy environment and how does it play into your strategy?
A: I think the China market is still maturing. I think that while the Chinese software sector in general still lags a bit behind the international standard in terms of price for value, we take a more nurturing approach to develop the market. Recently there have been a lot of discussions about revamping or reinvigorating the software industry, and I think the best thing I could suggest our government do is to adopt a policy to encourage the end-use customers to invest more in IT. The current policies that are supposed to encourage the software market are applied to the vendors, not the customers. By encouraging the end users to use more IT you would provide a more win-win situation for the development of the industry. Then the local companies could invest more in R&D and innovate more.
Q: How does intellectual property play into your strategy? Some people say this is the primary reason the domestic market doesn’t innovate enough.
A: The whole market is maturing. The government has done quite a bit to protect IP, but having said that, China is a very large country, and there are many companies out there, and it will take some time to reach the same level of IP protection as in the West. We want to work closely with the government and our partners on this issue, and this is one of our key strategies in China, to build a tighter collaboration model. We believe by joining forces with local talent – nobody can deny China has a lot of raw talent in IP – but by partnering with local companies we can innovate together.
Q: How much is SAP investing in R&D in China?
A: Overall, SAP as a corporation invests about 10 percent of our revenue in R&D. I don’t have a breakdown in China. Our lab here was formed in 2003, and now we have 1,500 people on our China lab campus supporting a variety of projects.
Q: There seems to be a difference between Western- and Chinese-style web and software interfaces, causing mutual confusion. How much interface localisation do you do here?
A: For our own software and solutions, we do translate everything for our customers, but at the same time, we also are looking at three levels of localisation. The first is translation; and the second is what we call localisation beyond language. The third is taking into consideration unique requirements from the Chinese customers. We get feedback from our customers and do projects to localise things like user interfaces. Then the third level includes the bigger changes pertaining to the Chinese market’s requirements in general. The other important thing about usability and interfaces that we have focused on is that we believe that more and more end users will want to have the ability to manipulate data at their fingertips so they can see different things, not just display reports. That is why we acquired Business Objects a couple of years ago, which is one of the top three business intelligence software companies out there.
Q: Beijing is trying to encourage domestic innovation in China. Is that a threat for SAP or an opportunity?
A: It’s a short-term challenge but a long-term opportunity. I think more can be achieved, while SAP can bring along a lot of innovation both in terms of software content as well as in the technology we use to develop the software. We believe more opportunities are ahead if we work closely with local software companies. We can offer our technologies to them, and we can also exchange ideas on methodology that come from our research lab, which can help local innovation as well. Innovation should be global, it should not be tied to a specific country.