Sap America: Strategic Move from Global to Mid-Tier Markets

Abstract

This case serves as an example of organizational self-renewal in order to survive against changing and volatile market requirements. Self-renewal is the last stage of lifecycle for a business ecosystem, where an ecosystem is the organization combined with its business partners and customers. This stage occurs when mature business communities are threatened by rising new ecosystems and innovation. The alternative ecosystems, which were raised by Oracle and PeopleSoft, if proved successful, SAP America would not only loose their position as a market leader, but could also become non-existent. SAP in order to remain a market leader needed to have a solid foothold on the mid-tier markets and service-based industries in addition to their existing grip on the manufacturing based industries consisting of companies with a turnover of $2.5 Billion. SAP America essentially had three alternatives to choose from, which are, (a) to slow the growth of the alternative ecosystems raised by Oracle and PeopleSoft, (b) try to incorporate innovation into their own ecosystem, and (c) fundamentally restructure themselves to cope with the new ecosystem. SAP chose the third alternative. They essentially restructured their organization from a horizontally to a more vertically integrated approach to enter the mid-tier market. In order to change both the myth and reality that SAP implementation was costly and time consuming, they diversified their focus, to include presales, consulting and implementation, in addition to their previous focus on product development, enhancement and licensing. Following this SAP America, not only survived the changes in the market, but also remained the industry leader and made their R/3 a De-facto standard throughout the industry. This case illustrates what it takes to become what Gary Hamel calls, the Grey haired revolutionary.

Keywords: SAP, SAP America, R/3, Oracle, PeopleSoft, Organizational Self-Renewal, ERP