Tuesday, November 18, 2008

What is the Place of Mid-sized Players on the French SAP Services Market?

SAP Services is a very competitive market where the leaders are the largest IT providers. We can say that the competitive environment is composed of four sets of players. The first is composed of the largest IT services providers, with more than 1,000 people, generally having an SAP practice; these are often global players. The second includes smaller independent companies with skills on core ERP as well as on the various modules of SAP. These can be considered SAP generalists. The third set includes very small companies with a small SAP team specialized on one SAP module (BI, CRM, SCM, etc.). Finally, the fourth set is composed of providers targeting mid-sized customers.

The race for critical size is strategic on this market, especially since most large SAP customers want to reduce IT costs by narrowing down their IT procurement, reducing the number of providers, referencing them and pushing broader fixed price projects to these larger providers.

The configuration of the top 20 in terms of local vs. global players clearly shows a domination of global companies. The top 10 represent 70.5% of the overall market as the top 20 reach 82.3% of this market, which illustrates the strong concentration of the French market for SAP-related consulting services.

Thus, most of the players of the top 10 largely over-performed the overall market growth (+10.3%) with growth rates going from 9.2% to 26.3%. The three front runners (Accenture, Capgemini and Logica) are global players as the other companies of the top 10 cover the worldwide market (IBM, CSC) or the European area (Sopra Group, Atos Origin, Steria).

The largest players have stabilized their SAP business in France. The small ones remain the victims of drastic procurement policies and are therefore found in the position of subcontractors.

Without this critical size, these companies have no choice but to differentiate their offerings, becoming specialists on niches and bringing their customers a profound expertise. This is the case for Alti and SQLi, for example, which have developed rare skills on fast-growing SAP modules. The main asset of these companies is their ability to innovate and react easily to market signals thanks to their size and swiftness. Their clients also appreciate their proximity and customer care as they feel that large providers don’t pay the same attention to all clients. The main challenge that small players have to address is to leave the time and materials business model, where they often start. To achieve this objective and thereby win market share, they have to implement tough project management methodologies and prove their ability to manage a complete project.

Alti, the youngest company belonging to the top 10, is gradually becoming a serious contender, thanks to its SAP consulting team. The company has skills on core ERP completed by a strong expertise in BI, CRM, and HR offerings. It also focuses on topics such as Netweaver and interoperability between SAP and Microsoft software.

On the same model, SQLi has developed a strong expertise with the acquisition of two companies: Clearvalue in 2006 and Eozen in 2007. The company has skills on BI, CRM and SRM and focuses on SOAs through Netweaver.

Procurement strategies have fostered large IT companies for many years, often leaving out some smaller but very talented companies. The financial crisis has amplified this phenomenon, reducing the opportunities for smaller companies to sell SAP technical assistance on a time and materials basis.