Business software vendors are increasingly turning their focus to small and medium enterprises (SMEs) as the market in larger organisations becomes increasingly saturated.

Last week, market leader SAP told delegates at its Sapphire user conference in Paris that it is targeting SMEs to help grow annual revenue from $30bn (£16bn) to $70bn (£37.5bn) by 2010.

The software giant is best known for supplying large firms, but chief executive Henning Kagermann says the firm can adapt.

‘We are the leaders in the SME market, so this is not something new to us,’ he said. ‘We are creating tailor-made products for this market that are sophisticated and affordable.’

Kagermann says implementation of its software can cost as little as ¤40,000 (£27,000).

If there is a contradiction in focusing on a market in which SAP is already the leader, SAP does not acknowledge it. And analysts say that despite its position, SAP must capture more of the SME sector.

‘SAP might be the market leader, but that is only a small share of the market,’ said Butler Group analyst Theresa Jones.

Muntons, a maker of malt for the global brewing market, with about 250 staff, implemented SAP to cope with increased competition in its industry.

‘We did not consider SAP originally because we thought we were too small and would not be able to afford it,’ said group finance director Roger Baker. ‘But it turned out to be the most cost-effective option.’

Muntons brought in SAP software to manage its back-office functions, including purchasing, distribution, finance, information systems, human resources and payroll.

‘The size of our company did not hold us back and there have been huge benefits,’ said Baker.

‘The savings have paid for the implementation of SAP and ongoing support.’

But SAP will have to adjust its image, with one delegate suggesting that offering SAP to SMEs is akin to selling a Porsche to Volkswagen (VW) drivers.

‘If VW drivers are paying VW prices and getting a Porsche, then I am sure that would make them happy,’ said SAP Europe president Ernie Gunst.

‘Small and medium enterprises are the backbone of industry. But many are still not using IT in the best way and are using old solutions. This is changing though and some are becoming more computer literate,’ he said.

Kagermann is confident that SAP can beat off competition from the likes of Microsoft, Oracle and Sage in the SME sector.

‘Last year, we expanded our market share, we have prepared to meet the needs of small and medium businesses and we do not need to be afraid of anyone,’ he said.

Small talk

• SAP aims to achieve double-digit growth before 2010, increasing its annual revenue from $30bn to $70bn.
• SAP wants to derive 45 per cent of revenue from SMEs, up from 30 per cent.

Despite claiming leadership of the SME market, SAP is still seen primarily as a software company for large enterprises.

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