SAP wants to tap India’s booming start-up culture: Bill McDermott7 min read . Updated: 21 Mar 2016, 01:18 AM IST
SAP CEO McDermott on the importance of India for the enterprise software company
SAP CEO McDermott on the importance of India for the enterprise software company
German enterprise software giant SAP SE is planning to help Indian start-ups innovate by leveraging its HANA platform that helps companies with analytics and business intelligence to manage their processes, says chief executive officer Bill McDermott. He also talks about SAP’s recent push in the healthcare sector and explains the importance of India for the company.
Edited excerpts from an interview:
What is the purpose of your visit to India this time? Is it a regular business trip or is there something more on the agenda?
There is a real high purpose. We want to make sure that we impact 1 billion lives in India. SAP is going to do that through a combination of things. One of the things is to impact young start-ups. So, we are making a bold commitment to the start-up community. We see that HANA is the database platform for the 21st century. We want to give young start-ups access to HANA; we want to make it easy for them to make their innovations on top of HANA and with SAP and we want to make it extremely simple and affordable for them to do that.
In combination with IIT (Bombay), we will announce a beautiful incubation programme for the young brilliant minds which are filled with new ideas. They can see around corners that haven’t been created yet and we can partner with them and give the tools they need to fulfil the dreams on our technology. Other major areas of impact that we want to work on are education and healthcare.
It’s an interesting time. You almost have a start-up revolution in India. The government too has come up with Digital India and Start-up India programmes. So, from a business opportunity standpoint, does it help you?
I think it is the best of times. There are two sides of the equation—one of small and medium enterprises and start-ups and the other of large enterprises. The small and medium enterprises are largely uninitiated in the digital economy. Most small companies today don’t have the interest and resources to buy all the hardware, support all the hardware and all the staff to run the hardware and then all the updates and improvements in the innovation cycle. It’s just too complex. What I see on the small side of the equation is to provide small and medium enterprises and young start-ups the access to SAP innovation in the cloud, which is an easy way to consume affordable cloud solution. So, we take away all the complexity and we give them all the benefits of digital that large companies need, but in a small company package.
On the other side of the equation, the most significant state-owned companies and the largest commercial entities, these are companies that have to digitize to win.
They are very complex, their data structures and processes are very complex. So, if you are the government and if you are trying to provide digital services to citizens, you have to digitize.
If you are a large commercial entity trying to connect your supply chain to your demand chain where your customers live, and incidentally they want you to be able to know them, customize your products to their likes and needs and sell them something on the mobile. That’s a very different company than what we have today. So, we have to work to digitize those companies.
Lately, SAP has been focusing a lot on the healthcare industry. Is it driven by your personal experiences? While the opportunity would be huge, it is also a fragmented and disorganized industry, at least in India.
People say that in every geography, there is the patient, the hospital and the insurer. It’s disorganized and it is fragmented. But we have HANA, which is a great simplifier and that’s why we have a moonshot at transforming the healthcare industry. I believe that once the network of professionals understand the potential, they will pull SAP as much as we will push them.
So, it’s something you are trying because you already have the base to build on?
We are going to totally commit to it. We are going to announce a healthcare division. So, we will have a healthcare division globally and we will know more about the healthcare industry than any company in our space. We already have the best engineers working on it. We already have relationships with NCT (National Center for Tumor Diseases) Heidelberg, Germany. We are doing the human genome sequencing; we are already fighting against cancer. In the US, we have partnered with ASCO (American Society of Clinical Oncology) on a cancer-linked application. We are partnering with all the best universities in the world to see how we can use HANA in their programmes and do the early research against this villain called cancer. We plan on taking this to India and all other parts of the world.
What’s interesting about healthcare is that it behaves a lot like smart meters for the home and like smart cities. So, a lot of the characteristics of the solution are transferable from one industry to another. It also capitalizes on the Internet of Things. So, we feel like we have a fast start and in some ways an unfair advantage. In India, too, you will see us put a tremendous amount of focus on healthcare.
Is there an additional investment towards these healthcare plans?
We already have an operating plan that we have communicated to the capital markets and a guidance. At this time, it’s appropriate simply to say that we have factored that investment in. We manage a portfolio. So, we just have to look at the portfolio and decide on how much one priority gets over the other. So, at the macro level, it’s accounted for. Within the company, we make the adjustment based on priorities.
You also have a communicated strategy on mergers and acquisitions. You have done a handful already. How is the integration coming along and are you still on the lookout globally and in India?
This is an important leadership question. It might have appeared that SAP was becoming a highly acquisitive company if you watch what we did in 2010 and beyond. The acquisitions we did were necessary to get first-mover advantage on the best possible cloud assets that were available in the world. Our customers expected us to buy the best ones, the market leaders, and to make sure that the culture and the teams that came along with that technology were very customer centric. Every single one of them has outperformed the business case that we proposed to the board of directors when we got the funding for them. I think that is represented in the revenue and stock performance of the company. Now, if you look at the landscape, there are not a lot of good assets left to buy, at least of size and scale. So, most of our activity will be tuck-in in its orientation or smaller by nature because we got the big ones that we needed.
So, the acquisition strategy is a product or industry specific as opposed to geography specific?
Yes. That’s because one of the things we have is a strong global channel. So, one of the things you have seen us do is take smaller companies and grow them quickly across global channels. So, when we buy something, we think of it as global in nature and scalable across our global channels. It is not necessarily great to do M&A (merger and acquisition) geographically if you can’t extend the solution globally.
You have invested close to a billion dollars in India in the past decade. With the kind of plans you are talking about with a focus on SMEs, healthcare, education and start-ups, will the investment and the size of SAP in India grow?
Definitely. You will see consistent hiring in India. You have a very large workforce here already, but we will have a larger workforce. So, I think you will see a 10-15% increase in hiring on a per annum basis for the next several years. Of course, if our ambitions play out the way I dream they would, that will just accelerate.
The other thing is that we have 77,000 employees globally, but the whole ecosystem is over 2 million. So, when we grow, the ecosystem grows. For every one employee we have in India, the ecosystem has nine or 10. Therefore, this start-up initiative with HANA as a platform, if India embraces it, we can become the technology on which these start-ups are built.