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Overseas software giants hit domestic counterparts hard
( 2002-07-24 09:55 ) (1 )

Multinational business software makers are increasingly applying pressure on domestic counterparts by entering the small and medium-sized business market.

One recent example is a move by Germany-based world software giant SAP, which released on Tuesday its small and medium-sized business (SMB) applications, and vowed to dominate the market in three years' time.

"We will invest in this market and in our partners to enter this market," said Hans-Peter Klaey, SAP Asia's president.

The company released two SMB applications into the market: mySAP All-in-One to target medium-sized businesses and SAP Business One to tap the demand for small enterprises.

Claus Zimmer, SAP China's president, said, since more than 60 per cent of Chinese enterprises are small and medium-sized, the market has huge potential and will become a new engine to boost SAP China.

The company predicted that the SMB market will cap 1.8 billion yuan (US$218 million) this year and 5.3 billion yuan (US$640 million) in 2005.

According to Zimmer, by 2005, SMB business will account for 40 per cent of SAP's revenues in China.

The entry into the SMB market by international giants will break the present roadmap of the enterprise solution market, in which multinational giants focus on high-end products for large foreign-invested and State-owned enterprises, while domestic makers mainly focus on small and medium-sized businesses.

"Domestic software makers' shares surely will be squeezed by international giants, as they lag far behind their foreign peers in terms of technology," said Dorothy Yang, a research manager with the information technology market researcher International Data Corporation (IDC) China.

However, Yang stressed, since solutions for small and medium-sized businesses are often sold through distributors rather than direct sales, it will take some time for SAP to build a nationwide distribution network.

To solve this problem, SAP said it would find more than 100 distribution partners this year to spread the sales network nationwide.

"We are talking about investing in some of our partners, including some distributors, to foster the market," said Zimmer.

However, analysts also believe, due to the lack of publicity among small and medium-sized businesses, international companies like SAP are not as recognized as their local competitors, which may become another obstacle for the multinationals.