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Sun 21 Jan 2007 12:00 AM

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A decade of change

SAP Arabia CEO Essam Enany has headed the firm since its incorporation in 1994. He talks to Andrew White about the past, present and future of the Middle East’s IT market.

A Pioneer? No!” Essam Enany laughs, shaking his head. “I’m part of a machine that is driving change.”

‘Change’ is an important word to Enany. Moreover, the CEO of business software giant SAP Arabia has shown himself to be an expert at acclimatising to the constantly evolving needs of a market as dynamic as that of the Middle East. He has headed SAP Arabia since the company's inception in 1994, and as such has played an important role at the very forefront of the region’s IT expansion.

“Historically SAP was targeted towards large businesses, but over the last four years the company has transformed and put out products that cater to the SME business,” Enany explains. “Globally, the split is roughly 60% towards the SME business. In our region, that’s a little bit lower because we’re still driving larger customers, but I would say still 40% of our business is SME.”

SAP Arabia now operates from six regional offices, and offers industry-specific software solutions across around 30 industries. The product is standard, but also one that is variable and can be modified to a customer’s particular needs. It is designed to address multiple business requirements within every sector, and enable companies to drive business, look for increased efficiency, and improve their competitiveness.

“If you look at the region over the last few years, there are several drivers that have pushed companies into the need for modernisation and looking for solutions such as SAP. Drivers such as economic growth, competition and privatisation are pushing these companies to be more efficient, and so driven the need for such products up,” he continues. “The average growth in the market now is about 16% in the whole region year on year, so we have a substantially healthy market that is growing because of demand from companies that are looking for solutions to enable them to go public, or to become more efficient, and to compete far more effectively.”

Such ambition from companies within the Middle East is an encouraging trend, and a tangible indicator of the region’s confidence and steady economic growth.

“Companies are much more aware than they were a few years ago of their requirements,” says Enany.

“ERP, financial systems, human resource systems, portals, production planning, CRM packages — these are all basic needs for these companies, and products like SAP drive the companies to come forward and say ‘yes, we need the product’.

“Year on year, we’re seeing a doubling of the number of customers,” he continues. “In Saudi Arabia, for example, in 2005, the latest available figures, we had 46% market share in absolute terms. In our peer group, we had a 65% market share in Saudi Arabia alone. Saudi is one of the largest markets for us, and has the strongest market share for us.”

Saudi Arabia is also the base of the Enany Group of Companies, within which Essam Enany is a prominent figure. He is on the board of directors at the Al Riyadh Company for Maintenance and Operation — which specialises in the construction and maintenance of sports facilities, stadiums, and large real estate projects — and also on an investment fund “that looks to invest in equity on stocks in various different areas around the world”. Enany is convinced that working across such a wide remit is of considerable benefit to SAP Arabia.

“There are definitely transferable skills that I can take between the different companies," he maintains. “If you look at the business with SAP, you are addressing different industries and offering an industry ‘best practice’ in how you run that business.

“SAP is the funnel where you collect all the best practices of that particular industry, and then you squeeze it all together, put it in a product, and then sell it,” continues Enany. “Therefore, looking at these best practices in other industries gives a great insight, and is very helpful to me personally.”

Enany also concedes that sitting as a board member makes a nice break from running the show at SAP Arabia.

“At that level, you can’t afford to be as involved if you are a board member, compared to what you do as a CEO," he chuckles. “It would be interfering too much, so it’s a very different ball game being on the board, as opposed to being CEO and running a company.”

Whether as a CEO or as a board member, Enany’s unique vantage point has allowed him to watch the region’s business community develop apace over the past decade. It is, he says, a different market today, and one a world away from when he first formed the company.

“In the early 90’s, the drive for change within the region was not very well established,” he explains. “There was a lack of privatisation, there were monopolies in a lot of sectors, and there was a lack of competition because of closed markets. These were drivers that were only pushing very large international countries to adapt and change.

“However, as we went forward in time, these elements started to change,” he continues. “Economically, at a government level and a competition level, companies realised that once they reached a certain size, things became too complex to handle on a manual level. That started to change, and drove customers towards products such SAP.”

“Different regions and different countries have different flavours too. Doing business in Egypt is different to doing business in Saudi Arabia, which is in turn different to doing business in the UAE, for example,” adds Enany. “That has represented a considerable challenge over the last decade — when you move into a new area, or launch a new product, it’s always a new challenge.”

So does Enany harbour any regrets? Are there any challenges he would have liked to have handled differently over the last 13 years? “You can always look back and think there is something you could have done differently, and if you don’t do that then you’re not reviewing how you’ve done things, and so you cannot adapt to the future,” he says.

“But you can’t just spend your time looking back on what you’ve done — you review it, take what you’ve learned from it, and move forward.”

Enany’s time at the helm has been characterised by significantly more successes than failures, yet asked to pick a decision he would change if he could, he is refreshingly candid.

“I think one of the biggest challenges that I would perhaps have approached differently if I could do it again, would be the introduction of a localised, Arabised version, and the timing of it,” he reveals. “That had a major effect on the business, and I definitely would have preferred to get that out earlier. We launched it in 2003, and I personally think that launching it earlier would have allowed us to make a bigger impact on the market.”

So much for the past. Looking forward, Enany is determined to break new ground and to pitch SAP to customers previously out of reach of the company.

“We’ve a product that has a very rich, very well-established, and proven methodology and functionality.

When we take it to the smaller customers, the challenge is to grow through channel business,” he explains. “We’re looking for effective partners that can deliver such a product in a short time frame, and do so at a competitive price. We have launched products that are pre-packaged solutions, for smaller businesses, and looked for channels to get to potential customers.

“This has effectively changed how our organisation is running. It changes your mentality, the way you are reaching the customer, and that is something we are focusing on heavily in 2007,” continues the chief executive.

“One of the key things for us is to grow our partner network effectively. As you grow and spread over multiple countries, and take on more customers and smaller firms, you have to adapt and change your structure,” he adds. “The market changes dramatically, constantly, and over the last couple of years the market we are addressing is heading down the pyramid, and going into the SME market.”

Enany is quick to point out that SAP Arabia have not stopped selling to large firms, but simply that the SME business has added another dimension to the firm’s sales operations. This, he emphasises, is another element of SAP Arabia’s commitment to driving forward in the marketplace.

“It’s very interesting and very fulfilling to look around and meet customers, and see how they have adapted over the years,” he smiles. “When you talk to these customers and see how their business has evolved and changed over the years, you feel very rewarded. You feel that you are on top, and you want to ideally continue on at that pace.”

For SAP Arabia, setting the pace means producing a series of pre-packaged products — software solutions that do not require consulting time or effort to implement.

“That is really where SAP is heading for — establishing itself as a technology platform, not just applications,” explains Enany. “We are looking at solutions and ways of pre-packaging the software, in order to minimise the time it takes to implement. For example, we have Duet, a new product that was jointly developed between SAP and Microsoft.”

In Enany’s mind, the future is bright for Saudi Arabia, for the Enany Group, and for SAP Arabia.

“I look at Saudi Arabia and the Enany Group during the next few years as having a fantastic opportunity, because the country itself is going through a transformation and modernisation that involves companies such as SAP — the development of cities, of economic areas, the deregulation of financial sectors, the growth of the real estate business, and so on,” he says.

“I see this as a fantastic time for the group to take the opportunities that are presented to it. In whichever sector that we’re involved in, I see a growth that is being driven primarily by the vision that is being implemented within Saudi Arabia.”

In another 13 years from now, don't be surprised if Essam Enany is still at the forefront of the Middle East IT industry. Some things, it seems, will never change.

SAP: software giant

SAP is the third largest software company in the world in terms of market capitalisation after Microsoft and IBM. SAP is also the largest business application and Enterprise Resource Planning (ERP) solution software provider in terms of revenue.

SAP’s products focus on ERP, which it helped to pioneer. The company also offers a new technology platform entitled SAP NetWeaver. While its original products are typically used by Fortune 500 companies, SAP is now also actively targeting small and medium sized enterprises (SMEs) with its SAP Business One and SAP All-in-One products.

Reportedly, there are over 100,800 SAP installations at more than 28,000 companies, while SAP products are used by over 12 million people in more than 120 countries.

SAP was founded in 1972 as ‘Systemanalyse und Programmentwicklung’ by five former IBM engineers in Mannheim, Germany. The acronym was later changed to stand for ‘Systeme, Anwendungen und Produkte in der Datenverarbeitung’ (‘Systems, Applications And Products in Data Processing’) and at the 2005 annual general meeting the company’s official name was finally confirmed as just SAP AG.

After a preliminary review of its 2006 fourth quarter results, SAP expects fourth quarter product revenues to be approximately US$2.85bn, representing an increase of around 8% (around 12% at constant currencies) compared to fourth quarter 2005 product revenues of US$2.64bn.

Full-year 2006 product revenues are expected to be approximately US$8.6bn, representing an increase of around 11% (around 13% at constant currencies) compared to product revenues of US$7.7bn reported for the full-year 2005.

In the fourth quarter 2006, the company expects software revenues to contribute approximately US$1.6bn to product revenues, representing an increase of around 7% (around 12% at constant currencies) compared to fourth quarter 2005 software revenues of US$1.5bn.

Accordingly, the company expects full-year 2006 software revenues to be approximately US$4bn, representing an increase of around 11% (around 13.5% at constant currencies) compared to full-year 2005 software revenues of US$3.6bn. 2006 represented another year of strong share gains for the German company.

Based on 2006 preliminary software revenue results, SAP’s worldwide share of Core Enterprise Applications vendors, which account for approximately US$16.4bn in software revenues as defined by the company based on industry analyst research on a rolling four quarter basis, is expected to be around 24.2% at the end of the fourth quarter of 2006, representing around 3.0 percentage points share gain for 2006 compared to the previous year.

Total revenues for the fourth quarter of 2006 are expected to be approximately US$3.8bn, which is an increase of around 7% (approximately 12% at constant currencies) compared to US$3.56bn reported for 2005. Total revenues for the full-year 2006 are expected to be approximately US$12.2bn, which is an increase of around 11% (around 12% at constant currencies) compared to US$11bn reported for the financial year 2005.

On the basis of these figures, the company expects its full-year 2006 adjusted operating margin to increase between 0.6 and 0.7 percentage points compared to 2005 (28.3%).

"I see this as a fantastic time for the group to take the opportunities that are presented to it"

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