WorldCity Business Magazine

Q&A with Raul Vejar

by Joachim Bamrud

If SAP is at all concerned about a pumped-up Oracle, after its takeover of PeopleSoft, Raul Vejar, SAP’s Latin American president, isn’t letting on. In fact, when WorldCity paid him a visit at his Blue Lagoon office in January, he was all smiles.

No wonder. In 2004, SAP, the world’s largest enterprise software company with more than 26,000 customers in 120 countries, increased software sales by 10 percent worldwide and gained market share against its principal rivals Oracle, PeopleSoft, Siebel and Microsoft. In Latin America, with a customer base of 1,600, results were even more impressive, with software sales rising some 20 percent in dollar terms and over 10 percent in Euros.

When we sat down with Vejar to look ahead at 2005 and talk about new challenges, as well as new technologies shaping the world of business, he was enjoying that brief lull at the beginning of each year, just before the results of the previous year are made public, when company managers can bask in their accomplishments.

Mexican-born Vejar, who started with SAP in 1990 at the company’s headquarters in Walldorf, Germany, was preparing to leave for a 2005 “kick-off” meeting of top SAP executives in Barcelona. “These are the glory days,” he said, clearly enjoying them.

You’re wearing a big smile on your face, so business must be good.

Business is very good. Throughout Latin America in 2004,there was more confidence, more willingness to invest. Everythingcombined for us to have a very good year. We grew considerably,about 20 percent in software sales.

But that’s in U.S. dollars terms. When you translate that to Euros, the results probably don’t look so great.

Actually, we grew last year in Euros for the second year in a row. We had double-digit growth in Euros.

What were the top markets for SAP in 2004?

We divide Latin America into four sub-regions Brazil, Mexico, the Andean area and the southern region. Last year, we had double- digit growth in all four.

What do you see as the hot markets for 2005?

Argentina is coming back fast. In terms of percentage growth, that will be one of the hotspots. Although, in terms of absolute numbers, Argentina has not yet reached the level prior to the crisis. We continue to expect interesting growth from Brazil. But, then, we are expecting doubledigit growth from all four regions. That is our business plan.

Two years ago, SAP separated its Latin American operation from the North America division, essentially granting you independence. Was that a recognition of the region’s importance in terms of global sales?

Latin America accounts for only four to five percent of SAP’s total revenues, so that was not the issue. Rather, SAP recognizes that Latin America is very different from any other region. The differences between the U.S. and Canadian markets, on the one hand, and markets such as Peru or Colombia, on the other, are huge.

How does the Latin American differ?

In Latin America seven industry segments (out of 23 segments that SAP serves) account for 60-70 percent of total revenue retail, oil and gas, telecom, utilities, consumer goods, financial services and the public sector. In a market like Canada, for example, this mix would be very different.

Do the region’s 500 largest companies still constitute your principal target market?

Sixty percent of our revenue comes from companies with annual sales of $300 million or more. But there is still room for us to grow.

What about down-market? Is SAP still aggressively pursuing the small and medium-size businesses?

We have made tremendous progress in this segment. [And] it is one of our top priorities. Today about 7 percent of our revenue comes from companies with less than $100 million in sales.

Who are you competing against in this market?

Even though there are some other global players trying to address this market, our main competitors are local companies, such as Microsiga in Brazil and Exactus [a Costa Rican firm] in Mexico.

Speaking of global players, what changes for SAP as a result of the Oracle/PeopleSoft merger?

Even after the merger, SAP is still at least twice the size [of Oracle] in terms of software revenue in Latin America. We will continue to do what we have been doing for many years in the region focusing on the customer, on what the customer needs and how we can best provide that.

No worries, then?

Let’s see how [Oracle] comes out of this merger and how long it takes, because it does take some time. And there are questions, especially when this is already the second acquisition (PeopleSoft acquired JD Edwards in 2003). Now you have the JD Edwards customers, the PeopleSoft customers and the Oracle customers. They need to sort that out. They also need to sort out how they integrate companies with different cultures. This will probably take some time.

So what’s new at SAP?

The big change is that we are no longer just offering an ERP solution, but instead incorporating that solution into an integration platform. In other words, we provide a set of tools that allow a customer to integrate their applications (theirs or those of a third party) with ours at a much lower cost. We came realize that, no matter how broad and complete our solution was, most customers wouldn’t use 100 percent of it. And even if they did, we still wouldn’t come close to solving 100 percent of their problems. There will always be systems that fill a gap in something that we don’t do or that the customer would rather solve in a different way.

What’s the benefit for the customer?

It allows them to continue to evolve, while leveraging everything they have, instead of ripping out systems and replacing them with new ones. It also allows customers to innovate, to come up with new business processes that support any kind of competitive advantage [they might have].

Has the market changed since the crash of 2000?

What has changed is that customers now precisely measure the business benefits before they spend. The thinking before, especially before Y2K, was “I need to fix the system, so I’ll throw the old system out and put in a new one.” Companies probably could have quantified the benefit and come up with a clear ROI, but they didn’t even go through the exercise. Now, with everything they buy, [IT managers] want first to understand the business benefit, and only then make the investment.

One of the exciting new technologies out there is Radio Frequency Identification (RFID). How is SAP involved in this new technology and what kind of impact will it have?

We are participating with those companies that are creating the technology by helping to set some of the standards. RFID is all about tagging objects moving along the supply chain. Companies will be able to track everything they sell all the way to the end consumer. They will know at all times where each item is located, whether it has been sold or not, whether it is sitting on a shelf. The benefits are huge. Companies will be able to bring down inventories, reduce working capital, reduce theft of merchandise, speed up the delivery cycle, avoid stock-outs at stores and save millions of dollars.

You moved your office from Philadelphia to Miami in mid-2003. How has that worked out?

My family is very happy here in Miami. And, for me, it is much more convenient to be located here. I spend the same time on the road as before, but now everything is much more efficient. For starters, trips are shorter, usually overnight. So, I can have a full productive day here in Miami, take an eight or nine-hour flight to Sao Paulo or Buenos Aires and be at the office first thing in the morning. And I can even get some work done on the airplane. That may not be the best thing for your health, but it is very efficient.