From the E-Logit newswire today (Japanese), SAP Japan has announced that it will deliver ERP software, titled SAP Business One 2005B, targeting the Japanese middle market. The move comes after taking into account a growing voice amongst Japanese customers for this type of package.
With typically smaller IT budgets and staff than larger companies, middle market firms in Japan are very price-sensitive and prefer change in smaller steps over larger, transformational IT initiatives. In this case, choosing an IT product from a large provider such as SAP has been historically un-attractive. Thus, as in other countries and regional markets, it is necessary for companies like SAP to maintain their large project niche or create products for the middle market at a smaller scale, lower price and shorter introduction period. Although this market may not be as profitable for SAP compared to its larger customer market, it is smart from my point-of-view as many middle market companies have larger customers utilizing, or preparing to utilize, SAP products. In an effort to maintain these larger customers into the future, and in the midst of a more competitive, globalized world, middle market companies will want to sync themselves as much as possible to customers.
Historically, middle market companies in Japan have made many IT decisions based on personal contacts rather than strategic analyses. Thus, many companies have IT applications running for financial activities and operations that are incompatible. Although there are more companies than SAP who provide application packages to solve this issue and help middle market companies better respond to changes their customers are implementing, Japanese companies may feel more comfortable going with SAP if their larger customer has already committed to the software. Again, referrals from personal contacts will always come into play resulting in the possibility of choosing a different, but SAP-compatible, systems provider.
In terms of SAP Business One, it packages together not just financial and management accounting functions, but also sales, supply, inventory, and customer planning along with sales support--all functions that support corporate growth and would be attractive to middle-market firms in Japan. The package is designed to be introduced over a short period at low cost, which as I mentioned is a key characteristic, and can respond to needs for financial compliance and internal controls, which is coming under more scrutiny in Japan.
For the design of SAP Business One 2005B, SAP took into account more than 30 functionalities that were considered top needs by Japan customers. These needs centered around system operability, Japan-unique billing processes involving the application of taxes, and data analysis tools that can be used by management in companies where IT specialists are rare or do not exist. In the future, SAP looks to deploy a business intelligence package to link to Business One.
Many of the issues will be not in implementing new software, but rather in the staff of middle-market companies being able to adapt to the software through new and more efficient work processes. This will involve new ways of training regardless of the systems provider employed.