SAP believes that India is getting too expensive and that China is the next frontier of opportunity. To that end, the enterprise applications giant has committed to creating a new laboratory in Shanghai with 500 staff to be joined by another 1,000. SAP has also set up a laboratory in Chengdu, although with only 100 employees.
According to estimates from analyst Cornelia Wels-Maug of Ovum, SAP s new Chinese jobs represent 31% of the 3,500 positions SAP wants to create globally in 2006. China will replace Israel as SAP s fourth-largest research hub, after Germany, India and the US. Given that SAP has 1,500 customers in China, the purpose of the new hires will be to provide care and feeding for the local market as well as working on applications and technology destined for use in North America and Europe. In an early trial, special software for automotive suppliers was developed in China and was initially introduced in Germany, relates Wels-Maug. It s no secret that China s gigantic labor market and low salaries were the major attractors for SAP. Paying more Chinese as opposed to Indian or, for that matter, German or U.S.- salaries is part of SAP CEO Kagermann s attempt to increase the profit margin from 28.3% in 2005 to anything between 28.8-29.3%, according to Wels-Maug. Klaus Zimmer, who heads up SAP China, offered the following description of the company s Chinese strategy back in 2004. This, then, is the blueprint for action that SAP is following in China: SAP will concentrate on eight industries and achieve higher growth in them. These industries include oil and gas, banking, or utilities, for example. In addition, we will be focusing on small and midsize businesses. In the medium term, this market will have the highest growth rates. It is a great help to us that SAP Labs China in Shanghai is concentrating on the development of our global SMB solution. Zimmer is one of those rare business executives with an appreciation of history, noting in the same interview that In the long term, China will return to the economic position of power it last had in 1820. Then, China had a 30 percent share of the gross global product. As for intellectual property IP- concerns that have kept SAP from investing more heavily in China, the company evidently feels that the reward is worth the risk. SAP has its own answer, concludes Wels-Maug, it will employ its own surveyors to search for those making illegal copies. Source: line56.coma>