SAP details plans for software development in China Comments: This message did not originate from

SAP details plans for software development in China Cornelia Wels-Maug

In an interview in today's Financial Times Germany, Klaus Zimmer, head of SAP in Asia, has detailed plans for software development in China. A new laboratory in Shanghai will open at the end of March, with an initial staff of 500. By year-end, it will increase its workforce to 1,000 and expand it further to 1,500 at a later stage. In addition, a new SAP research centre with 100 staff will be opened in Chengdu, West China, this month. Comment: At the beginning of this year, CEO Henning Kagermann announced that SAP will expand its development capacities in China and Eastern Europe. Though SAP currently employs almost 1,000 people in China, the majority work in sales, and the number of developers is still in the lower three-digit range. This move will increase that number significantly. The 1,100 new 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.

For SAP, this is a strategic appraisal of China in terms of software development. The newly-created facilities will focus on the development of solutions targeting small and medium-sized companies, a market which is "booming" in China according to Zimmer. He should know, because 80% of SAP's 1,500 clients in China fall into this bracket. The solutions developed in China will then be incorporated into SAP's global portfolio. In an early trial, special software for automotive suppliers was developed in China and was initially introduced in Germany.

Behind all this is Kagermann's attempt to increase the profit margin from 28.3% in 2005 to anything between 28.8-29.3%. Costs of development in India are increasingly rising due to shortage of staff. The underlying conditions in China seem alluring: a huge domestic market, tax relief, low labour costs and large pool of qualified personal, with one university in Peking about to launch an officially-certified SAP Masters degree as of this summer. But what about the issue of infringed intellectual property rights which, so far, has kept SAP at bay? SAP has its own answer: it will employ its own surveyors to search for those making illegal copies!