SAP has branded itself globally as the powerhouse solutions provider behind powerhouse companies. But aware of the small- and midsize-enterprise (SME) opportunity that’s growing with the popularity of flexible cloud-based solutions, SAP hosted an SME Summit at its New York office Nov. 29 to get out a new message: We do small, too.
The summit coincided with the release of an SAP survey on small businesses in New York City and followed an SAP-sponsored global SME study by the Economist Intelligence Unit, which likewise found the entrepreneurs behind SMEs to be optimistic, despite suboptimal economic conditions.
“There’s definitely room for optimism in the way the small-business community has grown over the last few years,” said Jorge Silva-Puras, an administrator in the U.S. Small Business Administration, who was part of a six-person panel that kicked-off the event. “Before the recession, they were growing very fast, and even now they contribute two out of every three new jobs.”
In New York City, small businesses make up 99 percent of all businesses. Loosely defined, SMEs are those with revenue of $500 million or less, though more than 90 percent of those in the SAP study had revenue below $50 million. The SAP study found that 94 percent point to growth as their top priority. Secondary priorities include attracting and retaining talent (65 percent), developing new products and services (59 percent), and accessing funds and capital (59 percent).
Companies in the survey said their primary obstacles are growing competition in key markets, the rising costs of commodities and other inputs, the decline in customer confidence and taxes. Immigration was also described as a frustration.
“We have always invested in Manhattan,” said panelist Sunil Hirani, CEO of trueEX Group, the latest of a handful of financial companies he has founded. “The talent here is absolutely incredible [and it’s amazing] being able to access workers. … A lot of people came here to study, and we educate them, but we don’t make it easy for them to stay here.”
SAP co-CEO Bill McDermott emphasized that even SAP had once been a small business. “Forty years ago, it was five guys. We now have 65,000 employees, but more than 300,000 people are in the ecosystem of SAP—all those jobs were built on the backbone of an idea that five guys had,” he said. “So if you innovate and stay true to your customer and execute well … you can run a pretty interesting company.”
When asked how the market for SMEs is today, McDermott said he was optimistic and quoted panelist Linda Rottenberg—co-founder and CEO of Endeavor Global, an organization that cherry-picks and backs people its believes have the potential to be “high-impact entrepreneurs”—who earlier that morning had told him, “Entrepreneurs do best when things are at their worst.”
In discussing SMEs, SAP’s other agenda for the day was promoting its cloud-based HANA platform; SAP on Nov. 15 announced a number of additional solutions to it. HANA is helping SAP take advantage of the new business paradigm, which McDermott described as an “inverted pyramid” in which the power is in the hands of the consumer, the little guys, who are nimble and mobile and demand systems that “perform at the speed of thought.”
The cloud also makes it easy to upgrade and grow, which related to a repeated theme of the event: why some small businesses succeed and others fail. According to Silva-Puras, 50 percent fail within their first few years.
One reason for their failure, the group agreed, was that small businesses don’t plan ahead to become big business and they can’t scale up. “They get stuck,” said Endeavor’s Rottenberg.
In a day-long conversation about what’s now possible for small businesses, given the flexibility that the cloud provides, the potential in networking (and, ahem, SAP’s Ariba network) and the SAP partner companies that are creating specialized solutions for even very small and niche businesses—the event closed with a presentation of Hilliard’s Beer, a seven-employee-strong Seattle craft brewery—arguably the most compelling takeaway of the day had nothing to do with technology or capital or mobility.
Rottenberg said that in a study of the Endeavor-chosen entrepreneurs, who have generated annual revenue of $5 billion, the No. 1 determinant of their success was found to be whether they had a mentor.