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SAP Comes on Strong in HR Software Sales

December 21, 2005
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SAP has sizzled this year when it comes to sales of human resources software in North America.

Revenue from human capital management software for the second quarter of 2005 was up 46 percent compared with the same period of 2004 at SAP America, the U.S. subsidiary of Germany-based SAP. The growth refers to sales of application licenses plus revenue from SAP’s deals with outsourcers that use its HR software.

Mark Lange, vice president of human capital management at SAP America, says the company hasn’t finished compiling results for the third quarter of this year, but he is expecting hot sales growth for 2005 overall.

"Our target is to grow 50 percent this year," he says.

That pace is well ahead of the 17 percent growth in SAP America’s HR applications business in 2004. According to Lange, HR software is now one of the fastest-growing parts of SAP’s business, which includes software for a range of tasks.

In 2004, SAP was the world leader in new-license sales of HCM applications, according to research firm Gartner. Still, many organizations for years used SAP business software for virtually everything except HR, where they’d run PeopleSoft. Oracle finished second with a 19 percent market share, if its results are combined with those of PeopleSoft, which was acquired by Oracle this year. Oracle declined to disclose revenue-growth data for this year.

A trend toward integrated packages of business software is fueling sales of SAP’s HR applications, says Ray Wang, analyst at research firm Forrester. Upgrading a patchwork of programs is harder than refreshing a seamless application suite, Wang says. "It’s expensive to run a lot of different production systems in house," he says.

Albert Pang, analyst at research firm IDC, says another factor in SAP’s performance is its expertise in specific industries. As a result, SAP’s HR software can be tailored to customers in various fields. "They have been able to take market share away not only from Oracle but also some of the smaller HCM vendors," he says.

Lange suggests that his team’s growth comes partly from a calmer market, now that Oracle has acquired PeopleSoft. He also points to a deeper focus on HR software at his firm, including a new dedicated sales group. Lange is part of that focus. He was vice president of global product marketing for human capital management at PeopleSoft until he came to SAP last year.

SAP America’s zippy sales also stem from the growing HR outsourcing trend. SAP has arranged for its HR software to be used by Convergys, ADP and Affiliated Computer Services.

In 2006, Lange’s team is planning for cooler revenue growth of 25 percent to 30 percent. The expected slower pace, he says, owes to the challenge of expanding a larger base.

Ed Frauenheim

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