European technology company SAP plans to continue consolidating its presence in the wider Middle East and expects the regional markets to yield $1bn in revenues by 2020.
I would not be surprised if by 2020 the market unit in the Middle East reach $1bn in aggregate revenues, Luka Mucic, chief financial officer at SAP told MEED, adding that it will be a good revenue generation aim to have for these markets. In the last seven years alone, we have increased our revenues in the region by five times and we see no signs of a slowdown.
The company, which had put formal growth plans for the region in place back in 2012 and made an investment commitment of $450m, was rewarded as Middle East has outperformed the firms other fast growing regions. Not in terms of the size but definitely in terms of growth. The performance was very consistent, he added.
I think there is still a very long runway in these markets and we are only starting to penetrate, Mucic said.
SAP, which supplies software for oil and gas and industrial sectors, supply chains, banks and financial services firms, and public sector clients, last week made another medium-term commitment of investing $200m in the region.
Mucic, who took office in July 2014, said there should be no reason for SAP to slow down the pace of investments even going beyond 2020. We believe in the prospects of this region turning into more of an innovation power house, he said, adding that there are opportunities that are starting to unfold and that should propel us to much stronger growth prospects even beyond 2020.
Even in the last two years, when the regions hydrocarbon dependent economies slowed down on the back of slumping oil prices, the opportunities of growth were still available despite challenging operating environment. The public and the private sector entities in the region, he said, continued to look for technological capabilities to transform and become more efficient.
SAP, which formally inaugurated its regional headquarters in Dubai in mid-March, is setting up a new Cloud Data Centre in the emirate, which will go live in the second half of this year. It plans to open up a similar facility in Saudi Arabia this year.
We are putting a co-innovation lab into this [UAE] facility, which means we now also have the opportunity to do extra development work, he said.
Within the region, the software giant is servicing 17 countries and plans to further strengthen its operations in the UAE, Qatar, Saudi Arabia, Oman and Kuwait.
Egypt is also an area of focus for SAP. We are still looking forward to seeing continued stabilisation in markets like Egypt where there was a lot of turmoil around a couple of years ago, he said. If that country is fully stabilised, as it definitely signals it will, I think it could become very interesting.
Further afield, SAP sees potential in Iran, once the market opens up completely and export restrictions are lifted entirely, Mucic said.
Iran is the second biggest economy in the wider Middle East region after Saudi Arabia and has a population of around 80 million people. Of course [Iran] has a dire need for modernisation of the IT architecture. At that point in time when that market opens up entirely, it will be important, he said, adding that there are still restriction for export of certain technological goods to Iran, especially, on the US side and it is hard to predict when they will be lifted.
Technology and software firms are focused on the Middle Eastern markets to tap growth potential as both public and private sector entities look to modernise IT infrastructure and enhance efficiencies to cut costs and make operations more transparent.
SAP, which has more than 700 personnel on the ground in the region, boasts a clients list which includes oil and gas and petrochemical giants such as Saudi Aramco and Saudi Basic Industries Corporation. Within the utilities sector, the firm works with Dubai Water and Electricity Authority (Dewa) and has similar arrangements with utility companies in Saudi Arabia and Qatar.
Retail, manufacturing financial services and transport are among the other sector where SAP is providing tailor-made solutions, according to Mucic, who added that SAP is increasingly engaging with public sector clients in the region.
The company has already won a contract for Expo 2020, where it will provide visitors and crowd management solutions and software for internal operations, including handling and deployment of about 30,000 volunteers on the site.
We are not only managing their internal processes but also the whole visitors experience, he said of the SAPs engagement with Expo, which is expected to attract 25 million visitors.