SAP ditches local partners in Middle East

24 November 2007

SAP, the world's largest business software company, has ruled out signing any more distribution deals with local partners in the region and will instead distribute its software itself.

The company has made the decision just two months after buying SAP Arabia out of its 13-year-old exclusive contract to distribute SAP's software in the Middle East (MEED 29:9:07).

SAP bought SAP Arabia's distribution agreement, its right to use the SAP name and its customer list, which includes many of the region's biggest companies, including Saudi Aramco and Saudi Basic Industries Corporation (Sabic).

Maher Chebbo, vice-president for utilities at SAP, says the direct distribution arrangement is already in place.

“In some countries, it does not matter that we do not have a legal entity with a local partner in place,” says Chebbo. “In Saudi Arabia it does matter, and we have to sell software licences directly. We will not go for joint ventures in the region.”

SAP bought out SAP Arabia for an undisclosed sum. At the time of the deal, SAP said the move was necessary in an increasingly competitive market. SAP is the Middle East's largest supplier of enterprise resource planning software, which is used by companies to run HR, finance and other in-house functions. However, its rival Oracle has been growing more quickly.

According to US consultancy Gartner, SAP's revenues grew by 3.3 per cent in 2006, compared with Oracle's growth of 64 per cent.

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