Midmarket Companies See Technology as Key Vehicle for Growth, Successful Competition with Larger Rivals

May 30, 2006

Economist Intelligence Unit Research Confirms Importance of Information Technology for SME Growth According to More than 1,400 Executives of Midsize Companies Across Europe

PARIS - Executives from midsize companies across Europe see technology as critical to a company’s ability to grow and compete successfully with larger multinational corporations. This is the finding of a major Economist Intelligence Unit (EIU) research program, sponsored by SAP AG (NYSE: SAP), based on in-depth interviews with more than 1,400 business and public sector executives of midsize companies (with an annual turnover of $20 to $500 million) across Europe. The research was released at SAPPHIRE® ’06, SAP’s international customer conference, being held in Paris, France, May 30 – June 1.

Midmarket firms have been the powerhouses behind many of Europe’s national economies but the rising dominance of big players has been threatening to push them out. One of the EIU survey’s key findings is the belief from midmarket executives that technology has an important role to play in ensuring an effective growth strategy and maintaining strong customer and partner relationships. More than two-thirds, 65 percent of respondents, see technology as critical to a company’s ability to grow, and 70 percent believe that technology strategy is closely integrated with business strategy. This is also reflected by the seniority of executives that are involved with key decisions: 78 percent of owners or board members and 83 percent of CEOs are involved with the key technology decisions.

“We deployed mySAP™ All-in-One in 1999 and the software has always been supporting our business needs,” says Robert Jan van Duijne, marketing manager, Majestic Product B.V. “The solution played and will play a very important role in our international growth strategy and provided a good overview over all our company-wide processes.”

Midsize firms are focused on growth and European firms are particularly aware that they need to tap into new markets to expand. Many executives expressed concerns about competition from large companies (43 percent of respondents), and 18 percent are concerned about large firms not yet in their market. Executives from the UK have expressed the greatest concern, with 54 percent fearing competition from existing larger companies.

The Advantages of Midmarket Firms
However, European firms are still confident that they can grow in an increasingly challenging marketplace. Despite the pressures from powerful customers and competitors, midmarket firms believe their size offers advantages. They believe in organic and optimal growth and do not consider mergers and acquisitions as attractive methods of growth. The survey found that smaller firms saw their size as enabling them to have better and deeper customer and partner relationships and to be more flexible and respond more quickly to customer needs. Approximately one-third of executives surveyed (more than 33 percent) are concerned that this competitive advantage will be eroded as their organizations expand.

“The research shows that while there are clearly a number of pressures that midmarket firms are facing—including pricing, skills and competition—there is still plenty of room to achieve growth,” said Denis McCauley, director of Global Technology Research, the Economist Intelligence Unit. “There is also a desire for governments to pay more attention to this area to help encourage growth. That being said, midmarket firms are focusing on achieving growth that works for them and realize that if they think smart and apply information technology strategically, they will be around for years to come.”

Executives Express Need for Upgraded IT Skills and Systems
Not all executives surveyed believe that their current IT systems are adequate for future or current business needs, and several respondents reported concerns about the current level of their workforce’s IT skills. Twenty-five percent believe that their existing systems do not conform with existing processing requirements set by customers or suppliers and 31 percent think that their current systems do not have the scalability to sustain growth.

The survey also uncovered executives’ beliefs that European employees lack the skills to get the most out of technology. Twenty-four percent think that technical skills could be a serious impediment to IT investment, 18 percent are concerned about ineffective management of IT and 20 percent fear a lack of IT understanding by senior management.

“Looking at the EIU survey, there is one clear message: IT does matter!” said Ernie Gunst, president, EMEA NEWS region, SAP. “SAP and its partners bring more than 30 years experience working with companies of all sizes to create affordable solutions for midmarket enterprises, with pre-packaged industry best practices that can be quickly implemented at a lower cost.”

Thinking big: Midsize companies and the challenges of growth is available free of charge from the Economist Intelligence Unit’s Executive Briefing website (http://www.eiu.com/ThinkingBig).

About the Economist Intelligence Unit
The Economist Intelligence Unit is the business information arm of The Economist Group, publisher of The Economist. Through our global network of over 500 analysts, we continuously assess and forecast political, economic and business conditions in 195 countries. As the world’s leading provider of country intelligence, we help executives make better business decisions by providing timely, reliable and impartial analysis on worldwide market trends and business strategies.

About SAP
SAP is the world’s leading provider of business software*. Today, more than 33,200 customers in more than 120 countries run SAP® applications—from distinct solutions addressing the needs of small and midsize enterprises to suite offerings for global organizations. Powered by the SAP NetWeaver® platform to drive innovation and enable business change, SAP software helps enterprises of all sizes around the world improve customer relationships, enhance partner collaboration and create efficiencies across their supply chains and business operations. SAP solution portfolios support the unique business processes of more than 25 industries, including high tech, retail, financial services, healthcare and the public sector. With subsidiaries in more than 50 countries, the company is listed on several exchanges, including the Frankfurt stock exchange and NYSE under the symbol “SAP.” (Additional information at http://www.sap.com/)

(*) SAP defines business software as comprising enterprise resource planning and related applications such as supply chain management, customer relationship management, product life-cycle management and supplier relationship management.

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