Consultancies thriving in expanding SAP ecosystems
As more companies look to SAP for their enterprise resource planning needs, the software giant’s growing ecosystems present a major opportunity for consulting firms. Professional services players including Accenture, Deloitte and EY are subsequently boosting their offerings to help clients utilise SAP for sustainability, supply chain and cloud solutions.
Enterprise resource planning (ERP) is the integrated management of main business processes, often in real time and mediated by software and technology. Firms using ERP systems internally have availed themselves of better reporting tools with real-time information, boosting customer service, improving inventory costs and raising cash flow as a result.
According to a new paper from deals advisory firm Equiteq, SAP is the undisputed leader of the ERP market. Accounting for 29% of the global ERP market, SAP’s closest rival Oracle comparatively musters a 19% share. This means that not only do some 430,000 companies in 180 countries directly use SAP solutions, but 77% of the world’s transaction revenues touch an SAP system at some point.
With SAP’s services covering such a wide portion of business activity, it has followed that its applications have steadily expanded beyond day-to-day business activities such as accounting, to take in aspects of procurement, project management, risk management and compliance, and supply chain operations.
According to Equiteq, SAP now has a wide range of clients with evolving product needs. While initially they might look for its services to support cloud adoption, or the digital transformation of core services, many more are now applying SAP to their supply chain and business networks, as well as looking to use it to build a broader industry cloud, or to boost sustainability drives.
With an estimated 45% of SAP cloud customers having now adopted multiple clouds, there is mounting demand for professional services firms, whose expertise can help clients get the most from their diverse applications of SAP solutions. Responding to this demand, SAP’s partner ecosystem – a chain of partners, software vendors and others who can contribute to innovation and effectiveness of SAP platform – has exploded, now counting 22,000 partners worldwide.
Among this thriving network are many of the world’s leading consulting firms. However, as SAP continues to expand its partner system – with a focus on combining consulting service and technology products to drive customer success and adoption – they are having to constantly grow their offerings, to stay ahead of the curve.
At present, Equiteq finds that Accenture and Deloitte have by far the strongest market presence – having developed both well-honed offerings, and long-term strategies to succeed in the SAP ecosystem. Traditional technology players IBM, TCS, HCL Technologies, Capgemini and Infosys are still strong performers – but they do not seem to boast the end-to-end services of the market leaders, who often use M&A activity to build a more holistic product. This is further underlined by Equiteq finding that another generalist – Big Four firm EY – is already on level-footing with the traditional IT experts. This trend is also reflected in the broader M&A statistics of the SAP partner-market.
While 2022 saw a dramatic dip in deal activity for the general market, SAP-related deals remained steady. A total of 56 deals occurred in 2022 – only down two from the record year before – and this means the market is still on a five-year CAGR of 21%. Since 2018, the majority of deal activity in the SAP ecosystem has also been fuelled by either emerging IT services firms – 51 of 211 deals in total – or sponsor backed bolt-ons, at 61 deals. With the growing opportunities for SAP partners, this has led to median EBITDA multiples of 13.3x over that period, helping preserve activity last year, and suggesting there will be plenty more to come in the years ahead.
