Even in the poorest economic climate, one can always find companies whose positions have actually improved due to conditions. One current example may be suppliers of supply-chain software, whose sales pitch is now finding a more receptive audience due to the persuasive powers of the poor economy. Just ask SAP.

The software giant, headquartered in Walldorf, Germany, recorded sales of about $4.477 billion through the first nine months of 2001, an increase of 23 percent over 2000. The company's operating income, before charges for stock-based compensation and acquisition-related charges, was up 49 percent to about $768 million. When making its third-quarter results public, SAP said it expected full-year revenues to grow about 15 percent.

Revenues from the company's supply-chain-management software package, mySAP SCM, totaled around $314 million through the first nine months, representing 23 percent of total software license sales.

It's a sad fact that the economy and the events of September 11 have proven beneficial to SAP, according to Bob Betts, SAP's senior executive for global supply-chain development. "It's actually been a big help for us," he says. "It's taken a lot of the theory out of this. What companies really need to look at are sustainable measurable results."

Such an assertion might have fallen on deaf ears not so long ago. "If you'd asked us 18 months ago how it was to sell the concept of supply-chain management, it would have been very difficult," Betts says. "It's amazing how much more acceptable this has become. It's much more down-to-earth now. People need on-time shipments. They can see a bottom-line result and a top-line potential. These conversations [about SCM sales] are very, very tactical right now."

SAP is the world's third-largest software company, with products in use at more than 15,000 companies in more than 120 countries. Founded in 1972 by five former IBM systems engineers, SAP went public in 1998 and launched its supply-chain-management software in 1997.

While SAP's client list is encyclopedic, including such giants as Colgate Palmolive, Lockheed Martin, Hewlett-Packard, and Eastman Chemical in the US, Nestle in Switzerland, and Unilever in Holland, there is room to grow, Betts says. Up to 20 percent of clients sign letters of agreement to add more applications, he says. While SAP relies on its existing client base, 2001 has brought a pleasant surprise. New customers increased 45 percent in the second quarter.

"I was thrilled," Betts says. Even better, he says, these new clients, referred by current users, are now approaching SAP, not being chased by salesmen. "It's not just a CEO thing," he adds. "Senior VPs who run these business units are also interested."

With supply-chain software, once critical mass is reached, customers help with the job of selling. "The major OEMs are trying to bring in their supplier base, so they're probably bringing them into the SAP fold," says Bob Ferrari, research director for AMR Research. "SAP has always been making great strides, but now that they're closing in on [major competitor] i2, they're leveraging their installed base. Now that APO is up to release three, the references are growing. They've done a lot of good work on functionality. Their numbers have been very, very healthy."

Betts says a conceptual shift has helped SAP to clarify its business goals and, as a result, increase its sales. "If you ask someone, 'What do we sell?' the answer would be 'Software,' but to our customers the real answer is 'potential results,'" he says. "By closing that gap, we've added several hundred clients worldwide and we've got another 1200 new ones interested."

SAP offers 84 different "master agents," discrete small pieces of software that allow them to interface and create interfaces for customers. Betts likes to compare them—to customers who don't mind the analogy—to Legos, the plastic toy bricks with which you can build a wide range of designs. "They're modular functions that are very, very simple and can be put together," he says.

Ferrari uses another analogy, that of a high-performance sports car, one that is thoughtfully designed but which demands a top mechanic and might spend some time in the shop. "It's a very, very sophisticated product, which is also one of its weaknesses," he says. "One of the issues with APO is that it could be too difficult to implement in 84 agents. It gives you all of these options, but you have to figure out how to use it."

Clients buy SAP SCM software to get a handle on one of five elements, Betts says: working capital, inventory reduction, compression of supply and demand, loss and waste factors (for such industries as metal stamping), and transportation, especially crucial for manufacturers of papers, plastics, and metals.

The market for SAP SCM offers enormous room for growth, as only 10 percent of customers are fully networked, Betts adds. His goal is to create "multiple tiers of customers with multiple needs, all the way down to the warehouse with 15 guys working there."