SAP CEO hits back at critics, defends Concur buyout

Bill McDermott says $8.3bn acquisition will solve one of the world's 'biggest problems'

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SAP CEO hits back at critics, defends Concur buyout McDermott: We didn't pay too much for Concur
By  Tom Paye Published  February 3, 2015

SAP CEO Bill McDermott last week hit back at comments made by Oracle executives denouncing the German vendor's acquisition of expense-statement company Concur, which was announced last year.

Speaking exclusively to ITP.net, McDermott defended the acquisition by saying that it would help SAP solve one of the corporate world's biggest headaches - managing a convoluted expense management process.

"If you can find me a single person, especially a millennial generation person, who is happy with their expense management process in any company in the world, I owe you the best dinner you could find at the best restaurant," he said.

"Think about 6% to 10% of a company's costs being tied up in travel. It's strategic, it's a lot of money. What if you could have all of this on one common platform? And what if the travel experience could not only be simple, but it could actually be done through voice character recognition? What if even written receipts could be photographed on the iPhone and uploaded into the ERP system, including the hand-written notes from the cab driver?"

RELATED: Oracle CEO slams SAP over acquisitions, cloud

McDermott said that SAP's plan for Concur would be to keep the company's management and development teams, and integrate them into SAP's existing solution sets. This way, he said, SAP's customers could streamline their expense management by having an easy-to-use solution that integrates directly into their existing ERP.

McDermott also defended the amount of money that SAP spent on acquiring Concur - $8.3bn - saying that it would ultimately benefit the company's shareholders.

"We didn't pay too much for it. You have to remember that this is the second-largest SaaS company in the world, as measured by revenue and free cash flow. Number two, it solves one of the world's biggest problems," he said.

"Even though they're very global - they cover 180 countries with their solution - 85% of their revenue came from the United States. They had a compound annual growth rate that's been steady now for 20 years at around 30%. If we can exceed their growth rate by a very small percentage, this ends up being extremely positive on every level, not just the revenue but also the profit line for SAP shareholders."

And while he was careful not mention Oracle, McDermott hit out at his competitors' acquisition strategies, saying that other firms simply look for the lowest-cost applications, gut the companies, and then sell the solutions as their own. He claimed that SAP, on the other hand, had a different way of doing things.

"We find the most prestigious asset in the market because that's what the customer expects from SAP, we keep their management and development teams, and we fold the SAP assets into the line of business with these divisions," he said.

McDermott may be receiving flack from Oracle's senior management about the acquisition, but according to at least one market analyst, the Concur acquisition seems largely positive, despite the high price that SAP paid for the company.

"In terms of the price, yes, it was expensive, but fundamentally I think it is a good asset for SAP. When you look at the expense management area, you could call it a niche area, but it is there and it's widely used and it's quite important for a lot of organisations," Chris Pang, research director at Gartner, told ITP.net.

"Both Oracle and SAP had products in place before which they'd written themselves. But in terms of the functionality, they didn't stack up compared to some of the other vendors like Concur. So basically a lot of their customers were going to Concur anyway, so in terms of why it made sense to acquire them, that's one of the reasons."

SAP last week released its full-year financial results for 2014. The company achieved a 45% jump in cloud subscriptions, though core software products still accounted for the majority of revenue.

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