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SAP Business Trends: SAP ServiceEconomy: What's next?

Posted by Nicolas Schobinger Oct 26, 2014

In previous posts, I have explained the impact of our SAP Service Economy. In Consulting & System

Integration it is $34 billion dollars in value and 365 thousand direct jobs at service providers worldwide.

Those figures were only for 2013. So, where is this Economy heading? As I wrote earlier:

Assuredly it’s going to change. With tech disruption like Cloud, Internet of Things, and

Big Data progressing on the software side, we are starting to also see changes in the

Service Economy.

Let me now share where I believe the SAP Service Economy could be by 2017. With the current trajectory

moving upwards towards $70-$75 billion for the total Services Economy, we're looking at an annual growth rate

of about 4 to 6%.

When we focus in on the Consulting & System Integration segment, it's even more startling. It's expected to

grow by more than $10 billion dollars to reach $45 billion dollars by 2017 which will provide at least half a

million direct jobs at service providers. This adds 135 thousands jobs to the overall Services Economy by

2017.

SAP Business Trends: SAP Service Economy: What's next?

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Categories with accelerated growth are Cloud-Services and Services related to our HANA-platform. These

segments will grow in excess of 35% annually (!). Note that these segments ask for distinctively different skills

and methodologies than the traditional business.

But you may ask yourself why is the SAP Economy growing at a different - lower - pace than the SAP software

business? Why is less of every software dollar directly translating into the SAP Service Economy?

Let me offer 4 reasons:

1/ SAP Strategy: SAP used to be an on-premise Applications company. The portfolio now includes networked

commerce, platform, and public and private cloud too. All of them drive different - typically lower - demand for

Services than the previous traditional applications business.

2/ Service Engineering: The industry is hard at work to further reduce the service intensity. SAP Services, for

example, is providing rapid deployment solutions or industrialized services with that same goal top of mind.

3/ Lower Blended Rates: The Services industry has deployed massive efforts to shift workloads to lower-cost

countries like India. The amount of work is identical, but is delivered at a lower price-point which leads to less

revenue for the same amount of work.

4/ More DIY by Customers: Customer knowledge of how to deploy SAP software has grown. They are doing

more of the work themselves without relying on external service providers. This is valid notably in the classic

application business.

SAP Business Trends: SAP Service Economy: What's next?

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But as illustrated, the SAP Economy will continue to grow. The bulk of our economy will still be tied to the

classic application and analytics business - we do not expect this segment to shrink. But, the true growth

catalyst will be Cloud and HANA. If you are in the SAP Service Economy and want to stay relevant - get into

these growth segments now.• If you are an Individual, train/certify yourself now.• If you are a Service Provider about to build capacity, post jobs now.

I'm expecting a sudden and strong demand surge in these skills. Soon.

Note: The SAP Service Economy is an open one; everybody who wants to do business is free to do so.

Maintenance, as it is captive to SAP, is not accounted for in this definition. All numbers are estimates - they are

not official SAP data.

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