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German software maker SAP and China's largest software exporter Neusoft announced yesterday that they will sign a cooperation agreement to form a strategic partnership.

 

The move aims to better tap into China's large, small and medium-sized business (SMB) enterprise resource planning (ERP) software market.

 

Under the agreement, SAP will invest 10 million euros (US$12.8 million) to buy a nearly 3-percent stake in outsourcer Neusoft, the Financial Times Deutschland said yesterday, quoting company sources. Both parties declined to disclose the amount invested.

 

"This is a milestone in SAP's development in China," said Klaus Zimmer, president of SAP Greater China.

 

"The cooperation with SAP marks the fact that Neusoft will begin to beef up its operations in China's ERP software market," said Liu Jiren, chairman of Neusoft. "The tie-up will help make better use of SMBs' investment in IT applications."

 

The agreement will help integrate SAP's technology and Neusoft's national network across China, said Henning Kagermann, president and CEO of SAP.

 

Neusoft has a large sales and marketing network in more than 40 cities in China, and over 8,000 corporate clients in major industries in China, according to Wang Yongfeng, president of Neusoft.

 

The two companies will work on solutions for SMBs in specific industries, in which Neusoft has extensive expertise.

 

Liu said: "SMBs in China are emerging as the most active ERP customers."

 

The information technology (IT) application market size for SMBs in China reached 122.575 billion yuan (US$15.3 billion) in 2005, increasing 16.7 percent on the previous year, according to market research house CCID Consulting.

 

In 2006, China had more than 11 million registered SMBs, according to the State Administration of Industry and Commerce of China.

 

Liu said Chinese companies now demand international ERP software, and the selection of the best ERP solution vendor to benefit existing customers makes the co-operation possible.

 

He said that in 2000 SAP and Neusoft formed a partnership, and during this process Neusoft came to know more about SAP.

 

Kagermann said: "Their cooperation will ensure that Chinese companies, wherever they are in China, can receive better IT training and better make use of global business opportunities."

 

More and more business software companies have sensed the IT application market opportunities with SMBs in China, and partnership with local independent vendors has become a common way to exploit the market.

 

In March, Oracle China Co Ltd, a business software maker, announced it would promote its software products and solutions among SMBs in 26 second-tier Chinese cities by the end of 2006. It formed partnerships with local independent software vendors with a strong local or industry presence.

 

Liu said Neusoft and SAP will set up a special commission to coordinate resources, while SAP will not interfere with the management at Neusoft.

 

Neosoft will set up a special SAP team, and increase threefold the number of people it has who are expert in SAP software.

 

(China Daily May 23, 2006)