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SAP's Manufacturing Strategy in China

Non-European production sites and markets are becoming increasingly important. China occupies a central place alongside Brazil, Russia and India. Many German companies also produce in China and sell their products locally and in other Asian markets.
Matthias Zacher, IDC
May 25, 2013
[shutterstock:313852031, Creativa Images]
This text has been automatically translated from German to English.

From an IT perspective, it is interesting to know how SAP is positioning itself in China. On the one hand, as an IT manufacturer for the chinese market, on the other hand as Company, which uses the resources of the country.

This article will focus on the manufacturing industry. A few facts in advance:

SAP has been represented in China since 1995. The Walldorf-based company's site directory currently lists nine locations here, including the development center (SAP Labs and Co-Innovation Labs) in Shanghai, which is geared toward local and global markets, as well as an SAP Active Global Support (AGS, Shanghai) site.

In addition, there are Chinese branches of the acquisitions Sybase, SuccessFactors and Ariba.

Between 2011 and 2015, SAP plans to invest two billion US dollars in China as part of a multi-year program. SAP currently employs more than 3,500 people in China. A substantial increase can be expected here over the next few years.

When it comes to concrete sales figures, the ERP-provider covered up. Revenues have grown by 30 percent, that much is known, and according to SAP announcements, they should reach 1.2 billion euros in the medium term. USDollar achieve. That is quite realistic.

By comparison, the current annual report shows growth of 23 percent for the AJP (Asia, Pacific, Japan) region in 2012. Of the sales achieved last year of 2.64 billion Euro 789 million in this region is accounted for by Euro on Japan.

The Chinese market remains important for all global Company important, notwithstanding the dip in growth in 2012.

The IT expenditures of the chinese manufacturing industry amounted to 11.2 billion last year. USDollar. They are growing at an average rate of 10.5 percent between 2012 and 2016. IT investments and innovations are becoming more important in the particularly fiercely competitive automotive sectors, High technology and consumer goods industries than in other sectors, which are not as strongly challenged to optimize operational processes and reduce costs.

SAP started its business in China in the second half of the 1990s in the automotive industry. Today, SAP is present in other industries. These include the High technology, consumer goods industry as well as numerous sub-sectors of the manufacturing industry. In terms of customer numbers, the sky is the limit. Jim Hagemann Snabe spoke at the beginning of this year of one million potential Customers for SAP.

The fact is, however, that numerous large companies as well as many small and medium-sized enterprises in China work with SAP solutions. In the classic ERP-segment (without CRM, BI, PLM, MES, and SCM), SAP can hold its own in second place between the two local players UFIDA and Kingdee in terms of market share. In business intelligence and CRM The Walldorf-based company even has the largest market shares in each of these areas.

SAP and the 3rd platform

In the April issue of E-3 Magazine, we presented our view of the IT transformation process currently underway, with its major thematic blocks of Cloud, Big Data/Analytics, Mobility and Social Business, which we refer to as the 3rd platform. In the context considered here, this has the following relevance:

  • Cloud computing:
    We estimate that the adoption rate of Cloud computing in China is only ten percent. But half of the Company from the manufacturing sector in Asia/Pacific (excluding Japan) plans to invest in the cloud within the next three years. The top three reasons for spending are easier and faster adoption of solutions, IT outsourcing, and better connectivity with partners and customers.The lion's share of the ERP-instances does not run in the cloud. This will not change in the medium term. But partial functionalities in the financials, project management or HR segments, as well as CRM SAP is pursuing a hybrid approach here that combines onsite solutions with cloud services. For example, we see clear interest in the chinese Automotive industry on cloud-based intercompany scenarios and supply chains. SAP addresses Cloud computing in this environment with Ariba.
  • Big Data/Analytics:
    SAP's in-memory technology Hana is clearly the core of the Walldorf innovation strategy. SAP continues to push the product onto the market with great intensity. The solution is also already being used in China, for example at Shanghai Dazhong and Nongfu Spring.Customers focus with regard to Hana at the moment on the optimization of existing Business processes and not yet prepared for the transformation of their Business processes. Therefore, in our view, it is essential to better communicate the evolution from the Hana database to the Hana platform, as the majority of customers and partners are just beginning to understand SAP's entry into the database market.And at this stage, it is important for Company important to understand what benefits corresponding investments can generate today and in the future.
  • Mobility:
    In view of the real and potential user numbers in the Asian region, the significance of mobile scenarios hardly requires any further explanation.According to our estimates, the number of mobile workers in the Asia-Pacific region will rise from 602 million people in 2010 to 839 million in 2015, with China and India leading the way. China and India are the undisputed leaders here.Mobile usage scenarios are currently most common in asset management for field services and maintenance, followed by CRMThe latter is currently still not widespread. The geographical dimensions make it difficult to set up a wired modern ICT infrastructure over a large area.Compared with banks or retail, manufacturing is significantly behind in the degree of use of mobile platforms. We expect an adaptation of M2M technology (machine-to-machine) in conjunction with Hana and a mobile platform can be of great benefit to many manufacturers. Support is also coming from elsewhere. The Chinese government is driving forward the so-called Internet of Things with various initiatives.
  • Social Business:
    Chinese CIOs have placed enterprise social networks high on their agenda. The corporate culture in chinese Company relies on a largely centralized approach to information management. In addition, the use of corresponding Tools very good opportunities to improve knowledge management. Communication on internal topics via public social media is usually not permitted.The benefit of modern Tools is still a thing of the future in the manufacturing industry. Here, e-mail and instant messaging continue to dominate. With Jam and Ariba, SAP has a lot of potential to drive business collaboration in conjunction with business networks.


Asia, and China in particular, are important to SAP in two ways: as a development and support location within the SAP world, and as a market for SAP solutions.

SAP addresses the manufacturing market with its entire product breadth. We forecast that the IT investments of the chinese manufacturing companies are increasingly flowing into automation and innovation, implementing essential elements of IT transformation.

Matthias Zacher, IDC

Working as Senior Consultant for IDCCentral Europe GmbH.

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