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SAP Sets Sights on India

SAP sent an unmistakable message to its competition Tuesday when its entire executive board traveled to New Delhi to reaffirm the company's plan to invest $1 billion into the world's second-largest country by 2010.

SAP  said the investment, first announced in 2006, will be spent to create a "strategic hub" in the region from which it hopes to build on its recent success selling software into the booming Indian economy. The company said it more than doubled its total customer base in India to 2,000 accounts this year, an impressive feat considering it took SAP more than nine years to attract the first 1,000 customers.

The unprecedented presence of CEO Henning Kagermann and the rest of SAP's executive board in New Delhi underscores the crucial role it expects India to play in its ambitious quest for 100,000 customers by 2010. With more than 41,000 customers already onboard, analysts say SAP needs to branch out from its traditional, large-enterprise base in Europe and the U.S. to emerging international markets and small- and mid-sized companies (SMBs) -- two markets that India provides -- to make it happen.

"The unprecedented growth that we are seeing from India is one of the best examples of how our 2010 strategy translates into action," Kagermann said in the statement. "Markets like India are at an inflection point when it comes to the adoption of technology by businesses of all shapes and sizes."

SAP isn't the only software vendor infatuated with India. Oracle  established roots there in 1993, employs more than 21,000 workers in-country and claims India accounts for its largest research and development investment outside the U.S. Microsoft   has invested billions over the years to establish its foothold through new hires and R&D projects. And Salesforce.com  continues to aggressively target India with its hosted, on-demand model.

All these vendors continue to battle it out among themselves, particularly in the customer relationship management (CRM)  and enterprise resource planning (ERP)  software markets, occasionally winning a new contract with a large enterprise customer or stealing one away from a competitor.

But to garner and sustain significant growth going forward, vendors are going after the swelling SMB market.

Access Markets International Partners, a New York-based IT research and consulting firm, in August reported that SMBs in India will spend more than $640 million on packaged software in 2007, an increase of more than 25 percent from 2006. Spending on databases, accounting, networking, productivity and system software will account for roughly 90 percent of that $640 million.

"We expect the Indian IT market to maintain this bullish trend because of increased IT awareness among SMBs," analyst Nirupam Chaudhuri wrote in the research report. "Vendors maintain close monitoring of their own -- as well as their competitors' -- channel quotients and set up new alliances to target new geographies and niche verticals."

SAP last month reported the Asia-Pacific region accounted for only 13 percent of the 1.7 billion euros in sales it recorded in the second quarter. Europe and North America checked in at 52 percent and 35 percent, respectively.