Publish in Special Reports - Wednesday, September 2, 2020
Cristina Palmaka, President SAP Latin America & Caribbean. (Photo: SAP)
Ricardo Villate, IDC and R “Ray” Wang, Constellation Research. (Latinvex collage)
Brazilian native Palmaka heads strong software and cloud business in region.
BY JOACHIM BAMRUD
Germany-based SAP, the world’s largest business software company, has a new president for Latin America – Brazilian native Cristina Palmaka.
Palmaka, the first female president of the company in Latin America, previously headed up SAP’s business in Brazil for nearly six years. Her experience also includes working with Microsoft, HP and Philips in Brazil.
She succeeds Argentine native Claudio Muruzabal who had been president for five years.
“The first big job is to take over Latin America and talk with our customers,” she says. “Also [continue the] amazing work Claudio built last 5 years. So my first priority in a way is continuity, but with additional attention to our next chapter.”
Muruzabal is praised for his strong focus on Cloud and customer attention.
“During his tenure, Claudio stabilized growth for SAP Latin America and ushered an unprecedented move to Cloud in many fronts: not only of the native Cloud applications like SucessFactors or Ariba, but also of the core ERP,” says Ricardo Villate, Group Vice President for Latin America for technology researcher IDC. “Today, many Latin American customers of SAP consume their ERP through the cloud in a diversity of hybrid models.”
R “Ray” Wang, the Chairman and Principal Analyst of Silicon Valley-based Constellation Research, singles out Muruzabal’s customer focus.
“Claudio brought finesse and a global views to the LatAm market,” he says. “His passion to help and create a customer focused approach as well as active participation in the community helped him win trust in the region.”
Palmaka faces several key challenges as the new head of SAP in Latin America.
“The Latin America IT Industry is challenged to accelerate the rhythm of digital transformation,” Villate says. “End-users are accelerating their journey to a digital economy. During the current pandemic, IDC has seen an acceleration of demand for technology in several fronts in Latin America, which impact in the majority of SAPs business model in the region: more demand for cloud-based infrastructure and platforms, more automation of the analytics, more machine learning and AI in all the applications, an increasing need for supply-chain interoperability across industry ecosystems, and a diversity of disruptive solutions being integrated to the systems of record. SAP Latin America will need to focus on a strategy that allows them to address this acceleration in the context of a contrasting economic recession.”
In particular, there are three areas of tactical focus for SAP in IDC Latin America's opinion, Villate points out. They are:
1. Establish the necessary conditions that will accelerate the migration of old ERP versions to S/4HANA. Last week SAP Corporate announced the extension of end-of life support of legacy SAP implementations up to 2030, which is a sign that end-users are not migrating as quickly.
2. Refine the current partner strategy to address the ongoing transformation of the partner ecosystem in a region like Latin America, where the majority of sales come from a partner ecosystem that is increasingly generating value creation from proprietary IP versus license resale or implementation services.
3. Continue to position SAP as a pillar of innovation and digital transformation. As with many large established ISV's, SAP faces the duality of serving a large based of traditional customers and needing to be the solution of choice to a new generation of digital native companies that are disrupting every conceivable business model.
Meanwhile, issues like price and value will also be key, Wang says.
“Clients are seeking to understand the value SAP brings going forward,” he says. “They are trying to reduce the cost of ownership and reduce dependency with SAP where possible at a time when SAP is trying to get customers to pay for an upgrade to a new version of their software that more than likely will cost more and have much less functionality. That tension and threats of indirect access and audits does not sit well with customers.”
Latin America is expected to see a 9.4 percent economic decline this year, with Brazil and Mexico’s economies falling 9.1 and 10.5 percent, respectively, according to the IMF.
“IDC has recently projected a 4.2% decline in the Latin America information technology industry in 2020, purely associated to the covid-19 economic deceleration,” Villate says. “Some of SAP's traditionally strong sectors like government, and manufacturing are being hit particularly hard. Other depressed sectors are energy and, of course, hospitality.”
The COVID-19 pandemic hit the region hard, with Brazil and Mexico having the second- and third-largest number of cases after the US. Meanwhile, Brazil, Argentina, Chile, Colombia and Peru all imposed strict lockdowns, which curtailed economic activity significantly.
“The impact was giant,” Palmaka says of how SAP Latin America was impacted. “The whole region was affected. We helped our customers survive the tough times…We [also] had customers that are rethinking their business. In some countries more affected because of extensive lockdown. Some countries still closed as we speak, as others coming from pandemic faster.”
SAP reacted to the pandemic and lockdowns by providing as much online support as possible and looking at various modules that could help its clients, Palmaka says.
Meanwhile, it also had to look after its own employees in the region.
“Last and not least, [we employ] more than 5000 people, in region,” she says. “Our focus is too protect our teams, to guarantee that they are safe, that’s our first priority. Independent of where they were located.”
IDC’s Villate says SAP was quick to react to COVID-19.
“IDC perceives that SAP has been quick to react to the changing needs and challenges of their customers and partners, addressing financial deceleration, a sharp correction from strategic to tactical investment decisions, a very high impact of currency fluctuations in all sorts of transactions, and the myriad of challenges associated to the largest quickest move to work from home we will ever see,” he says.
As Palmaka takes over SAP Latin America she has one advantage – having managed the software company’ largest market in the region.
“Brazil is SAP's largest subsidiary in the region [and] there are advantages and challenges for any organization that moves their Brazil head to become a regional head,” Villate says. “The main advantage is the similarity on the scale and complexity of the operation. The main challenge is to balance the intensity required to continue to manage the Brazil business keeping a correct perspective of strategic differences in the rest of the countries.”
Meanwhile, Palmaka’s appointment cements the strong position of female executives at SAP. In Latin America, two of the regional managing directors are now female. They include Adriana Aroulho, Palmaka’s successor in Brazil, and Claudia Boeri, the head of SAP’s South Market Unit (Argentina, Peru, Chile, Uruguay)..
The other two MDs are Guillermo Brinkmann, head of SAP’s North Market Unit (Colombia, Venezuela, Ecuador, Central America and Caribbean) and Desmond Mullarkey, head of the Mexico Market Unit.
Palmaka says she plans to continue SAP’s focus on diversity.
"The diversity and inclusion is part of SAP DNA,” she says. “Being a German company, there is diversity across all aspects, ethnic, inclusion, LGBT. For sure [we will look at] how to accelerate [and] have a more diverse community in Latin America. We already have a strong participation. So we have reached our ambition of 29% of 30% of female participation.”
SAP saw double digit growth in cloud business and SAP Customer Experience services in Latin America in the second quarter, with Mexico standing out in cloud business.
“We closed pretty well globally and also across the region in the first half,” Palmaka says.
In Brazil, telecom carrier Vivo (a unit of Spain-based Telefonica) and Votorantim Cimentos (the largest cement company in the country and one of the largest worldwide) expanded its SAP Customer Experience services.
And Argentina-based, Latin American online retailer MercadoLibre is also a SAP client, using its ERP solution for large enterprises, S/4HANA.
“The sectors that are rebounding faster are finance, health, and retail (particularly the online portion), together with education,” Villate says. “It is in these sectors that IDC is seeing the strongest opportunities around the so-called digital acceleration of 2020.”
In terms of markets, Palmaka says no specific country will be driving growth in Latin America the next few months.
“We are seeing a lot of good stories [and] a lot of opportunities across the region,” she says.
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