INTERVIEW-SAP sees new round of global growth, led by BRIC

Fri Sep 3, 2010 5:42am EDT

* SAP sees new round of global IT spending

* Says China could become top global market in 5-10 years

By Lucy Hornby and Huang Yuntao

BEIJING, Sept 3 (Reuters) - European software giant SAP AG (SAPG.DE) said on Friday that a new round of growth has begun in the global economy, led by emerging countries such as China, Brazil, Russia and India.

Following rapid growth in the so-called BRIC countries, China could become SAP's top market globally in the next five to 10 years, Chief Executive Bill McDermott told Reuters in an interview.

"We want to treat the China market as our second hometown," he said. "There is no reason why in the next five to 10 years China can't be the largest market in the world for SAP."

McDermott said SAP's sales in China, which accounted for less than 10 percent of total profit, should continue to grow at high double-digit or even triple-digit percentage rates for the next few years.

China is one of the world's fastest growing markets, recently passing Japan to become the second-largest economy behind the United States. But software sales have been slower to take off due to rampant piracy.

SAP has been able to somewhat avoid that issue as many of its products are large systems used by businesses that are more difficult to pirate, unlike more consumer-focused products such as Microsoft's (MSFT.O) Windows operating system.

But the relatively high cost of its products is also a major stumbling block for the company, which must often compete in China with lower-cost local rivals.

Founded in 1972, SAP, whose more than 92,000 customers include McDonald's Corp (MCD.N), PepsiCo Inc (PEP.N), Audi AG (NSUG.DE), Apple Inc (AAPL.O) and General Electric Co (GE.N) as well as institutions such as Johns Hopkins Hospital, bills itself as the world's leading provider of software to help companies manage supply chains and customer relations.

It competes with U.S. software companies Oracle Corp ORCL.O, International Business Machines Corp (IBM.N) and Microsoft Corp (MSFT.O), which have also reported recent strong results on the back of improved demand.

Separately, McDermott said technology companies such as SAP could find themselves increasingly having to work with governments to allay their concerns, as tech products become more sophisticated and difficult for security-conscious governments to monitor when they believe national security may be at risk.

Such concerns have been in the spotlight in recent months surrounding Research in Motion's RIM.TO BlackBerry smartphones. In the latest of those, RIM is moving closer to addressing national security concerns from India by agreeing to locate some of its servers inside the country.

"We will cooperate with governments on government terms and I think a lot of IT companies will do that and you have to have these local understandings," McDermott said. "I think RIM handled the situation great. Basically they are going to provide a server to India and ... protect the integrity of their offering in other places yet at the same time comply and work with the goverment. That's appropriate."

(Writing by Doug Young; Editing by Chris Lewis)

((doug.young@thomsonreuters.com; +852 2843-1631; Reuters Messaging: doug.young.reuters.com@reuters.net))

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