Balancing act: software giant SAP navigates Russian risks

    MOSCOW/WALLDORF, Germany (Reuters) – Most Western know-how firms are dropping floor in Russia underneath the load of restrictive guidelines and mounting native competitors. Germany’s SAP (SAPG.DE) is flourishing.

    A view exhibits an set up with the brand of SAP software program firm on the roof of an workplace constructing, with a visitors signal seen within the foreground, in Moscow, Russia April 23, 2018. REUTERS/Tatyana Makeyeva

    SAP is the clear chief within the Russian business-planning software program market, supplying 53 of the highest 100 Russian firms by income, in keeping with a Reuters evaluation of firm filings.

    Its success has come at a time of intense authorized stress on international know-how companies, together with a legislation requiring them to permit Russian authorities to hunt for vulnerabilities of their software program, which has raised safety considerations in Washington.

    Whereas the likes of Oracle (ORCL.N), Microsoft (MSFT.O) and Google (GOOGL.O) have been dropping market share, Russia is considered one of SAP’s fastest-growing markets, with income rising by a couple of third to 468 million euros ($565 million) final 12 months.

    A part of the explanation for this, analysts say, is that its merchandise are entrenched in operating the largest state companies in industries together with vitality, metals, transport and retail. The German agency has invested closely available in the market, even sponsoring top-tier Saint Petersburg soccer membership Zenit.

    It’s consequently successful new work with shoppers, together with supplying cloud-based functions that construct on its present software program; for instance, final month Russia’s largest financial institution Sberbank (SBER.MM), which is state-owned, stated it had put in place a brand new SAP human assets system masking 230,000 staff.

    “The big state firms … all use SAP due to the long-term funding concerned, the cash already spent and since the software program works,” stated Moscow-based software program analyst Elena Semenovskaia of world tech analysis agency IDC. “You would need to be insane to tear out SAP and set up one thing else.”

    At a time of fraught ties between Russia and the West, SAP has additionally taken steps to easy relations with authorities on each side.

    Russia is a small marketplace for SAP, representing simply 2 p.c of its world income, however its actions spotlight the issues dealing with world know-how companies working in a world divided over nationwide safety considerations. Balancing the safety pursuits of 1 nation with these of a rival energy, when each are utilizing the identical software program, generally is a minefield.

    For instance, SAP has employed a former common from Russia’s FSB Federal Safety Service to assist it handle its relationship with the Russian authorities and safety providers, in keeping with publicly accessible information and a supply near the corporate.

    Slideshow (three Photos)

    In a transfer that might assist assuage Western safety considerations about its publicity to Russian authorities, the corporate additionally says it solely permits Russian examinations of its merchandise’ interior workings, or supply code, to be performed at a particular “clear room” laboratory in Germany.

    SAP advised Reuters it has complied on uncommon events with Russian software program vetting guidelines whereas making each effort to make sure the safety of merchandise and prospects elsewhere.

    Requested concerning the hiring late final 12 months of the ex-FSB common, Vladimir Vladlenovich Skorik, it stated: “Such people might present perception into the certification processes that SAP must undertake because it sells into the general public sector.”

    Reuters couldn’t set up Skorik’s precise job title or duties. He didn’t reply to a message despatched to his official SAP electronic mail account.

    The apply of using former operatives to provide firms perception into state safety processes can be frequent in some Western nations, together with the US.

    The Kremlin and FSB didn’t reply to requests for remark about Skorik’s employment.


    SAP is Europe’s largest software program firm however quantity 4 globally behind U.S. rivals Microsoft, Oracle and IBM by way of annual gross sales. It focuses on business-planning software program whereas rivals are extra diversified.

    Microsoft faces a troublesome street in Russia as a result of its accounting-focused software program faces direct competitors from the Russian market chief in that space, 1C. Database big Oracle has additionally misplaced floor available in the market over the previous decade.

    Google and Fb have lengthy struggled with copycat rivals – Yandex in search and VKontakte in social networking – that put them within the uncommon place of second-place gamers. Current antitrust and knowledge legislation adjustments have additionally elevated stress on each companies.

    SAP, against this, is the undisputed chief within the Russian business-planning software program market, with 50 p.c of the market.

    Reuters has reported in current months that SAP and different firms have acceded to calls for by Russian authorities, together with the FSB, to permit navy contractors to assessment the supply code of a few of their merchandise.

    Moscow says the evaluations are essential to detect flaws in foreign-made software program utilized by Russian state firms which may very well be exploited by hackers. However U.S. lawmakers worry they pose a safety risk as the identical software program is utilized by American authorities businesses.

    Cyber safety companies Symantec and McAfee not permit international governments to assessment the supply code of their merchandise due to safety considerations. This shuts them out of components of Russia’s state know-how market, however it was unclear how a lot enterprise both firm beforehand had in these areas.

    Reuters was given unique entry to go to SAP’s “clear room” close to its headquarters within the city of Waldorf within the southern German state of Baden-Wuerttemberg.

    Guests descend beneath floor by means of three zones of safety to enter a steel cargo transport container geared up to dam electromagnetic indicators.

    Russian code-testers accredited by the Russian safety providers fly in to conduct the examinations. No outdoors electronics, notepads and even pencils are allowed into the location. The testers have entry to an remoted laptop display, keyboard and nothing else, SAP International Vice President Stefan Schulz stated.

    Schulz stated there had been a handful of Russian code evaluations of SAP software program lately, and none previously 12 months. No different authorities has carried out such evaluations, he added.

    He stated safety evaluations have turned up solely already identified points. “I don’t know of any case the place any new vulnerability was discovered within the context of such a supply code assessment,” he stated.

    Reporting by Jack Stubbs in Moscow and Eric Auchard in Walldorf; Enhancing by Jonathan Weber and Pravin Char

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