SOFTWARE GIANT SAP NAVIGATES RUSSIAN RISKS

WHILE most Western technology companies are losing ground in Russia under the weight of restrictive rules and mounting local competition, Germany’s SAP is thriving.

SAP is the clear leader in the Russian businessplanning software market, supplying 53 of the top 100 Russian companies by revenue, according to a Reuters analysis of company filings.

Its success has come at a time of intense legal pressure on foreign technology firms, including a law requiring them to allow Russian authorities to hunt for vulnerabilities in their software, which has raised security concerns in Washington.

While the likes of Oracle, Microsoft and Google have been losing market share, Russia is one of SAP’S fastest-growing markets, with revenue rising by about a third to €468 million (R6.8 billion) last year.

Part of the reason for this, analysts say, is that its products are entrenched in running the biggest state firms in industries including energy, metals, transport and retail. The German firm has invested heavily in the market, even sponsoring top-tier St Petersburg football club Zenit.

It is winning new work with clients, including supplying cloud-based applications that build on its existing software. For example, in April, Russia’s largest bank, Sberbank, which is state-owned, said it had put in place a new SAP human resources system covering 230 000 employees.

“The large state companies all use SAP because of the long-term investment involved, the money already spent and because the software works,” said Moscow-based software analyst Elena Semenovskaia of global tech research firm IDC. “You would have to be insane to rip out SAP and install something else.”

At a time of fraught ties between Russia and the West, SAP has also taken steps to smooth relations with authorities on both sides.

Russia is a small market for SAP, representing just 2% of its global revenue, but its actions highlight the complications facing global technology firms operating in a world divided over national-security concerns.

Balancing the security interests of one country with those of a rival power, when both are using the same software, can be a minefield.

For example, SAP has hired a former general from Russia’s FSB Federal Security Service to help it manage its relationship with the Russian government and security services, according to publicly available records and a source.

In a move that could help assuage Western security concerns about its exposure to Russian authorities, the company also says it only allows Russian examinations of its products’ inner workings, or source code, to be conducted at a special “clean room” laboratory in Germany.

SAP has said it has complied on rare occasions with Russian software-vetting rules while making every effort to ensure the security of products and customers elsewhere.

Asked about the hiring late last year of the

EX-FSB general Vladimir Vladlenovich Skorik, it said: “Such individuals may provide insight into the certification processes that SAP will have to undertake as it sells into the public sector.”

The practice of employing former operatives to give companies insight into state security processes is also common in some Western countries, including the US.

The Kremlin and FSB did not respond to requests for comment about Skorik’s employment. – Reuters