"It's a significant commitment we're making to what we think is a significant opportunity," said Robert Salvucci, president of SAP America's public sector unit. The center will be fully staffed and operational by Jan. 1.
Salvucci said he decided the company needed a Washington-based software center in April, after an examination of the government's unique software needs in areas such as finance, human resources and logistics.
He wants to see fast growth for the unit he started last December. He expects at least $60 million in sales in 1998 and over $300 million in 2000. Last year, before SAP had a subsidiary dedicated to the government, SAP made $25 million selling products to the public sector.
Though SAP is late getting into the U.S. public sector, it is the world's leading manufacturer of software that controls business operations such as payroll, human resources and inventory management. The company sells products and services to more than 430 public sector customers worldwide.
SAP AG, which has over 12,000 employees, reported revenues of $3.3 billion in 1997, a 62 percent increase from the previous year.
Salvucci, who joined SAP in 1992 after 25 years at Armonk, N.Y.-based IBM Corp., is confident sales will soar now that the company has a unit dedicated to federal, state and local governments, higher education and non-profit organizations.
"We're somewhat unknown, but we've been well-received by the agencies," he said. For example, in February the public sector unit won a $2 million contract to provide the New York Power Authority with a full suite of SAP software.
But at least one of SAP's competitors in the public sector has been customizing government software for years.
PeopleSoft Inc., Pleasanton, Calif., entered the government market in 1995 and has been writing software specifically for the public sector ever since.
"It's really the trend in packaged software across the board," said Michelle Cooper, PeopleSoft's director of government marketing. "There are certain processes and transactions unique to all organizations."
PeopleSoft does not disclose government revenues, but Cooper said the company has doubled its growth every year. Overall, the company had revenues of $815.7 million in 1997, nearly double revenues of $450 million in 1996.
PeopleSoft works with more than 30 federal agencies, including the Department of State, the Environmental Protection Agency and the Social Security Administration. The company has about 65 employees in its federal unit and expects to hire another 30 by the end of the year, Cooper said.
Despite competition from entrenched players like PeopleSoft and Oracle Corp., Redwood City, Calif., one government research analyst thinks there is plenty of room in the federal government market for SAP.
"They have the right product at the right time," said Gilbert Toth, senior analyst at Input, an IT research group in Vienna, Va. "The government loves to have a company with a good track record. SAP has a wonderful track record in the commercial market."
To spark business, Salvucci said the company is trying to be flexible. In addition to tailoring software, Salvucci said he is bidding more fixed contracts than he would in the private sector. "It gives the customer some comfort," he said.