TDS AG, a German IT services and consultancy firm, is trying to break into the UK SAP outsourcing market with a business model that takes advantage of Germany’s lower consultants’ salaries. The company offers either a managed service for existing SAP R/3 customers or outsourced IT, routing all the enterprise resource planning traffic through 200 servers at its Neckersulm headquarters in Germany.
Lower German consultants’ rates enable the company to save customers between 30% and 40% on the costs of running their IT in-house according to TDS’ UK managing director Tim Foxlow. There are additional traffic costs, which Foxlow declined to name, but these are included in the pricing.
The managed service costs vary depending on the number of R/3 modules, but a 100-user system for an R/3 customer on a five-year contract would cost around 1,300 pounds ($2,087) per user per year. TDS will be focusing on the mid-market, targeting the SAP installed base of 600 companies directly. Without R/3, the pricing is around 2000 pounds ($3,200). TDS will seek systems integrator partnerships for indirect sales. Druid, Axon and Morse are all possible partners.
By effectively exporting SAP business from the UK back to Germany, TDS had run the risk of upsetting the German enterprise resource planning vendor’s UK subsidiary, but it has circumvented this by joining SAP’s Agent Programme, which will help it find new business, while passing it through SAP UK’s books.
