Lawsuits against SAP CIS: investors, management, and creditors want it
A lawsuit was recently filed by Mercedes-Benz Rus JSC, the only official importer of Mercedes-Benz premium cars in Russia, against SAP CIS LLC to the Moscow Arbitration Court. The decision caused a storm of emotions in business circles not only in the capital, but also in the country as a whole. At the same time, no one was able to explain the reason intelligibly. As well as the amount of claims of 189 million rubles.
In addition, this is not the only legal claim against the German IT developer. As TASS reported, in September 2022, the company was already sued for 330 million from the Russian manufacturer of communications and aviation navigation equipment Azimut. Someone clearly wants to “degrease” a non-poor manufacturer. “Versiya” tried to understand this strange case.
This is how the abbreviation SAP stands for. Translated into Russian, this means “system analysis and program development.” SAP was founded in Germany in 1972. Pretty soon, she became one of the global suppliers of IT products. Among them: enterprise resource planning systems (ERP systems), machine learning technologies and the Internet of things.
SAP is one of the largest in the world and the Russian Federation (about 60% of the market) suppliers of systems for enterprise resource management. SAP CIS is a division of the international company SAP SE. In 1992, the SAP office in Moscow was opened, follows from the information on the company’s website. According to kartoteka.ru, SAP CIS LLC was registered in 2001.
According to the Federal Tax Service, the net profit of a Russian LLC in 2021 amounted to 2.1 billion rubles with a total revenue of 37 billion. In the portfolio of the developer of some government contracts, there were 10 billion. The company’s problems began in 2022 after the introduction of anti-Russian sanctions, which forced European businesses to leave our country. German top managers of SAP began to look for a partner in Russia to sell their business. As Kommersant reported, it includes servers, switches and data storage systems. There are about 3.5 thousand instruments and devices in total.
Professionals in the IT field then said that the book value of all this equipment was at least 50 million euros, which in rubles was 3 billion (at the exchange rate of the Central Bank of the Russian Federation on 09/07/2022). But any businessman is rich because he knows how to bargain. The market value was reduced by almost half – to 1.4 billion rubles. Doesn’t such an assessment look mocking? With a company profit of 2 billion in 21! It turns out that it will be possible to recoup the costs in less than a year! And the assets will get at all for free? So it is also in the shrinking IT market, where such major consultants as IBM have recently left.
Unconfirmed information appeared in the media that the Russian giant of the communications market, Rostelecom, was interested in such a bargain. And not just because of the bargain price. Since 2014 SAP CIS has created several Data Processing Centers (DPCs) in Russia. And just on the basis of Rostelecom’s infrastructure. With the introduction of sanctions against our country, Rostelecom found itself in a difficult situation due to the ban on the supply of high-tech equipment to Russia. And our giant needs the opportunity to buy out such equipment and a production base from a former German partner like air. It is foolish to refuse such a tidbit. Moreover, the operator intends to invest 10–20 billion rubles in the development of regional data processing centers in the coming years.
But there is no exact information about the results of a possible deal, “break off from a piece” could be fast-moving resellers of used equipment. Yes, and many people from management would not mind getting such an option as an asset, even if only temporarily. Given the profits and book value of the German company, such an acquisition will significantly improve its financial situation. In addition, there is an opportunity to start your own parallel projects on the basis of a high-tech IT developer.
As mentioned above, a lawsuit for 330 million rubles in September 2022 from the Russian developer Azimut added a headache for the German company. The company is engaged in the production and supply of navigation equipment for the needs of civil aviation. As Kommersant reported on January 22 this year, there is still no court decision on the claim. The reason for the claim was not disclosed by either the plaintiff or the defendant.
Dealers for the export and service of Mercedes-Benz cars decided to add problems for SAP CIS. A few days ago, Mercedes-Benz Rus JSC applied to the Moscow Arbitration Court with a demand to recover 189.2 million rubles from the IT developer. As in the first case, no one discloses the details of the lawsuit.
But for the exporter of premium cars, the money will not be superfluous, given the sanctions situation. In July 2022, RBC reported that Mercedes-Benz intends to sell property in Russia that belongs to the official distributor of the Mercedes-Benz Rus brand to one of the car dealers. Among the possible buyers were called Avtodom, Avilon, Major and Panavto.
But lawyers familiar with the activities of SAP CIS note that it is very, very difficult to win a case against an IT developer – the company’s lawyers know their business thoroughly. For example, “SAP CIS” in December 2022 was able to “punish” two American companies. The first in line was a lawsuit against the Uzbek representative office of the investment company Epsilon Development Company, which invested in gas production projects. The second – “Joint-stock commercial bank Invest Finance Bank with the participation of foreign capital.” Both companies were in no hurry to pay contracts for the software supplied to them. The total amount of claims won was 3 million euros.
By October, 2022 it became clear that until the end of 2022 SAP completely will not leave Russia. SAP CIS LLC is still a division of SAP in our country. However, since March 2022, the IT developer has not concluded any new contracts, but has only been servicing old clients under concluded contracts.
To date, SAP CIS LLC remains a division of SAP in the country, although it is negotiating with the head office to separate it into an independent structure.
As you know, big business is a tough business where there are no friends. It is logical to assume that the same Azimuth decided to take advantage of the situation and create problems for its competitor represented by SAP CIS. The activities of both companies have many points of intersection in terms of the development of equipment and IT services. And the sooner the German manufacturer leaves the Russian market, the better for the opponent. And perishing to agree with “their”, perhaps, easier.
Another point is also possible, which suggests itself in explaining the situation with lawsuits. As we wrote above, since March 2022, SAP CIS has not entered into new contracts, but continues to serve old customers. In addition, contracts for multimillion-dollar sums are not a purchase at the checkout in a store here and now. It takes time to service such transactions – from a month to a year. The assumption suggests itself that Azimuth and Mercedes-Benz Rus did not receive equipment and software under contracts concluded before March 2022. “SAP CIS” simply did not have time to fulfill them, as severe sanctions were announced. And going against the sanctions can be much more dangerous and costly than lawsuits.
We add, according to the telegram channel “Arbiter”, in October last year, the company “Timlis” posted on the Federal resource a notice of intent to bankrupt LLC “SAP CIS”. For Timlis, this will eliminate the main competitor. As follows from the information from the official website, “the company offers services in the field of management IT consulting, implementation and development of information systems for automating business processes.”
Again, this is speculation for now. Perhaps soon we will find out the official versions. But it is already clear that they will “bite” the German IT developer tangibly and painfully. Some reputational losses are worth a lot, not to mention the financial side of claims and underestimated value.