For football fans, the end of August marks a time of excitement or disappointment – depending on which team you support. It’s the closure of the summer transfer window, so the last opportunity of the year for football clubs to spend a ludicrous sum of money on a player that could boost their chances of success.
This time, there were few transfers to drum up hype for the new Premier League season – mainly because the money demanded for talented footballers today clashes with new administrative rules that prevent clubs from spending beyond their means. In other words, if football clubs want to be successful going forward, they have to run more like a normal business.
It’s for that reason, perhaps, that some of the biggest signings among England’s elite clubs this summer came less through €50 million purchases of 19-year-old boys – although some did still exist – and more in the form of technology partnerships.
First, City Football Group, which owns Manchester City, announced a global, multi-year marketing and technology partnership with German software firm SAP to simplify its operations, enhance fan engagement and transform the way its teams perform – from the boardroom to the pitch.
SAP’s work with the German national team in the lead up to their victory at last year’s World Cup no doubt convinced Manchester City of the company’s sporting credentials, and helped put pen to paper on a deal to implement a wide variety of cloud-based solutions across HR, finance and social.
Predictive analytics and business intelligence will be at the centre of the ownership group’s new information infrastructure to analyse and simulate all data – helping make decision-making a faster and more informed process.
“Our common ambition is to create groundbreaking football-specific technology solutions and products and I have every confidence that we will be successful,” said Khaldoon al Mubarak, chairman of City Football Group, which also owns New York City FC, Melbourne City FC and Yokohama F. Marinos.
Not to be outdone by their arch rivals, Manchester United put on a press conference barely a few weeks following City Football Group’s announcement to reveal a digital transformation of their own – in partnership with HCL Technologies, one of India’s big six IT firms
Like City, United are keen to enhance fan experience through a string of digital initiatives, including the creation of a ‘United Xperience lab’ in their Old Trafford stadium. They will also improve their website and mobile app as they prepare to launch a new digital media strategy next year.
United’s group MD Richard Arnold said United Xperience will see the club leverage the latest technology available in the evolving digital landscape. “It is a very exciting prospect and the possibilities of what we can achieve are endless,” he said. “Through digital transformation we hope to change the way in which our fans experience and interact with Manchester United.”
Then it was the turn of current champions Chelsea, who have chosen another Indian company, Wipro, for their so-called ‘digital journey’ – in other words, the fan engagement and in-stadia experience that City and United speak of.
According to Chelsea MD Christian Purslow, the partnership will “truly enhance the fan experience for millions of Chelsea supporters worldwide”.
While England’s top three football clubs love to pretend these significant investments are all for the benefit of their fans, the real reason is of course business related. The administrative rules have left them searching for new ways to boost revenue – and a significant opportunity lies in monetising their relationships with hundreds of millions of fans through targeted promotions and advertising.
The influence and prevalence of such strategies are set to grow going forward as directors spend less time stroking the inflated egos of spoilt footballers and more experimenting with innovation.
And it’s not just England that is impacted by the rules. The Financial Fair Play Regulations (FFP) were established by football’s governing body for Europe, UEFA, which is keen to safeguard the long-term survival of clubs across the whole continent by preventing them from spending more than they earn in the pursuit of success.
Further afield, in Latin America, governance in football is far less stringent, but the disorder around club administration is just as troublesome.
While football, as a sport, was invented in England, which also hosts the world’s most lucrative league, its spiritual home is undoubtedly Brazil, where people treat it like a religion.
But despite the country possessing the most World Cup titles and many of the most talented players, the best ones strive to compete in Europe’s top leagues where both the standards and salaries are higher.
That’s not to say that European football clubs have greater opportunities to generate revenue, but rather they are more mature in monetising effectively and creating exposure on a global scale. Brazilian clubs, generally, are administrated chaotically – and, because they do not fall under UEFA’s jurisdiction, they are not being forced to clean up their act.
That means that any change must be driven of individual clubs’ own accord. One of Brazil’s most notorious clubs, Palmeiras, which has 20 million fans and more national titles than any other team, is taking the lead.
The club is looking at an increase in revenue of 70% to 80% this year, which it partly attributes to the deployment of SAP Business One, an enterprise resource planning (ERP) software solution that provides an integrated view of core business processes.
SAP traditionally sells its suites of business management software to 24 vertical industries, but in the last three years it has been developing customised solutions for sports organisations.
Palmeiras was the first football club to acquire Business One in Brazil, a feat that the club’s president Paulo Nobre, who previously worked as a lawyer in the financial services industry, was eager to achieve when he won election in January 2013 under a promise to modernise its administration.
“We found the club was completely in a big mess,” he told Information Age. “Some clubs have better or worse circumstances, but no clubs work with a profit — they sell their lunch so they can have dinner. They spend much more than the money they receive.
“A president has just two to three years in front of the team, but it is often not possible to become champion in that time with the money available. So normally they take money from future administrations for the present value to have more money than the other teams.
“They don’t try to make more money during their time as president — they try to be bigger than they really are. So in the future they have no money to work with.”
In Nobre’s first year in charge, 75% of the revenue that should have been available for him to invest in the team was marked off as spend that had been borrowed from the previous administrations.
“This situation could not continue,” he said. “We realised that we should think differently about money, and that the administration should be much more transparent in all the steps it takes.”
Head over heart
Nobre sought to professionalise the departments of the club. Previously, none of the staff or directors were paid, effectively working for free because of their love for the team. But because they had day jobs they could only work for the club for a couple of hours in the evening, leaving departments with no formal structure and insufficient resources.
So Nobre went about recruiting people to work full time in roles that were necessary to the healthy running of the business.
“When you pay you can be much more demanding,” said Nobre. “And they need to work not just because they are Palmeiras fans, but because they are professionals. Once you become a professional it doesn’t matter if you play against a team in your heart.
“We realised we should invest in professionals, good people, and by doing that we could break the taboo that only Palmeiras fans can work for Palmeiras — now, if you’re a good professional you can work here.”
Nobre also wanted to encourage a culture of productivity by changing how the club pays its players.
“I came from the financial markets where big guys make the same money in a year that a really regular player does. But in the financial markets when a professional makes $10 million a year it is because they brought, for example, $1 billion of investment for the bank — so you produce more to receive more. We started to do this with the players.”
Now, if Palmeiras players want to receive more money, they must play more. Salaries are structured so that 80% is fixed, while the other 20% relates to productivity. If they play the whole game they earn more money than if they play half of it. If they get a red card, that impacts their pay packet.
As for the SAP deployment, it wasn’t an easy roll out – particularly with most of the staff resistant to change – but Nobre was determined to make it work.
“In the beginning it was a complete mess because everybody worked in one way and this required them to completely change the way they work – 80% to 90% didn’t like it and preferred to say SAP doesn’t work.
“So we realised it should be top-down – we said SAP is a reality in the club and if you don’t adapt please leave. The administration was a mess so we said let’s start from the beginning and start right.”
The Business One software now controls the inflow and outflow of the whole club, and ensures that everything that happens leaves a visible track.
But the back-end administration is not the only area where Nobre has invested in technology – he has also began to look at how he can bring it to the football side too.
Most notably, he has established a centre of excellence that uses technology to preempt injuries and take care of the players in a way that prevents them.
“We play crazy salaries, so a player injured for 15 days is a lot of money thrown away,” he said. “We worry now a lot about the player before they get injured – everything that we are doing here is thinking on that.”
A big part of the centre of excellence’s value comes from being able to control the players for as long as possible. They no longer go home in between morning and afternoon training sessions – instead forced to rest on-site – and must eat meals approved by the team’s nutritionists.
“In the past we would say this is not necessary. Brazil are five-time world champions so who should tell us how to play soccer? But if you look at what happened in the World Cups, we won in 1958, 1962 and 1970, and only twice since then.”
The 2014 World Cup, hosted in Brazil, was also a big wake-up call for the country. Humbled to a humiliating 7-1 defeat to Germany in the tournament’s semi-finals, it was clear that football had matured in a way that Brazil had failed to keep up with.
“Brazilian people have soccer in the blood, and more talent, but this is not enough,” Nobre admitted. “You must be really professional today to play against the other teams. Look at what Germany did to us – it was not luck. If they played us ten times, they would have won eight times because they were thinking differently.
“So we must invest in technology – we measure the temperature of the bodies to prevent injuries and to drive decisions. If we think somebody is close to injury they go to the swimming pool instead of the field.
“We want to be the best team in Brazil – we want to be the reference in South America. Of course we cannot compare to the budgets of Barcelona and Real Madrid, but we would like to be to South America what the big teams in Europe are to their continent.
Nobre is not naïve to think that an investment in business software will bring immediate success to Palmeiras on the pitch, but he sees it as an important way to control the heated passion that runs rife through Brazil.
“In football you can work 24 hours a day, as hard as you can, but a couple of centimeters will be the difference between the ball hitting the post and then going in the net, or hitting the post and then going away from the goal. So if you don’t have passion in soccer, it doesn’t work – but starting with SAP means the passions doesn’t destroy out work.
“We secured $60 million last year just in sponsorship and I guarantee this happened because we invested in infrastructure and process, which gave the sponsors trust in the administration. For sure, SAP is in the middle of this. In the future, SAP can do many more good things for Palmeiras because we will be in front of the other teams in terms of clear processes.”