SAP reports quarterly revenues that fell by 9 percent thanks to a decrease in spending on business software, but increased adoption of its products by SMBs may help it through economically challenging times. The president of SAP North America suggests that SAP is unconcerned by the seemingly imminent acquisition of Sun Microsystems by Oracle.
The future of the enterprise will be a hybrid, at least when it comes to
software as a service, the president of SAP
North America told eWEEK in a recent interview.
"Businesses will likely have to have both on-premises and SAAS
[software]," Rob Enslin said during an Oct. 21 customer event in New
York. "On-demand applications certainly are
significant, but when you run mission-critical applications, so many other
factors need to be taken into account; these potentially keep those
mission-critical applications on premises."
The cloud "is going to be a realistic option for mission-critical
applications," Enslin added, "but it's going to take time."
The future of software, and how businesses use it, is certainly on the minds
of SAP executives in the wake of the
company's Oct. 28 quarterly earnings call. As reported by a number of news
outlets, including Bloomberg,
the software maker is
predicting a 6 to 8 percent dip in software and service revenue for 2009. The
company's total revenues for the quarter fell by 9 percent year over year, even
as net income rose 12 percent.
Earnings and revenue were expected to be higher. While the drop in SAP's
numbers may be largely chalked up to the effects of a still-moribund economy
and an attendant cut in IT spending by major corporations, it calls into
question what SAP can do to regain some of
That effort will be dependent, in some part, on SAP
making its software road map appealing to current and future clients.
To compound matters, one of SAP's major
rivals in the enterprise space, Oracle,
is seemingly on the verge of removing
all roadblocks to its acquisition of Sun Microsystems. That $7.4 billion deal
was already approved on Aug. 20 by the Department of Justice, although European
Commission regulators have been urged by some software industry groups to block
the takeover in Europe.
So far in 2009, Oracle has launched a number of new applications and
capabilities, such as a
suite of solutions through its Oracle Accelerate program,
deepen companies' access to business intelligence, transportation management
and other functionality. Many of SAP's
offerings touch on those same areas, including enterprise-critical applications
such as BI and data warehousing.
Publicly, SAP is taking care to show a
lack of concern over Oracle's Sun acquisition.
"I don't think it's going to impact us," Enslin said. "Oracle
will have to compete against IBM,
[Hewlett-Packard] and others; whereas we've always had good partnerships."
Recent deals include an agreement with HP to integrate
SAP BI applications with the HP Neoview platform
and an expansion of a partnership
with Novell to cover governance, risk and compliance solutions.
There is also a difference in the strategies that both companies are willing
to share with the outside world. Oracle
CEO Larry Ellison recently expressed interest in taking market share away from
IBM in the systems business,
and recent Oracle releases such as Fusion
Middleware 11g aim to consolidate
enterprise-network aspects such as IT governance and service-oriented security
into a single homogeneous stack.
SAP, at least according to Enslin, does
not have Oracle-style aspirations to make itself into the newest end-to-end
software, service and infrastructure company.
The focus instead will be on its core products, such as the next version of SAP
BusinessObjects Explorer announced on Oct. 27 during the SAP TechEd conference
in Vienna, Austria, layered with additional functionality and applications courtesy
of the cloud.
"Developed apps on demand that plug into platforms like Business Suite
7," Enslin suggested, will become the "significant play" for
companies. SAP Business Suite 7, unveiled in
February, is designed to allow companies to create and manage efficient and
flexible business processes; IT players including IBM
partnered with SAP for the rollout to
During the Business Suite 7 launch event in New York
on Feb. 4, SAP co-CEO
Leo Apotheker referred to Business Suite 7's ability to enact processes across
multiple parts of a company, as well as integrate those processes with advanced
analytics, as indicative of "the future of enterprise computing."
Apotheker said, "We actually have a vision of how business should evolve
in the future ... We believe that the world is evolving toward business
The continued focus on cost-cutting by small and midsize businesses and the
enterprise, he added, will only boost SAP's
fortunes in the long run.
"Customers want things with immediate returns. 'How are we going to
cost-cut?' 'We have a good supply chain, but where is the revenue going to come
from?' They want to squeeze whatever they can out of what's left of their
budgets," Enslin said. "The shift now is around analytics, which is
where things like [SAP BusinessObjects]
Explorer come into play."
SAP seemed to recognize companies'
generally squeezed IT budgets by allowing customers to cherry-pick the functions
of Business Suite 7 needed for their businesses without necessarily upgrading to
the entire platform. This also allows SAP to
appeal more strongly to SMBs, which have become an increasing part of its
With businesses cutting back on software spending over the past year-and
perhaps continuing to do so into early 2010-smaller businesses may help SAP
reverse some of its current financial trends. An Oct. 28 statement by Apotheker
seemed to suggest as much.
"Despite the continued tough spending environment," the co-CEO
wrote as an accompaniment to SAP's earnings
report, "we are pleased to see further progress in the evolution of our
volume business as a result of smaller deals."