TechnologyRecession-hit SAP faced with strategy dilemma

Recession-hit SAP faced with strategy dilemma

Analysts say the software giant should concentrate on the middle market and become more nimble and better at closing smaller deals more quickly

SAP hq

Financial software provider SAP will need to change its strategy for the
future if it hopes to weather the recession, according to experts in the IT
profession.

Analysts said SAP, which last week posted a 40% drop in software-related
revenues, will need to change its sales strategy to weather the economic storm
and should focus more on the mid market.

Thomas Otter, an analyst with IT research firm Gartner, said: ‘The big deals
in terms of millions of pounds of software projects are history. They are
becoming tougher to find for SAP and it has to grow and become better at being
more nimble and able to close smaller deals quicker.’

Otter also said that SAP ‘needs to compete more effectively in the mid
market’.

The company reported its software revenues were E543m (£462m) for the second
quarter of 2009, compared with E898m in the same period in 2008. A company
spokesman said: ‘The comparison quarter last year was our strongest in history,
so it is a very tough one.’

However, the spokesman added: ‘We are cautiously optimistic and believe the
worst is behind us and that things will improve in 2010.’

David Bradshaw, an analyst at technology research firm IDC, said: ‘Licences
are immediately affected by the economic situation so it is not surprising that
software-related revenues are down.

‘I believe this is temporary and there’s nothing to suggest anything has
changed drastically in the long term.’

The latest blow comes as it emerged that SAP had to re-evaluate its online
product Business ByDesign. A spokesman confirmed that the technology wasn’t
‘cost effective’ and that it was proving more expensive for the company to run
than it was able to make from the software.

Bradshaw said: ‘The way SAP built it, it was expensive for them.’

Business ByDesign, which is currently being tested by 90 clients, is aimed at
mid-market customers.

SAP said it rectified glitches but would not elaborate on what the problems
were, or how they were resolved.

The company hopes to have the technology on general release next year,
although they declined to comment on a specific timeframe.

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