SAP Survives Oracle Onslaught

Author: Steven Zolman

For a while, it appeared that SAP was doomed.  Oracle was winning a high percentage of the deals, and was seen as the innovator, promoting vertically integrated technology solutions that combined hardware, software and services, while SAP was often viewed as being left behind, trying to bilk maintenance out of its legacy customers.  There was renewed talk of an SAP acquisition by IBM, or maybe HP, or perhaps Microsoft, or even, God forbid, Oracle.

SAP has seemingly stabilized, however, and we believe will actually show some good results in Q4.  We believe SAP licensing revenue will be up around 15%, and profit margins will improve, to hover around 40%.  In addition, SAP seems to be riding the industry “Big Data” wave, as some of the core growth areas for SAP have shown some promise.  As an example, HANA (in-memory database) sales are up, and SAP’s plans to get more of its applications into more hands of more users through mobility (SAP’s primary reason for acquiring Sybase) also appears to be gaining traction.

We expect SAP’s Q4 and 2011 numbers to be strong in the Americas, and in the APJ region.  EMEA remains a concern, but we expect solid performance in major markets like Germany, the UK, and France.

In 2012, we will be keeping a close eye on (i) SAP’s continuing performance in ERP in both new license sales, and also in its legacy maintenance sales, (ii) SAP’s continuing performance with its Sybase acquisition, and specifically how SAP can gain market acceptance with in-memory computing and mobility, (iii) how SAP’s Business Objects acquisition performs in both SAP and non-SAP shops, and (iv) how SAP can parlay its most recent acquisition of SuccessFactors into more success with employee performance management.

All in all, SAP remains a difficult supplier for most of our Clients to deal with primarily because of its poor account management, premium pricing, restrictive terms and conditions, inadequate levels of service and support, and a lack of effective partnership with Client executives.  Perhaps 2012 will bring positive developments in these areas as SAP aims to get some of its mojo back.

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