SAP: Every Silver Lining has a Cloud

SAP reported strong earnings for Q1. In particular, Jeff Nolan is pleased that Americas revenue for the quarter were higher than worldwide Oracle applications licenses last quarter (its third quarter of the fiscal year, ending February 28). 24 Oracle customers (including Siebel, Peoplesoft, JDE, and Retek customers) committed to replacing their software with offerings from SAP. Additionally, TomorrowNow, a unit of SAP, which offers third party maintenance to PeopleSoft and JD Edwards customers signed 27 new accounts.

So, in its battle with Oracle for larger accounts for core ERP functionality, SAP is doing well. But by its own calculations,  SAP has about 21% of the enterprise applications market. By that definition Oracle has less than 20% - so between them they have 40% market share. That leaves large chunks still wide open.

Jason Wood in his analysis says “U.S. license revenue growth was the slowest we've seen since 2004, which is to be expected given the tough comparisons after a blistering 2005.”

SAP is still not showing consistent traction in the SME market (to its credit it has tried and tried for over a decade with varying packages) and will increasingly face more robust SaaS vendor competition from NetSuite and AppExchange. One of these days Microsoft will also have a more coherent message in that market. In a number of verticals like banking, healthcare, mortgage SAP still has little market share. To get traction, maybe they should get dedicated Jeff Nolans for those markets too - not just a focus on Oracle!

The other thing is the TomorrowNow third party maintenance phenomenon is also happening to SAP itself. It is starting to lose maintenance to third parties and in many cases having to discount the maintenance for more mature customers.

Just do not expect SAP to put those in any press release.

Comments

[Michael Krigsman]

Vinnie, I always enjoy your insightful comments. However, regarding the comment about SAP's traction in the SME market an additional point needs to be made.

It is certainly true that SAP has been "looking at" the mid-market for many years. However, they have recently put substantial energy into a new channel strategy. I believe this represents a real shift in SAP's thinking about the SME market -- they are very serious about it now.

[viinnie mirchandani]

Michael, I cannot disagree with you. But the numbers do not show it yet. May be if it was elevated to the status the Oracle market has within SAP (hence y comment about more Jeff Nolans), it would be quite somehting...