SAP says its lower than expected revenue forecast for the third
quarter of 2008 is an indication of the wider effects of the
credit crunch.
Preliminary data for the period released yesterday showed a
clear slowdown of the world's
third largest software supplier's sales in the last two weeks
of September.
SAP co-chief executive Henning Kagermann said concerns about the
financial crisis had "triggered a very sudden and unexpected drop
in business activity."
He said although the forecast revenue of around £1.5bn from
software sales, service contracts and subscriptions was a 14%
increase on the previous year, it was "below our expectations".
David Mitchell, senior vice-president at analyst firm Ovum, said
the slowdown in September is true of many companies and not just
SAP.
He said many companies have reported a reduction in market
demand and SAP's share price, which dropped over 15%, was not the
only one affected.
According to Mitchell, companies need to look beyond short term
survival strategies, such as freezing recruitment, to longer term
plans for revenue diversification.
He said companies should look to new geographies such as the
Asia-Pacific region, non-business application products, and a
balance between products and services.
Kagermann said SAP had already implemented such strategies to
ensure growth in difficult time.
In May,
Kagermann said SAP would ride out the downturn by pursuing a
strategy of collaboration with partners to ensure a greater
source of innovation in a difficult time.
SAP has not been as successful in the services department, with
strong opposition to plans to move all customers on standard
support to its enterprise support programme.
This would mean an increase of 5% of contract value for many
customers who would be forced to pay for a more comprehensive
support programme than they need.
Alan Bowling, chairman of the SAP User Group, said the mandatory
nature of the change had received a negative response from
members.
"Along with the German user group, we are sceptical that the
enterprise support offering is sized appropriately and we remain
concerned on its suitability for many small and medium-sized
enterprises," he said.