SAP’S THIRD QUARTER 2009 EARNINGS - TBR COMMENTARY - Sponsored Whitepaper

Responding to the dramatic decline in license deals across 2009, both CEO Leo Apotheker and President of Global Field Operations Bill McDermott described how SAP will address customer hesitation brought about by the recession.

In the mid-market, SAP is scaling up its partner program and offerings to build a volume business. The sales force is getting a makeover as well, to better focus the efforts of the sales executives on specific segments. The end result will be a smoother deal flow with fewer of the large, strategic deals that are highly risky and more iterative, smaller deals that attack specific business problems in a sequence.

This approach has the benefit of taking risk out of large implementation deals for customers and smoothes the revenue streams for SAP. On the downside, longer contacts lock-in customers and can appear to force migrations to new versions of SAP offerings.

SAP wants its customers to upgrade to the latest releases of its software, not only for the revenue, but to reduce the burden (and expense) of supporting and carrying all of the complicated custom code that has evolved over the years. Customizing SAP code to meet evolving requirements is one of the strengths of the company’s platforms; over time, however, each customer’s code veers out of alignment with the source code, making support and upgrades increasingly difficult.

The announcement on shifting the sales process toward smaller, more incremental deals with provable ROI provides a way out of this dilemma – one that helps customers to consume software in smaller chunks while still staying on their SAP platforms.