CIO — In late May 2008, SAP co-CEO Henning Kagermann proclaimed that the U.S. software market "is tough, but not worsening."

According to June 2008 software market data from ChangeWave, Kagermann might have to reassess his view of SAP's North American prospects. The ChangeWave survey of U.S. corporate software buyers found that "not only did overall software spending take another hit, but 25 percent of respondents said their company's second-quarter capital budgets had been adjusted lower during the past 90 days," states the survey results. (The ChangeWave survey tapped into its network of 15,000 members, who are regularly surveyed about topics such as tech spending.)

When compared with January 2008 survey data on SAP's market share, the June data showed SAP "getting hammered in the United States in several of its software sweet spots, including customer relationship management (CRM), enterprise resource planning (ERP) and business intelligence (BI) software," noted the report. SAP's ERP market share dropped 3 percent (from 37 percent to 34 percent), BI declined 6 percent (from 24 percent to 18 percent), and CRM dipped 3 percent (from 14 percent to 11 percent).

Planned SAP purchases during the next six months also look bleak: CRM will be down five points, ERP down nine points and BI down three points, according to the data.

Why SAP Isn't Worried

SAP executives such as Kagermann are quick to note that North American sales account for roughly a third of SAP's total sales. (SAP has more than 47,800 customers worldwide.) At a corporate event on May 18, Kagermann said that "there is no spillover from the recession in the U.S. to Asia and Europe.... We are not immune, but we are more global," he stated in a Bloomberg article.

Kagermann claimed at the event that while SAP's competitors generated 50 percent of their business in North America, SAP generates only 30 percent to 35 percent of its sales there, according to the article. "Europe and Asia are still strong," he said. "This may seem surprising from the outside, but it's a fact."

Still, SAP's first-quarter profit fell 22 percent to $377 million. In addition, several troubling factors loom on SAP's horizon. For starters, SAP's nascent push into the SMB market has created a skills gap as its software outpaces the supply of skilled people to implement and service it in the SAP ecosystem, a problem which SAP knows all too well.

This "upstream" and "downstream" turmoil has unraveled at an inopportune time for SAP because the company has recently embarked on several new product and application strategies, which necessitate even more talented people with even more in-demand skillsets: new NetWeaver, business process management (BPM), BI and master data management (MDM) products as well as its omnipresent ERP software (in this case, its latest ERP 6.0 release). (For more on SAP's strategies, see "Five Things About SAP's Strategy That You Need to Know.")

At the May 2008 press briefing, Kagermann concluded that dire U.S. economic conditions are troubling, but said that SAP always has a Plan B at hand just in case the North American financial situation worsens. "We don't have endless flexibility," he said, "but we have enough flexibility."