SAP’s 2009 Sapphire show in Orlando has officially kicked off. Typically, this multiday schmoozefest lets SAP trot out its executives to meet with customers, partners and tech journalists and talk up its line of ERP, CRM, BI and supply chain products.
MORE ON CIO.com
SAP Earnings Down, But ERP Vendor Shows Recession Smarts
SAP Expands BI Strategy
What Netbook Fans and Frustrated ERP Customers Have in Common
The affair is usually chock-full of SAP customers (mostly CIOs) who give SAP-centric speeches or sit on panel discussions on timely enterprise software topics. A feel-good big-name concert caps off the event. (This year’s act is Don Henley, a risky choice, given that bloggers may be tempted to write “locked in” headlines about how customers can check into SAP but they can never leave.)
Entertainment aside, the stakes this year couldn’t be higher for software vendors such as SAP—and especially for newly christened CEO Leo Apotheker, who has formally succeeded his co-CEO Henning Kagermann. In fact, the theme of the event—”See Your Way Clear: Strategies for Success in the New Reality”—is just as appropriate for SAP’s customers as it is for the German software giant itself.
First off, there’s the matter of the global financial recession that is hitting SAP’s core customers’ IT budgets and capital-investment plans: SAP recently announced a 16 percent drop in first-quarter 2009 net income and a revenue dip of 3 percent (compared to the year previous). And things are likely to get worse before they get better, analysts say.
Next up is how SAP is dealing with its strategy to increase its maintenance and support fees. Approximately a year ago, SAP had let its customers know of an upcoming maintenance-fee increase that would commence in 2009. SAP recently announced that it was modifying the pricing program for SAP Enterprise Support, in effect delaying the much-talked-about maintenance price increases.
The issue was clearly a “damned if you do, damned if you don’t” proposition for SAP: Those maintenance fees are the sacred cash cow for vendors like SAP and Oracle, and shareholders might not have been thrilled with the plan to cut into revenue streams in this environment. But if SAP hadn’t acted, its customers might have pulled back even more on spending with the vendor, because they are struggling mightily right now. (Even Oracle was reluctantly forced to do something on the maintenance-fee front.)
How will SAP execs directly deal with this question at the face-to-face event? It will be interesting to see. Especially since third-party maintenance provider Rimini Street announced on Monday at Sapphire the immediate availability of support services for SAP’s older products (R/3 4.x, ECC 5.0, ECC 6.0 and BW 3.5) still in use by many companies today—for half the price SAP charges. (CIO.com has chronicled Rimini Street’s rise during the past several years.)
Before arriving in Orlando, Apotheker held a press conference in New York City to drum up excitement about SAP’s BI strategy and its new BusinessObjects Explorer, a business-analytics search tool that Apotheker equated to an “iTunes” for analytics, enabling users to quickly find business-analytics information.
“Even SAP can be cool,” Apotheker joked, in reference to the exaggerated iTunes comparison.
But during what was supposed to be a business intelligence discussion, the maintenance fee issue came up, and Apotheker took shots back at Salesforce.com CEO Marc Benioff’s recent calls for the end of traditional software maintenance and vendor lock-in.
Apotheker pointed out, according to the IDG News Service, that SAP’s 86,000 customers do have a choice about whether they want to pay for its support—they could walk away, if they really wanted. “There is no other vendor on the planet that has sat down with its users and customers [about support like SAP],” he said. “We will deliver a 30 percent value generation over a period of four years.”
With all that’s up against Apotheker and SAP right now—increased competition, pent-up user frustration and a festering ERP backlash—he’ll need a lot of good humor and steely resolve this week.
Do you Tweet? Follow me on Twitter @twailgum. Follow everything from CIO.com on Twitter @CIOonline.