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SAP recently reported results that certainly look positive for the enterprise software giant, but it is far too early to say the company is out of the woods. In reporting its fourth quarter results, Germany-based SAP said its fourth quarter revenue dropped 9% - a smaller decline than the company had earlier forecasted.
Revenue came in at 3.69 billion Euros or $4.61 billion for the quarter ended Dec. 31, 2009, compared to 3.49 billion Euros for the same period of 2008. The key metric of software and software-related service revenue fell about 4% on a year-over-year basis to 2.56 billion Euros.
The results were substantially healthier than many analysts had predicted and bode well for SAP as the economy improves. But in a sign of just how fragile the company is feeling these days, it once again delayed a planned implementation of a service charge increase.
The service charge increase has been a thorn in SAP’s side since first proposed in 2008. Back then SAP announced it planned to move customers to a pricier, but more full-featured enterprise support package. The planned change raised the ire of many SAP customers who were trying to weather the recession on tighter budgets and had little room to maneuver on increases to their support fees. SAP delayed the program in 2009, acknowledging that the timing wasn’t the best.
Now, with chief information officers still having to make do with constrained budgets, it appears SAP has thrown in the towel on the planned changes.
In a statement, the company said it would bring back its standard support model and would hold maintenance prices at 2009 levels.
“SAP’s new support model is a direct response to the many discussions we’ve had with our customer and user groups,” SAP Chief Executive Leo Apotheker, said in announcing the new position. “We have taken into consideration the feedback and suggestions from customers worldwide. As a result, we are now providing consistent, global support alternatives that address differentiated customer needs while continuing to bring the best value and full transparency to our customers with SAP Enterprise Support.”
The translation of this statement would be: Our customers worldwide have said you can take your planned service fee increase and shove it. We don’t have room in our IT budgets to stomach an increase right now and if you don’t listen to us, we’re prepared to listen to another vendor at the next opportunity.
While the change of heart is a sign that SAP is vulnerable, it does have a positive angle. SAP is going to win a fair amount of goodwill from its customer base as a result of this decision. As the economy improves, that goodwill should translate into increased revenues.
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