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The results are now in for enterprise software’s big three, SAP, Oracle and Microsoft, and the results are not pretty.
As a whole the companies managed to stem the bleeding through a series of cost cuts, including some of the worst layoffs the industry has seen to date. But while the cost cuts managed to protect profits, they could not hide the fact that revenues were under attack.
SAP was the latest to post its results. On Wednesday it reported that sales in the second quarter fell 9.8% to €2.58 billion from €2.86 billion. More troubling was the fact that topline software revenues fell 40% in the quarter from €898 million in 2008 to €543 million.
Microsoft, which reported late last week, posted a 17% decline in revenues for its fiscal fourth quarter, ended June 30, and a 29% drop in quarterly profits. It marked the first time Microsoft’s sales had declined on an annual basis since the company went public more than two decades ago. And Oracle, which competes more closely with SAP, reported in June that revenues for its fiscal fourth quarter, which ended May 31, fell for the first time since 2002. Oracle’s revenue fell 5.2% in the quarter to $6.86 billion.
It was a tough quarter and an ugly first six months of the year, but as a whole the chief executives of the enterprise software giants seemed positive that the worst of the recession was over. And they appear to be getting support for that view from research firm Gartner.
Gartner predicted this week that worldwide software budgets will increase in 2010, by a modest 1.53%. Gartner says it surveyed 1,000 companies between April and May of 2009. On a regional basis, software budgets in North America are still expected to decline in 2010, by about 2%. Europe, Middle East and Africa (EMEA) will be slightly positive at 0.45%, while budgets in Latin America and Asia will make the strongest gains at 2.5% and 4.34% respectively.
So the picture is looking a brighter, but Gartner still warns software vendors they may be in for tough bargaining sessions with customers and that now is the time to prove they are good partners. Vendors need to work with clients to help them determine where costs can be cut and how to make their budgeted dollars go further.
“Vendors need to use a consultative selling approach to understand and then address the most critical needs of IT and the business of their current and prospective clients,” Joanne Correia, managing vice president at Gartner, said in releasing the survey results.
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