vc
never underestimate SAP
Filed in archive Technology by tj on April 15, 2004
is a lesson learned by so many technology companies. SAP has often been slow to recognize new trends but once discovered it was about to deliver the best product in the industry. This article sheds light on some new developments that might be a risk to SAP. Anyway I'll still buy SAP stocks...

"Analysts will no doubt be looking for signs of weakness when SAP discusses its first-quarter earnings on April 22, given that the market value of the company is nearly 40 times its 2003 earnings, a higher rate than many of its peers'. For Oracle and Microsoft, the price-to-earnings ratios are about 25 and 31, respectively."

"The question is whether SAP can continue to grow and innovate as it confronts major shifts in technology and new buying trends. The answer wasn't immediately forthcoming--SAP executives declined to be interviewed for this story, citing quiet period rules in advance of its earnings announcement."

"Flanked by executives from Visa, an SAP partner, and Whirlpool, a customer, SAP executive board member Shai Agassi explained how his company intends to take on IBM and Microsoft, among others, in the so-called middleware software market with a new product dubbed NetWeaver."

"NetWeaver, which SAP first introduced last year, is a collection of programs designed to make its line of business applications easier to modify and better able to work with other systems."

"Touting middleware is an unusual move for SAP, which built its fortune convincing blue-chip companies, including Dow Corning and Coca-Cola, to toss out the hodgepodge of software they used to run their businesses and replace it with one system. All the data about a company's operations would be kept up-to-date and available at the click of a mouse, SAP's pitch went. "

"But SAP may be missing out on future growth by ignoring the subscription model. According to a March report from researcher IDC, 43 of 100 software makers it polled believe they will derive a majority of their revenue from subscription agreements, rather than perpetual licenses, by 2010. And AMR Research says subscription software is on a growth trajectory in the customer information systems arena, while demand for software sold under the traditional model will remain relatively flat."

"Nevertheless, SAP will suffer for its reluctance to adopt the subscription model because it's the way companies will increasingly buy software, said Salesforce's Benioff. "Five years from now, (SAP) will mostly be living off their maintenance revenue," he predicted."
What the author does not recognize is that SAP took the ASP as serious as nobody else and had subscription models out as many competitors just paid lip service. SAP also just bought the remaining 26% of the SAP SI subsidiary in Dresden for �26 million from Software AG to better steer the strategic policy of the consulting company.


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Tags: technology  entrepreneurship  underestimate  never  2003  never+underestimate  venture+capital  java+entrep 
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