SAP FUD: Fear, Uncertainty, Doubt -- and Truth Bending [UPDATED]
When you hear corporations beating their chests over their competitive position, there's always a good bet they are trying to make things look sunnier. My colleague Michael Hickins caught Oracle in posturing. But he mentioned SAP claiming that, where it competes with Oracle, it was "doing very well, thank you." So I dug up SAP's last financial statement, and if that's doing well, I'd hate to be doing badly.
Here's what Michael noted about Oracle:
Oracle held its own in database and middleware revenues, where it doesn't compete with SAP, but in applications, where it does go head to head with the business applications vendor, new license sales declined almost 20 percent and total applications, including support and license updates, declined by 9 percent. It was able to make up some of that ground thanks to twelve percent growth in license updates and product support for middleware and databases.So how has SAP done? It depends on how you look at things. In its last released financial statement for the quarter that closed March 31, 2009, total revenue was down three percent, compared to Oracle's nine percent. But look at the details:
Software revenue was down by a full third, dwarfing even the drop that Oracle saw. Subscription and other service revenue was actually up by 27 percent, but that was only an increase from $€56 million to $€71 million compared to the $€204 million drop in software sales. Even if Oracle wanted to claim that customers were switching to a service-based model, they clearly weren't doing so at anywhere near the pace of the purchasing plunge. Training revenue was down by 31 percent, professional service revenue by nine percent. The only thing that was up, and the only thing that helped keep the overall revenue number from looking worse, was an 18 percent increase in support revenue. Had service revenue even stayed flat, SAP revenue would have been down by 10.4 percent year over year.
And now to SAP's claim in May that it was addressing price increases by setting up benchmarks with its user group.
The measures focus on support provided by SAP after purchase, which is a sore spot for customers -- and vendors who want to have happy reference customers. In many cases, customers are pretty much left to their own devices once they've paid for the software license -- a key contention of software-as-a-service (SaaS) vendors who claim a subscription model forces them to take better care of their customers. (The SAP benchmarking agreement, however, doesn't include promised feature sets that aren't delivered and upgrade cycles that lag, but that's material for a separate post.)SAP boasted that Oracle customers were already paying 22 percent of contract value for support, but that SAP wouldn't be raising its prices to that level until 2015. What it didn't include is that SAP was only reacting to a user revolt when it tried increasing the fees far earlier than that just under a year ago, and in February 2008 raised maintenance fees for all new customers.
Quick, how do you tell that an enterprise software vendor is -- mm, deforming the truth? Its spokesperson's mouth is moving.
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