- Related Stories
-
SAP launches investment fund, new software
May 17, 2006 -
SAP and Microsoft tune up for Duet
May 2, 2006 -
Microsoft, SAP mulled merger
June 7, 2004
(continued from previous page)
Where does SAP go next with on-demand? You announced a hybrid approach with a CRM (customer relationship management) product that works the same, whether it's on-demand or on-premise. Are there other product areas that you are looking at?
Kagermann: The hybrid approach is the key approach. You will see more applications as we move to this more sophisticated model. This model is cheaper in terms of hosting. We believe it is the right approach. It is a little more expensive, but with blade servers and all of this stuff, I'd say the difference (from hosted applications from other companies) is more that the security is pretty high.
The other models of on-demand might be better for companies with 10 or 20 employees. But since we get our customers from the midmarket and higher, it's the right approach for us. We really don't target small companies today.
So those smaller companies might still go to Salesforce.com?
Kagermann: Yes. But over time, I think we will be cheaper there as well. I think this is a larger market, and this is more effective for that. It doesn't help us if we are going after companies with two or three users.
Let's talk about Microsoft: You've gone from discussing a potential merger to becoming close partners in the business software market. It seems like SAP and Microsoft have come to a sort of detente, where you have mapped out areas where you will compete and areas where you will team up to compete with Oracle and others. Is that a fair assessment?
Kagermann: Yes. That we figured out. We know we are too large to partner on all areas. But on the other side, we can partner where we don't compete. We've figured this out--we know we can be tough but fair in competing with them. It's a good relationship.
So no more acquisition talks?
Kagermann: No.
How is the mix of license revenue to maintenance and support revenue changing over time? I know that license revenue was very strong for SAP last quarter.
Kagermann: Maintenance is largest; it has been for one or two years. License revenue is growing faster, and if it continues to grow at the same level, it could come up to the same level as maintenance. But today, maintenance is slightly higher. Services revenue is going down. It's less than 30 percent now, which is good. Services is lower margin.
So why the battle between SAP and Oracle to sell services to each other's customers?
Kagermann: It's not a battle for services. It's a battle for software. It's a battle for customers and over who sells more software. We sell much more. Every software deal is a competitive deal for new clients.
With existing clients, it's not so competitive because those clients go for the wider SAP strategy. It doesn't mean they give you the check immediately, but the competitiveness is lower. But for new clients, it's always competitive.
Is your license revenue increasing due to new sales and new customers? Or is that sales to your existing customers?
Kagermann: It's both. Twenty-five percent is new sales, and the rest is to existing customers, which is not surprising, because whenever you sell to a company which is already a customer, it's the installed base, and we have a pretty high penetration at the high end, so we have left to get only the smaller (companies).
Which leads to the next question: Where does the new growth come from, since you already count as customers a very high percentage of the market?
Kagermann: We have a big chunk, but there is still a large market. But if you look at the whole market, we have roughly 12 percent in North America and 36 percent in Europe, so it's not so high that you would say we have saturated the market.
On the other side, we have many new products. We believe that with these new products, we can double the addressable market over time. So whether the market grows or not doesn't matter that much, since we will open up new markets and gain market share in existing ones.
See more CNET content tagged:
Henning Kagermann,
SAP AG,
SOA,
customer base,
ERP
As a businessman, technologist and Irish Tax payer I find this discussion about architectures functionality and flexibility, tiresome and irrelevant.
Lightweight orthogonal components with suitable mechanisms for generating, managing and storing chains, can more than address the levels of complexity handled by SAP, negating the need for its clearly unmanagable complexity.
Increasing complexity increases the size of the job and therefore the value to the technology suppliers. Decreasing complexity is hard work but ultimately increases the value of the technology to the customers. Which direction are you pushing in?