The cracks in IT demand have started to appear, as Financial Times blogger Richard Waters wrote in a recent post.
On Monday, SAP CEO Henning Kagermann pre-announced that SAP’s third quarter earnings would be lower than expected.
“The market developments of the past several weeks have been dramatic and worrying to many businesses,” Kagermann said in a press release. “These concerns triggered a very sudden and unexpected drop in business activity at the end of the quarter.”
Entering the third quarter, customer sentiment was cautious, but still resolute, Kagermann explained on a conference call.
That predictability disappeared once the financial crisis accelerated dramatically during the last two weeks of September, Kagermann said. This had a strong impact on SAP’s ability to sign contracts, as many customers expressed the need to put planned IT investments on hold for now.
There was also some hesitation on new software purchases where it seemed getting the financing was an issue, he explained.
Companies like SAP and Oracle are “the last refuges of tech investing,” as blogger Jim Kerstetter wrote in a recent blog post on making sense of the tech meltdown on Wall Street.
And if SAP’s hurting, as Boston Globe columnist Steven Syre, wrote, it’s one of the “ominous signs in pullback by businesses.”
There are many questions left unanswered. Will the economic downturn affect SAP’s product development? Are there some parts of the country and the world where IT spending is slowing more than others? Which industries will be hit hardest by the downturn and what does that mean for IT spending there?
SAP said it would have better answers to some of those questions when it delivers its official third quarter earnings at the end of the month.
But another task that could be made more difficult by this economy will be explaining Enterprise Support to its customers. This is not only simply because many customers are upset about the price increase, but because travel and training budgets will no doubt be scaled back in this economy. Even SAP’s trimming its travel budget, according to Reuters. And while there has been a series of webcasts hosted by ASUG on the new support system, some in-depth education on Enterprise Support has and is scheduled to take place at conference events, where customers can ask industry analysts and SAP their own questions.
Kagermann made clear during the call that SAP would continue to roll out Enterprise Support, and that customers would find value in it. SAP offered up this explanation last week in a podcast interview on the new support offering with SearchSAP.com, and explained that part of its “full-court press” would be to continue to partner with user groups to explain how to find the value in it.
Explaining the “how” may get even tougher now.
Courtney Bjorlin, News Editor