SAP Watch

Jan 7 2010   12:40PM GMT

Why SAP’s 2010 market strategy should matter to you now

CourtneyBjorlin Courtney Bjorlin Profile: CourtneyBjorlin

It’s certainly no secret that license sales are way down for software vendors. In fact, new license revenue for ERP vendors was down 24% in 2009, according to Forrester Research.

That means more discounts on software, as well as more calls and emails from ERP account representatives, pitching more add-ons as they try to increase volume in existing accounts.

But it could also mean some changes in the makeup of IT departments.

In its recent ERP trends report, Forrester asserts that there’s a vast shift underway in the ERP vendors’ business model. They need to increase recurring revenue streams to make up for what they’ve lost in non-recurring lines like license sales.

Maintenance fees are one way they’ll look to make that up. In turn, SAP is also hoping to hang on to as much of its net new sales and existing customers as it can by offering subscription pricing for its on-premise products, an attractive option for the myriad customers out there without a whole lot of capital.

Another major initiative will be selling new services. Enterprise applications vendors will move more into hosting, application life-cycle management, platform as a service, collaboration and business process outsourcing, according to Forrester. These services may be provided through the vendor, or through partners.

“Traditionally, there’s been a line in the sand between the support the vendor provides and the support the customer does internally,” Hamerman said. “What’s going to happen is that line is going to become blurred, with the vendor taking on more support service that the company typically does.”

We’re already seeing evidence of this. When Software AG bought IDS Scheer last year, analysts asserted that one of Software AG’s major motivations was IDS Scheer’s professional services business. Additionally, Lawson is getting into the hosting business, according to Forrester’s Paul Hamerman. Meanwhile implementation partners like Deloitte, which doesn’t offer much in the way of ongoing support or hosting, are trying to expand into those areas, according to Forrester.

Vendors, and likely in SAP’s case their partners, will therefore take on more of the support services that companies typically do themselves.

With that in mind, the types of skills companies should look to foster on their teams are the things that won’t soon be commoditized -like skills related to business process support, Hamerman said.

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