SAP is feeling the effect of customers reluctant to spend on new software, after the German software giant recorded a 33 percent fall in software sales.
Announcing its first quarter results, SAP said that its net income was down 16 percent year on year, and revenue down 3 percent. Net income for the first quarter fell to 204 million euros (£183 million) as of March 31 from 242 million euros a year earlier. SAP blamed the fall on a restructuring charge related to previously announced staff lay-offs.
Revenue fell to 2.40 billion euros from 2.46 billion euros a year earlier. Within that, software support revenue rose 18 percent to 1.25 billion euros, a rise somewhat offset by a fall in professional services revenue, down 9 percent to 649 million euros.
The biggest fall was in software sales, down 33 percent to 418 million euros. SAP blamed the decline on a difficult operating environment worldwide due to the global economic downturn.
It is unclear when buyers will regain confidence: "Visibility for software revenues remains limited," SAP said.
However, SAP's customers are continuing to buy software, but in smaller pieces, SAP co-CEO Leo Apotheker said during a conference call with financial analysts.
"It is obvious that in the current climate customers are trying to pinch every dollar, euro and yen before they spend it," he said.
SAP is therefore focusing on growing the overall volume of deals "in every theatre and every market segment," said Bill McDermott, an SAP executive board member and president of global field operations.
The company is also looking forward to the upcoming general release of its Business Suite 7 application, as well as new BI (business intelligence) software, which will help drive revenues up, Apotheker said.
But the company declined to comment further on the outlook for the rest of the year, sticking to the same forecast it provided in January. Back then it made no predictions for future revenue, citing uncertainty about the business environment.
SAP may have slightly lower software support revenue in the coming years than it had previously hoped. Following pressure from users, it announced on Wednesday that it has capped the price of its new Enterprise Support program at 22 percent of the software license price until at least 2015. For existing users forced to migrate to that service from a cheaper existing service, the price rise will be spread over a longer period, limiting increases to 3.1 percent a year, rather than the previous 8 percent a year, SAP said.
But Enterprise Support "will become a competitive advantage" for the company, Apotheker predicted.
Along with its earnings report, SAP on Tuesday announced that it had agreed on a set of KPIs (key performance indicators) for Enterprise Support with SUGEN (SAP User Group Executive Network), a group composed of SAP user groups around the world.
No other vendor "comes even close" to providing the level of insight into support costs that the KPIs will afford, Apotheker said.