SAP ANZ achieves record growth amidst economic slowdown

SAP ANZ achieves record growth amidst economic slowdown

Globally, SAP to cut workforce as ‘new reality’ bites.

SAP Australia New Zealand reports a record year of growth in 2008, boosted it says by sales in the retail, utilities and mining industries. In a press statement, SAP says overall revenues grew 36 per cent in Australia and 22 per cent in New Zealand. Software licence revenue grew 79 per cent year on year in Australia and 20 per cent in New Zealand.

The report was released after news that SAP intends to reduce its global workforce to 48,500 staff from 51.500 by the end of this year.

The staff cuts will result in annual cost savings of €300 million to €350 million beginning in 2010, joint CEOs Henning Kagermann and Léo Apotheker wrote in an email message to all SAP staff. There will also be no pay increases in 2009, unless local laws require them, they wrote.

SAP’s net income for the full year 2008 dropped 2 percent year on year, to €1.89 billion, even as total revenue for the year grew 13 per cent to €11.6 billion (US$16.3 billion as of December 31, the last day of the period reported).

“SAP ANZ was the most outstanding SAP hub in the world in 2008,” says Tim Ebbeck, managing director SAP ANZ. “We have been growing consistently year-on-year for a number of years.”

New customers in ANZ for 2008 included Commonwealth Bank of Australia, 7-Eleven, AGL Ltd, Sparq Solutions, Adelaide Brighton Ltd and Corporate Express.

Ebbeck says 2009 “will be a very different operating environment for business in ANZ. However, we are focused on sustaining our success in what we call ‘The New Reality’.”

The phrase is taken from CEO Leo Apotheker who stated in a recent conference call, "It could have been the best year in SAP’s history ... but since September we have been talking about a new reality in the world’s economy."

The results include gains from January last year following SAP’s acquisition of French business intelligence software vendor Business Objects. The majority of the growth in revenue from software and software-related services came from Business Objects products, CFO Werner Brandt said during the conference call.

One product from which SAP is still struggling to extract the margin it wants is Business ByDesign, its on-demand offering, for which the cost of hosting and delivering the service was higher than expected.

"Our main focus is reducing operating costs," said Apotheker. "It’s not just a product, but also a process of supplying that product through the network. We are adapting the value chain so that we can be profitable everywhere. Adapting takes some time."

During the call Apotheker glossed over complaints from some user groups about the company’s recent increase in maintenance fees, saying the new price is "customary" for the industry, for a level of service that is "unusual." The company’s new products and services will help it gain market share, he said.

The economic crisis means SAP is having trouble getting some customers to pay their bills: The company’s ‘days sales outstanding’, a measure of the average time it takes a customer to pay an invoice, has increased to 71 days, from 66 in 2007. It will try to reduce the figure in 2009, said Brandt.

The operating environment is expected to continue to be challenging during the current year. In its press release SAP warned a comparison between 2009 and 2008 may be difficult, as the company posted strong results in the first half of 2008 before the economic crisis disrupted global markets.

The company says it would not provide a specific outlook for revenue from software and software-related services for 2009, because of the continued uncertainty surrounding the economic and business environment. The results that were presented are preliminary figures and will be confirmed when SAP files its annual report next month.

One figure that might change is the provision for settlement of a lawsuit with Oracle over the activities of SAP’s TomorrowNow subsidiary, as the next litigation conference comes before the company closes its books, Brandt said.

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