News that SAP is cutting 3,000 jobs in an effort to save €300-350 million is a good thing. No - it's not fun if your name gets pulled out of the hat but the company would have been crazy to do nothing or keep quiet. Given it is only about six percent of the total workforce, that's probably the minimum it could have done.
While the company is not giving specific forecasts, co-CEO Leo Apotheker said that he expects demand to be flat or a little below the levels seen in 2008. What a 'little' means is open to conjecture but on the basis of the last quarter's results, the staff cost reduction is equivalent to about a five percent fall in software revenue. Given that SAP reported a year over year fall of seven percent between 2007 and 2008, and that it is not looking for particluar improvements in margin as this time, that means sales will have likely shrunk somewhere around 12 percent in the 2007-09 timeframe. What's there to like about that?
Nothing if it wasn't for the fact SAP has yet to get serious about rolling out Business ByDesign. Most of my colleagues agree that on-demand/saas solutions are counter cyclical. From this perch it makes sense to focus on getting ByDesign out there as quickly as possible in order to take advantage of the market SAP identified several years ago. It has the advantage that ByDesign does a lot more than Oracle CRM or Salesforce.com and could capture some of the 'cool' factor attached to these styles of solution. Why do I think that?
Earlier today I spoke with CODA, which recently launched an order to cash process solution built on the Force.com platform. CODA tells me they are getting plenty of interest and are ahead of schedule for the next planned beta which will include payable and general ledger. I asked whether there are fears that the new solution might cannibalize existing markets. The answer is a firm 'no' because it is aimed at a different segment. More telling, CODA says that its customers don't swap out financial software that often so there is no pressure from the existing customer base.
If you believe that saas/on-demand is the way of the future then SAP could shore up its business and go significantly towards silencing its 'empty calories' critics. That sounds like an opportunity.