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March 8, 2013updated 19 Aug 2016 9:27am

SAP “facing downward pressure on pricing”

But it's all about helping customers get faster 'time to value'

By

Tim Noble
Tim Noble, SAP managing director, UK and Ireland

At an event to mark the recent launch of SAP Business Suite on HANA – its in-memory database technology – Tim Noble, managing director for the UK and Ireland, conceded that the firm is facing pricing pressure. But suggesting that’s just part of doing business in the current market, he said that it’s really because customers want faster implementation times which in turn reduce the total solution cost.

"Yes, in answer to your question there continues to be downward pressure [on pricing]," Noble told me. "But equally as well as downward pressure there also continues to be a thirst and a hunger for increased value on a decreased timescale, which is just as important as the overall cost. So again we work with IBM, we work with Accenture, in terms of how do we deploy these solutions as rapidly as we possibly can."

The question of cost is salient because at least one large customer, the Department for Transport (DfT) shared service centre in Swansea, recently announced it will replace an SAP platform with one from rival Aggresso.

"You talked about Aggresso, but we have talked about SuccessFactors [an SAP acquisition]," Noble told me. "And the attraction, whether it’s Ariba [another SAP acquisition] or SuccessFactors, is that we can get this up and running very, very quickly, based in the cloud."

"When you’re talking about pricing there’s the whole thing, right," Noble said. "There’s the software, there’s the implementation. Interestingly, and again working in partnership with everybody in this room [including HANA customer Vodafone, IBM, Accenture and the UK SAP User Group], we are spending more and more time decreasing the time to implementation and making the implementation simpler. Therefore increasing the value and the time to value. And therefore ultimately decreasing the cost to our mutual customers in terms of the implementation of SAP."

If SAP is seeing pricing pressure, its acquisitions such as Ariba and SuccessFactors have certainly helped it maintain its sales growth, even if it is not all organic. In its preliminary fourth quarter results, total revenue was up 12%, with a rise of 9% for software and 2,000% for cloud subscriptions and support (almost all down to acquisitions).

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However operating profit was down 5% and profit after tax was down 8%. The company is also now carrying over €13bn in goodwill on its books, up from less than €9bn a year earlier.

 

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