Is the economic rebound leading to SAP spending?

After spending as little as possible during the recent economic recession, some companies are looking to start spending on technology again, according to experts.

A growing number of companies are looking to launch new SAP projects now that the economy seems to be steadily improving, according to analysts, consultants and at least one customer.

“It is a big change from the same time last year,” according to Jacinto Arauz, the vice president of sales for Yash Technologies, an SAP software implementation partner based in East Moline, Ill.

Last year, the firm had very little in the way of business, and no ERP implementations to speak of, he said. “It was pretty soft back then.”

Now, the company is working on ERP implementations at six midsize companies, including a roughly $1.1 million project for Red Spot, an Evansville, Ind.-based specialty paint company, Arauz said.

Yash is now getting business leads from SAP itself because of tighter cooperation between the software company and its partners. Still, more companies are now willing to invest in their IT, according to Arauz. While ERP implementations constitute the lion’s share of business right now, other customers are deploying BusinessObjects, the second most common project for the firm.

Business is not just coming from new customers, he said. “Even the installed base is spending additional dollars.”

SAP projects by the numbers

Yash’s experience largely coincides with overall economic indicators for the enterprise applications market and the IT industry as a whole, according to Forrester Research analyst Andrew Bartels.

Although SAP will not release its latest financial results for a couple of more weeks, the early indication is that those numbers will reflect healthy increases in software license sales, according to Bartels.

Oracle, SAP’s largest competitor, recently posted a 19% increase in software sales and service for its financial quarter ending Feb 28. Those numbers bode well for SAP, although SAP may not have as large a gain given that a good portion of its sales are in Europe where the effects of the global recession are still being felt. SAP will likely post increases in software sales and service in the 10%-12% range, he said.

The biggest drivers in the enterprise software market are in manufacturing, followed by the professional service category, Bartels added. Those two are followed by the utilities industry. And much of that growth is being driven by sales around products that SAP has introduced in the last five years, including BusinessObjects. “It’s a lot of analytics,” he said of SAP customers’ purchases.

ERP implementations are mostly limited to the kinds of midsize companies Yash Technologies is currently working with, Bartels said.

“Most big companies already have big ERP,” he said.

But regardless of how well the economy is performing, companies can still negotiate deals for themselves by taking advantage of any leverage it might have with the sales representative, according to fellow Forrester analyst Duncan Jones.

“Each rep needs to make his numbers,” Jones said. “I’d say ensure you have non-SAP choices to keep the SAP rep giving you his best possible deal.”

 ‘We did it as minimal as possible’

2009 was a lean year for WL Plastics, a manufacturer of polyethylene pipe based in Fort Worth, Texas. The following year was a bit better, so the company moved forward with implementing Business ByDesign, while still keeping an eye on the bottom line, according to CFO Neil Briggs.

“We still did Business ByDesign, but we did it as minimal as possible to be successful with it,” he said.

Business is much better these days due in large part to the “booming” oil and gas industry that drives much of their business, Briggs said.  Some of those profits will possibly be used to purchase and deploy additional software to run in conjunction with the new release of Business ByDesign 2.6 which Briggs expects in early July.

“We’re just kind of on standby waiting for it,” he said.

One step behind

Not everyone is spending more on IT however, with at least some public sector governments still doing as much as possible with less.

 “We have to be selective in our projects and go with the ones where we have in-house expertise since we have very limited funding (if any) for consultants, (as well as go) with projects that use existing infrastructure and licensing,” said Mike Musser, principal business systems analyst for the government of Sacramento, which runs SAP.

Apart from some upgrades, the county had mostly gone with projects that save money, such as an employee self-service HR portal.

The county would like to implement SAP NetWeaver Business Warehouse and BusinessObjects, but doesn’t have the funds, Musser said.

 “It took us a year or so to feel the pain that the private sector felt and it will probably take even longer for us to pick up after the private sector picks up,” Musser said.

 

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