SAP CEO: Big-Deal Era Is Over

 
 
By Tom Steinert-Threlkeld  |  Posted 2003-07-17
 
 
 
NEW YORK—The big deal is dead.

Large corporations are not interested any longer in sweeping, long-term, hundred-million or billion-dollar information system deployments, said Henning Kagermann, CEO of SAP AG, the company that dominates the supply of integrated software to enterprises.

Kagermann said there has been "a fundamental transformation" in the past two- to three years of how companies are approaching the signing of software and systems contracts. Now, small is good. Pieces are good.

"We really have no big deals any longer," said Kagermann. "It's not that the big deals are now signed in phases. There are no big deals.''

In June 2000, Frankfurt, Germany-based SAP signed a $200 million agreement with food giant Nestle to supply Web versions of its enterprise software to 230,000 employees of the Swiss manufacturer, around the world. It was the largest Internet application deal in SAP's history; and the kind of deal enterprise software suppliers dream about.

Now, the deals are far smaller. In the second quarter of this year, only 27% percent of the deals SAP signed exceeded $3.45 million. A year ago, 42% percent exceeded that size. Now, 44% are at or under $1 million.

In the United States, the split is even more pronounced. SAP America President Willliam McDermott said Thursday that 77% of deals in this country are below half-a-million dollars.

Added on top of that is continued dramatic shrinkage of the enterprise software market. McDermott said the market SAP plays in was 38 percent smaller in the first half of 2003, than in the first half of 2002. He did not give the company's assessment of the size of the market in dollars.

But the company says it has been able to keep growing its revenue anyway, taking business away from rivals such as Oracle and Siebel Systems. After allowing for the sliding value of the dollar, SAP said its revenue in the U.S. in the second quarter was up 6 percent. It was the second straight quarterly gain for its U.S. business.