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Feeling the Pinch

The Credit crisis softens demand for enterprise resource planning tools while underscoring the need for enterprise risk management.

By Beth Karlin | Updated on November 03, 2008

Germany’s SAP reported a sudden drop in business at the end of September as global market turmoil escalated. “The market developments of the past several weeks have been dramatic and worrying to many businesses,” says Henning Kagermann, co-chief executive of the second-biggest business software–and largest–ERP provider in the world in announcing lower-than-expected third-quarter earnings in October. “SAP was not immune from the economic and financial crisis that has enveloped the markets in the second half of September, causing us to report numbers below our expectations,” he says. Although SAP reported a respectable 13% growth in third-quarter sales, Kagermann says, demand suddenly plummeted as customers focus on short-term investments.

JP Morgan analysts said in a report that the SAP announcement proved that their earlier warning that the ERP market would be susceptible to a slowdown was on the mark. “The big worry in our view was management’s indirect admission of very low visibility in the software business,” the report said.

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