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Monday, July 12, 2004In the Microsot, SAP merger talks, Microsoft was looking to gain long-sought enterprise clout through the German company's upscale customer base. What would SAP gain out of this? SAP like other ERP players found that ERP sales was coming down and the Harsh market reality is hitting them up. Thanks to Senthil for pointing out this excellent article There are several discernible trends that are reshaping the market. Amongst them are: A. After the twin blows of the technology bust and the national recession forced them to live with less,companies want the software they already own to more closely model how they do business rather than buying anything new. B.The average deal size has shrunk for ERP players. C.Unlike desktop applications or operating systems, sale cycles for enterprise resource technologies are notoriously long, with customers taking 15 months or more to make buying decisions. Companies only replace systems every 15 to 20 years, according to AMR, which means that major deals are few and far between. D.The proposed merger would have given SAP reach into the relatively untapped small- and midsize-business market, which all enterprise software makers covet.SAP does not have much experience in the low end of the market with high-volume, low-cost sales--that's what Microsoft is very good at. E.Forrester predicts that for SAP, Oracle and PeopleSoft, maintenance revenue will remain at more than 40 percent of overall sales for the foreseeable future.At this level, maintenance revenue would be greater than the services revenue and substantially greater than the license sale revenue.
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