July 27, 2011 8:17 pm

SAP gaining market share from rivals

SAP, the business software maker, said it was gaining market share from competitors, including archrival Oracle, after reporting a strong set of second-quarter results that buoyed its shares for a second day.

In an interview with the Financial Times, Jim Hagemann Snabe, co-chief executive, said SAP was “taking significant market share in all geographies.”

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“I actually believe that this marks a tipping point of a structural change in the industry which is pretty significant. You’ve seen companies go out in the second quarter with very different messages. Some are claiming IT spending is not growing. And we are obviously seeing the opposite,” he said.

Once considered a rather staid provider of enterprise software that helps companies run more efficiently, SAP is betting that mobile, cloud computing and in-memory computing – a new way to quickly analyse large amounts of business data – will help it gain ground on its rivals.

Mr Snabe and co-chief executive Bill McDermott have pushed these innovations since taking over last year and analysts said they could be beginning to bear fruit.

“The bottom line is this is a company with two new CEOs who have been making management changes … and you’re starting to see a lot of that change starting to take effect,” Donald Feinberg, vice-president at Gartner, said “Now they’re going to have to deliver on it”.

Mr Snabe said SAP was targeting €100m in revenues for mobility and in-memory computing this year. “This is quite significant given they were first launched as an idea and delivered to the market at the end of last year,” he said.

Rajeev Bahl, analyst at Matrix Capital Partners, said: “Mobility products are the most significant in the short term. It allows SAP to sweep up business that would otherwise go to others. It also extends the reach of SAP in businesses. On average just 23 per cent of employees in a company would come into contact with SAP software. Mobility takes that much further.”

Larry Elisson, Oracle’s founder, once infamously described in-memory technology as “wacko, ridiculous, complete nonsense”.

But SAP insists it is now answering its critics. “The pipeline for in-memory computing is the fastest pipeline growth in our history,” said Mr Snabe.

“A year ago competitors were laughing at us,” he said. “And now they realise that this is significant and will change the industry fundamentally.”

“We have definitely proved [the critics] wrong – you are seeing many companies in the industry desperately acquiring small companies that have any flavour of in-memory computing in their portfolio,” he added.

SAP raised its full-year earnings and revenue guidance late on Tuesday, causing its shares to jump 3.6 per cent. The share gained a further 1.6 per cent on Wednesday, on a day when most German blue chips lost ground.

SAP expects 2011 operating profit to be at the upper end of its previous range of €4.45bn-€4.65bn ($6.5bn-$6.75bn).

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