Biztech Apr 22, 2013
SAP AG's Asian business stumbled at the start of 2013 when top sales managers left the business software company, giving rivals an edge just as customers were switching from hardware to cloud computing.
The German company vowed to get its Asia Pacific business back on track after the problems pushed its first-quarter earnings and revenue below analyst forecasts. Its shares fell 2.8 percent last week.
SAP and rivals such as IBM and Oracle are dashing to meet surging demand for cloud computing, which allows clients to reduce costs by ditching bulky and costly servers for network-based software and storage in remote datacentres.
With the cloud services market forecast to grow 18.5 percent this year to $131 billion worldwide, according to research firm Gartner, competition is fierce and software firms face a challenge to adapt.
"We had some leadership changes in the region. That is why we saw some misses in the quarter," said SAP's co-Chief Executive Jim Hagemann Snabe.
He promised the Asia Pacific region would be back on track in the second quarter as the sales pipeline looked good and important sales positions were now taken care of.
SAP software helps companies to manage supplies, human resources and customer relations. It is reducing its reliance on traditional business software to become a major player in cloud computing.
Snabe said the industry was transforming as customers turned to web-based software products.
"Hardware is in trouble," he told Reuters Insider.
SAP faces competition in Internet-based software from IBM and Oracle and nimbler rivals like Salesforce.com Inc and Workday Inc. It spent $7.7 billion last year to buy Internet-based computing companies Ariba and SuccessFactors.
SAP said it had snatched market share from Oracle and others as customers turn to cloud services, which are seen as less vulnerable to the global economic downturn as there are no upfront costs for program licenses, hardware or installation.
More From Reuters.