Silver linings

MyCustomer.com

Every cloud has a silver lining - well, it does if you're a customer investing in the enterprise applications market at the moment. Price pressure on vendors is the name of the game - we've got the makings of an almighty price war out there and that means bargains to be had for customers, but more bad times for vendors.

The Big Three vendors (as defined - erroneously - by the US Justice Department) have all commented on the pressure in pricing at the moment. This week SAP CEO Henning Kagermann noted that this pressure might never go away. PeopleSoft Chief Executive Craig Conway, admitted that his company was sweetening deals, albeit with added software and services rather than lowering prices, while Oracle's Larry Ellison said in March that was "tremendous price pressure basically in all quarters" of the business software market.

There are a number of possible reasons for this pressure. It may simpley be a result of weaker demand for business software as increased technology spending goes on hardware and operating system software. Some analysts reckon that it may also be a sign of niche software vendors winning business from the Big Three (which rather nicely undermines the Justice Department's ludicrous posturing on the Oracle-Peoplesoft issue....)

For vendors, it means harder times chasing contracts. This week we saw two of the Big Three reporting very different fortunes. SAP had a nice set of numbers, including the revelation that the problematic US market appeared to be turning around for it. They weren't spectacular figures overall, but they were encouraging.

In stark contrast PeopleSoft's figures were shocking. A 37 per cent year on year drop in profits - and that's with JD Edwards figures added in to bolster the total. The company noted that revenues were up - well, they would be with a second company's turnover added to the mix! CEO Conway admitted grudgingly that the PeopleSoft glass could easily be seen as "half empty". You're telling me, Craig!

The economy may be showings signs of life at last, but it's clear there's a long way to go for many firms. We're not out of the woods yet.

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