30 September 2003 SAP CEO Henning Kagermann has warned that price competition from rival Oracle is intensifying — with pricing accounting for a higher proportion than ever of the company’s ‘lost’ deals.
“Forty percent of the deals we lose are now on pricing — that’s an all-time high,” he told Reuters. Kagermann feared that customers would get used to the lower prices. “If this happens, prices will never come back,” he added.
Kagermann speculated that Oracle was driving its prices lower in response to uncertainty wrought by its hostile takeover bid for PeopleSoft and the need to continue driving sales as a result.
But Oracle denied that the company had a particularly aggressive pricing policy in place.
In response, it issued a statement: “There is no unusual pricing initiative in place… If a competitor is losing deals to Oracle then that simply suggests that ours is the better offer to the customer, especially in terms of total cost of ownership”.
Kagermann has also suggested that recovery was already underway in the US and he forecast a rebound for Europe within the next six months.
The SAP CEO plans to address the price and cost sensitivity of customers today by pushing NetWeaver, SAP’s componentised enterprise application platform that also includes integration features. He says it will save organisations anywhere between 10% and 35% on their IT budgets.
However, although NetWeaver was unveiled in January this year, a complete version will only be ready for rollout in 2005.