Business Tech

Nokia and SAP are forming a new company that will use their technologies to help manufacturers battle counterfeit products.

Announced Tuesday at SAP TechEd in Vienna, Original1 will offer services to better authenticate branded products and protect them from counterfeiting, the companies said in a statement.

Offering software as a service (SaaS), Original1 will draw on a combination of SAP's supply-chain technology and Nokia's mobile authentication software. Nokia and SAP will each own 40 percent of the business, while German firm Giesecke & Devrient (G&D) will own the remaining 20 percent and add the security and encryption component.

The service will target products that are especially vulnerable to counterfeiting, such as pharmaceuticals and luxury goods, G&D spokesman Stefan Waldenmaier said. Other items, such as auto parts and software, could also benefit from the service, he said.

At this point, the service can only work with physical products, not electronic items. So, for example, Original1 could protect boxed software but not downloadable media.

Here's how it works: branded products will be electronically tagged with smart, tamper-proof barcodes, allowing the manufacturer to track them using a Nokia smartphone as they move from factory to store shelf. A retailer can then check the product information against a database and determine whether the data is coming from a legitimate product.

Located in Frankfurt, Germany, Original1 will be run by Claudia Alsdorf, currently the vice president of SAP Research.

"Counterfeiting is a worldwide problem that is increasing and affecting many successful companies in all industries," Alsdorf said in a statement. "Today, more than ever, companies need to combat counterfeiting before it's too late, when their company livelihood is at stake."

SAP has already run pilot tests of the new service with some of its customers and said the testing has been successful.

Nokia and SAP have a history of working together on mobile projects. Nokia is an SAP global technology partner, while SAP is a Nokia Enterprise Zone member.

Subject to regulatory approval, Original1 is expected to open its doors before year's end.

In the video below from SAP, Alsdorf talks about the new company:

SAP on Wednesday reported a 4 percent gain in earnings for the second quarter despite lower sales.

For the quarter ended June 30, the business software giant netted 423 million euros ($600 million) compared with 408 million euros for 2008's second quarter. The company attributed the gain to cost cuts and to stronger growth in its profit margin, the net difference between sales and earnings.

"Despite the challenging economic conditions, the strength of our business model combined with a strong cost discipline has proven itself once again by enabling us to report another quarter of strong operating margin growth," said SAP Chief Financial Officer Werner Brandt.

Hurt by the global downturn, overall revenue dropped 10 percent to 2.6 billion euros from 2.9 billion euros a year ago. Software sales were hit especially hard, falling 40 percent to 543 million euros from 898 million euros in the year-ago quarter. SAP noted that 2008's second quarter was prior to the current economic recession.

(Credit: SAP)

Though the company didn't offer sales and earnings estimates for the full year, it did boost its forecast for operating margin for 2009. Excluding nonrecurring expenses, SAP now expects its annual operating margin to range from 25.5 percent to 27 percent, up from its earlier estimate of 24.5 percent to 25.5 percent, which it provided in its first-quarter report.

As part of its cost-cutting efforts, SAP announced earlier this year that it would slice about 3,000 jobs globally by the end of 2009.

The company has also been trying to expand its reach through acquisitions. In May, SAP picked up carbon management firm Clear Standards. Last week, it announced it would acquire SAF AG, a provider of global forecasting software for the retail market.

Oracle announced on Tuesday lower fourth-quarter sales and earnings but was encouraged as results beat expectations.

For the fourth quarter of its fiscal year, which ended May 31, the database giant earned $1.9 billion, or 38 cents a share, versus $2 billion, or 39 cents, a year earlier. Sales fell 5 percent to $6.9 billion, compared with $7.2 billion a year ago. However, Wall Street had been predicting revenue of only $6.47 billion.

Oracle noted in its report that results were hurt by the lower value of foreign currencies versus the U.S. dollar. Without that impact, fourth-quarter income would have grown 9 percent to 42 cents a share.

The company was also pleased with its non-GAAP results, which discount certain nonrecurring costs.

"We executed substantially better than we expected on both the top and bottom line for the quarter," Oracle CFO Jeff Epstein said in a statement. "We grew Q4 non-GAAP operating margins by a faster than expected 240 basis points to over 51 percent. That helped us generate $7.7 billion in free cash flow for fiscal 2009."

For the full year, earnings per share rose 3 percent over the previous year to $1.09, while total net income inched up 1 percent to $5.5 billion. Revenue in 2009 hit $23 billion versus $22 billion for the preceding year.

"Adjusted for the substantial movement in the U.S. dollar exchange rate this fiscal year, which is beyond our control, we grew non-GAAP earnings per share by 19 percent for the year," Oracle President Safra Catz said in a statement. "That's an amazing achievement given what's been happening in the global economy over the past twelve months."

Results were boosted by heavy use of Oracle's business applications over those of archrival SAP, according to Oracle.

The quarter was a momentous one for Oracle, which in April announced its intended buyout of Sun Microsystems, due to be voted on by shareholders July 16.

This was originally posted at ZDNet's Between the Lines

SAP's first-quarter software revenue--an indicator of maintenance and services health--skidded 33 percent due to a "difficult operating environment" and a tough year-ago comparison. Meanwhile, SAP altered its maintenance pricing plans to allay customer concerns.

SAP on Wednesday reported first-quarter net income of 204 million euros, down from 242 million euros a year ago. Revenue was 2.39 billion euros, down from 2.46 billion euros a year ago. SAP managed to hold software and software-related service revenue flat at 1.74 billion euros in the first quarter compared to a year ago. The enterprise software company's first-quarter results a year ago were pumped up by the acquisition of Business Objects.

The results were worse than expected. A Dow Jones Newswire poll forecast SAP profits of 261 million euros on revenue of 2.55 billion euros. By region, SAP saw U.S. revenue fall 13 percent with Japan declining 16 percent. Europe, Middle East and Africa declined 3 percent.

Here's a look at the key SAP charts:

In a statement, co-CEO Leo Apotheker said the company will "maintain tight cost controls" and take "further steps to reduce expenses" by focusing on third-party costs and capital expenditures. SAP had announced plans to cut its workforce to 48,500 by the end of the year and as of March 31 the company had 49,916 employees. In the first quarter, SAP took a charge of 160 million euros to cover 2,200 job cuts.

As for the outlook, SAP isn't providing software and software-related service revenue projections. It does expect to maintain operating margins in the range of 24.5 percent to 25.5 percent.

What's unclear is how much SAP's software revenue slide is attributed to the economy versus pushback from customers annoyed with maintenance fees. In a separate statement, SAP said it reached an agreement with a federation of user groups to benchmark process improvement, business continuity, protection of investment, and total cost of operations and modify maintenance pricing. At first glance, it looks like SAP has instituted a maintenance cap. Here's the passage in full:

In consideration of the current economic climate, SAP is extending by three years the four-step price increase program announced in July 2008 for customers that were migrated to SAP Enterprise Support at that time. Originally scheduled to run until 2012, the program will now conclude in 2015, coinciding with the recently introduced 7-2 maintenance strategy. Starting in 2010, the price of SAP Enterprise Support for existing customers will continue to increase based on individual contract terms but will not be higher than a yearly fixed upper cap. This translates to an increase average of no more than 3.1 percent per year from 2010 onwards. The price of SAP Enterprise Support will be capped at 22 percent through 2015. With this adjustment, SAP demonstrates a clear commitment and responsiveness to its customers and the challenging global economic conditions they must navigate today.

Dennis Howlett's analysis:

This should not be a surprise. Last year, I asked Apotheker whether the company was prepared to share the economic pain of its customers. At the time, I drew a blank stare. I'm convinced SAP had no choice but to take these steps as a way of mollifying a very unhappy and increasingly vocal customer group. Even so, it is good to see that SAP has finally bent to the inevitable and now has an opportunity to put this fiasco behind it.

Vinnie Mirchandani provides the following analysis:

Essentially it's back to negotiating with individual customers annual increases. The question is can customers justify even the 17 percent in this economy? And will the KPIs (key performance indicators) show that some customers may be averaging $25,000, $50,000 a support call given how mature their usage is and how little they tax support.

Indeed, this maintenance issue is becoming a big deal. That fact is not lost on Salesforce.com CEO Marc Benioff, who released a no-maintenance opus to the press on Tuesday. Rivals such as Salesforce.com are going to pound the maintenance cost drum. Here's the Benioff memo targeted at the likes of Oracle and SAP.

For ten years, we've been driven by a simple vision: The End of Software. Now it's time to take on a new challenge: The End of Maintenance.

Let me tell you about a customer that I met on our Cloudforce tour. This customer currently uses Siebel software to run her call center. She pays more than $15 million a year for the privilege of having to implement the updates that Siebel sends her. That does not include backup. Or disaster recovery. And of course, it does not guarantee that she will be using the latest technology. The maintenance agreement only assures her that her outdated software will continue to work. She is paying tolls on a road to nowhere.

We can help her, and many other customers, and deliver much more for a fraction of what they currently pay in maintenance. It's time to open up a new front in "The End of Software"- one that is long overdue.

It's time for The End of Maintenance.

Every year, companies spend billions on maintenance fees and get relatively little in return. Maintenance fees cover updates that are mostly patches and fixes, but they stop far short of the kind of innovation every that enterprise needs to survive. Companies pay to keep the past working and they end up doubling down on technology that can never keep up with their needs. The fees that companies pay have actually been rising, from something like 17% a few years ago to numbers more like 22% today. Every four or five years, companies are paying for their software all over again.

It's time to set these businesses free and make them successful in the Sales Cloud, Service Cloud and on our Force.com platform.

Our new mission begins at a critical time in the economy, when companies are questioning conventional wisdom as they never have before. That, of course, extends to their IT budgets as well. The CIO is in a tough spot right now. Corporate budgets are tightening. And our rivals in the legacy client-server world are using this opportunities to extract more money from their customers by raising maintenance fees. I call this phenomenon "the compression of IT" and it resonates with just about every CIO I speak with these days.

We have a better vision. We sell our customers a service and every customer is able to use the latest. Innovations are included. Upgrades are automatic and invisible. Customers' intellectual property of customizations and extensions is rigorously preserved, and carried forward without disruption.

The service gets better, not just less buggy. That's not what people are getting for all those fees that supposedly buy them "maintenance."

It's time to set these business people free: to give them the experience of being wildly successful in the Sales Cloud, the Service Cloud, and in their own unique applications that they can build on our Force.com platform. This is the time to do it, because this is when people need it: their IT budgets are tight, their business situations are critical, and their old-world software vendors are taking care of themselves instead of meeting the needs of their customers.

We've raised people's expectations for better alignment of business value with IT cost. We've earned our leadership position in enterprise cloud computing. It's time for us to set people free from paying more and more to get less and less. It's time for The End of Maintenance.

Aloha,

Marc

Corporate software makers SAP and Sybase are teaming up to make it easier for business users to access SAP's software on mobile devices such as Apple's iPhone.

SAP, which is the world's biggest maker of business management software, is already working with Research In Motion to develop applications for the BlackBerry. But now SAP says it will extend its software to other devices like the iPhone.

Sybase, which provides database software to large companies, already sells programs that let users access corporate applications and information on their mobile devices. But now it says it will work closely with SAP to customize the software.

"It's true we can already get you to SAP on mobile devices," John Chen, chairman, CEO and president of Sybase, said during a press conference in New York City. "But it doesn't work very well. It is very clunky. We need to get with the SAP engineers to make sure that the experience will be a rewarding one for customers."

Initially, the companies plan to focus development efforts on the iPhone, RIM's BlackBerry, and phones running Microsoft Windows Mobile. But eventually they will provide support for other mobile platforms.

Bill McDermott, president of Global Field Operations for SAP and a member of the SAP executive board, said during the press conference that SAP sees big opportunity for taking its business applications mobile throughout the world. The goal is to help companies make their workforce more productive while away from the office. He said many companies have already started coming up with their own solutions. But the work with Sybase will allow SAP to offer a solution that is easy to implement.

"The big breakthrough here is that we are offering this solution out-of-the-box," he said. "We are handling all the integration for you."

Smartphones are the fastest growing segment of the mobile phone market. And devices, such as the iPhone, have made consumers aware of how applications and software can be used on a mobile device. Apple has also made it easy to purchase and download applications through its App Store. Other companies such as RIM, Microsoft, Google, and Nokia, have followed Apple's lead and are launching their own application stores.

It's little surprise that corporate applications would be bubbling to the top of the list of applications users are interested in, especially as people's work life and home life become more intertwined.

This was originally posted at ZDNet's Between the Lines.

SAP on Monday unveiled a multifront sustainability push including the launch of an EHS--or environment, health, and safety--management application.

The company unveiled its plans at CeBit (statement). Among the moving parts:

• SAP has teamed with TechniData to offer line of EHS applications, dubbed SAP Environment, Health and Safety Management. The goal of the EHS application is to make sure corporate sustainability policies are met and ensure a company is meeting its regulatory targets. In other wordis trying to align business processes with the enterprise's green IT talks, SAP .

• SAP said it plans to cut its greenhouse gas emissions 51 percent from its 2007 levels by 2020. If successful, SAP will cut its carbon dioxide levels to year 2000 levels.

• And SAP announced that Peter Graf, will be the company's first chief sustainability officer. Graf will report to SAP Executive Board member Jim Hagermann Snabe.

In a blog post, Graf said:

Sustainability is about much more than environmental concerns or "being green". It's the ability to holistically manage economic, social and environmental risks and opportunities for increased profitability.

I'll be curious to see how this line of software sells amid weak IT spending.

In an animated--and sometimes tense--conversation with bloggers, SAP co-CEO Leo Apotheker said the software giant would step over a systems integrator if it would save an IT project.

That comment, which was in response to multiple questions about the triangle between consultants, SAP, and customers, illustrates how the enterprise application vendor is trying to end the days where it's a whipping boy for failed implementations.

SAP's Leo Apotheker.

(Credit: Michael Krigsman via ZDNet News)

"I don't give a s**t if it's Accenture or IBM. I care about the customer. I find it shocking people are walking around talking to customers and have no experience on (SAP). (Consultants) get hired of people and have no clue. It's annoying but that's a fact. Let's start by certifying people," said Apotheker. "If we believe (a project) takes 500 days and another partner says it's 5,000 days I'll do it for 500 and a fixed fee."

Despite that declaration, Apotheker said that he "can't boil the ocean" and that the sometimes unhappy triad of customer, SAP, and systems integrator can be complicated. The chat with Apotheker, which lasted about 45 minutes or illustrated a bit of a conundrum for me. On the surface, it would seem like a no-brainer that Apotheker puts the customer first. What company doesn't say that? However, Apotheker's statement is news in the world of SAP implementations, which need a lot of things to go right between the customer, integrator, and software vendor to work.

Vinnie Mirchandani, Michael Krigsman, and Brian Sommer drilled down on the systems integrator issue, the need for certifications and making implementations easier-assuming customers are already on SAP's most recent enterprise application suite. The overarching theme focused on how do companies prevent IT project disasters, which can literally put an enterprise out of business in a downturn.

"How can you avoid a project failure? You boil it down and make it simple," said Apotheker, who argued that Business Suite 7 was a big step toward making upgrades easier.

On certifications for consultants, Apotheker said they are necessary. SAP currently has certification programs, but SAP mentors--top players in the developer community--say the specifics are vague. Meanwhile, Business Suite 7 will add even more competencies to the equation. A developer could get certified on SOA, specific modules and processes and vertical industries.

How will this certification process be managed?

"It's a very hard question. We are not a university and it's not up to SAP to make a judgment on people's skills. We can only certify people on their knowledge," said Apotheker. "We will try to keep it at a reasonable level."

Certifications, however, aren't the only answer. There are legal issues over customer contracts with integrators--when can SAP jump in on a soon-to-fail project? "Everyone says 'It's a failed SAP project' and we get the black eye. Annoyingly enough there's a contract between customer and system integrator. What I want SAP to do is to push on customer to be articulate to know what they really want and also push on the system integrator. I've written to customers that you need to do 1, 2, 3, or your project will fail."

"The loyalty is always to the customer. Period," said Apotheker.

But when questioned whether that approach was actually practiced in the field amid relationships with big consulting firms, Apotheker got a little wound up. He denied the assertion that the customer may not always be front and center.

"I've been in the field all my life. That monster out there is my creature. Loyalty is to the customer. The obligation is to the customer," said Apotheker, noting that he has ended relationships with integrators over failed projects.

"We're living in interesting times. SAP is going to dedicate a huge amount of effort to help customers to find ways to use technology to come out of this environment faster," said Apotheker. "I'm totally focused on it."

See also:

• Systems integrators: The model has to change

• Is SAP really done with 'scary upgrades' and 'sleepless night' projects?

• SAP adds enterprise 2.0 features to latest suite; Twitter meets ERP

• SAP BusinessSuite 7: Twittery clouds?

• SAP touts modular approach; Launches Business Suite 7

• Lemons into Lemonade - Business Suite 7

SAP is taking its on-premise suite and giving it a SaaS-y spin.

According to a prebriefing with The Wall Street Journal, SAP will launch Business Suite 7, which will allow customers to pay for just the modules they use. I'll be at SAP's New York office Wednesday with a handful of Enterprise Irregulars to get the rundown.

SAP's Business Suite 7 approach is a new veneer on on-premise software to make it more competitive with software as a service offerings. Typically customers buy a suite designed to run the back office operations.

That brain surgery, however, is a really tough sell right now. Let's face it: in the current downturn no one wants all you can implement software projects. The return on investment is dicey and the timelines are too long. As a result, SAP is going with the pick-and-choose-your-module approach.

What remains to be seen is whether customers-and prospective customers-see SAP's new approach as a real rival to vendors like Salesforce.com.

It also remains to be seen if SAP can successfully sell software with this approach. SAP is used to selling big software packages with equally large licensing and maintenance fees. This approach requires a lot of small transactions.

Correction: Sybase reported a 13 percent increase in license revenue, based on constant currency.

Update at 7:49 a.m. PST, with comments from the conference call.

Sybase posted fourth-quarter results on Wednesday that sailed past Wall Street's earnings expectations.

With earnings driven by strong growth in its core database business, company shares jumped 7.8 percent to $27.87 in early-morning trading.

Revenues during the quarter rose to $305.1 million, up 3 percent over the same time a year ago. Wall Street was expecting the enterprise software company to make $300.3 million, according to Thomson Reuters.

Sybase reported net income of $47.3 million, or 59 cents a share, compared with net income of $73.5 million, or 81 cents a share, a year earlier.

When excluding one-time charges and special items, the company posted earnings of 78 cents a share, soundly beating Wall Street's expectations of 61 cents a share, according to Thomson Reuters.

"They really blew it out this quarter, " said Terry Tillman, an analyst at Raymond James & Associates. "The theme for them is, they have the right kind of products in this type of market. Their database had one of the strongest product cycles in a decade."

Sybase posted a 38 percent increase in database sales, as customers continued to spend on such enterprise software as their data capacity needs continued to grow, despite recessionary times, noted Tillman.

He also noted that customers have been increasingly responding well to efforts Sybase has made in retooling its database, which began in late 2005. The company's Advanced Server Enterprise 15, otherwise known as ASE 15, has gained traction, and Sybase has taken advantage of its database with additional features to sit on top of the software, such as analytics.

Tillman noted that business intelligence software is performing well in this recessionary climate, as customers are particularly eager to gain insight into their own businesses.

John Chen, Sybase CEO, said during the conference call: "Clearly, we are taking share from our (database) competitors with these results."

During the quarter, Sybase reported that new licenses grew 8 percent to $122.1 million, compared with a year ago, when accounting for changes in currency. Based on constant currency, that figure rose 13 percent for the quarter. Investors tend to keep a keen eye on new license revenue because it serves as an indicator for future business in other parts of Sybase, from tie-on products and services to maintenance and support.

Sybase also provided guidance for how it expects to perform throughout 2009, a move that many companies are shying away from in these tumultuous economic times, as customers' orders are becoming increasingly difficult to predict.

The company expects to report revenues of $1.14 billion and earnings, excluding charges and special items, of $2.16 to $2.21 a share for 2009. The revenue forecast is slightly below Wall Street's expectations of $1.16 billion but higher than analysts' predictions of $2.14 a share.

"Customers are still buying and spending, but they're highly selective," Chen said. "While they are less willing to spend on professional services, they are still willing to spend on mission critical applications."

Some of those critical enterprise software applications include security software, real-time reporting, and risk management business intelligence software.

Chen noted, however, that sales cycles have been a little bit lengthened.