The Big Picture: Dichotomy In Revenue Growth for Q2 CY Quarterly Revenues

As many main app vendors continue to lower guidance on earnings, this calendar year Q2 public company quarterly earnings analysis shows that larger vendors and specialty vendors such as SAP, Oracle, Lawson, and Deltek gain ground in license revenue growth while growth for the mid-market players now comes from maintenance and services. SaaS vendors all appear to be growing subscription revenue at breakneck paces with Concur (76%), SFDC (50%), SAP (45%), and NetSuite (43%), leading the charge in year over year quarterly revenue growth.

As mentioned in past conversations, the leading indicator for long term growth is new software license sales which drive recurring revenue for vendors with perpetual license models. The trailing number is maintenance revenues which track retention. In the SaaS world this would be subscription revenue. Renewals represent retention.

Here's the break down of year over year quarterly new license sales numbers/recurring revenues:

Enterprise Software Vendors with Perpetual License Revenues (YoY)

• CDC Software - License down 20% to $14.8M / Maintenance up 26% to $26.8M / Services up 12% to $27M
  
• Deltek - License up 18% to $22.1M / Maintenance up 11.3% to $28.3M / Services up 12.9% to $22.3M
  
• Epicor Software - License down 3% to$24.3M /Maintenance up 23% to $48.7M / Services up 21% to $41M
• IFS - License down 27% to SKr 111M ($17.2M) /Maintenance flat at SKr 165M ($25.7M) / Services revenue up 9.5% to SKr 324M ($94.2M)
  
• Lawson Software - License up 3% to $41.7M/ Maintenance up 14.4% to $88.9M / Services up 8% to $102.4M
  
• Oracle (Apps) - License up 36% to $989M / Maintenance up 17.7% to $1.044B / Services up 16.8% to $957M
  
• QAD - License down 23 % to $11.4M / Maintenance up 8% to $34.5M / Services up 34% to $23.6M
  
• SAP - License up 25% to 898€ / Maintenance up 22% to $1.151B / Services up 21% to 2.06B€

Enterprise Software Vendors with Subscription Revenues (YoY)

• Concur - Subscriptions up 76% to $53M
• NetSuite - Up 43% to $36.6M
• Oracle (On Demand) - Subscriptions up 28.5% to $194M
  
• Right Now - Subscriptions up 25% to $24.5M
• SAP - Subscriptions up 45% to $64M
  
• SalesForce.com - Subscriptions up 50% to $240M
  

The bottom line
Growth for most vendors continues to be driven by maintenance and services revenues. The impact on customers will be a continued squeeze to increase maintenance fees and an increase in the number of service offerings delivered by the vendor. Users should begin their long term account planning and right set expectations. One place to start is to align your business drivers with a long term apps strategy.

Your turn.
Are you seeing a push by your vendor's sales person to up the size of the maintenance contract? Are you seeing more value added offerings in services? Is it getting more difficult to reduce the overall cost of operating your apps? Look forward to hearing from you! Feel free to post your comments here or send me an email at rwang0@gmail.com .

(The personal contents in this blog do not reflect the opinions, ideas, thoughts, points of view, and any other potential attribution of my current, past, or future employers.)
Copyrighted 2008 by R Wang. All rights reserved