SAP Looks To Improve Worker Productivity

| About: SAP AG (SAP)

While Oracle (NASDAQ:ORCL) has been buying up applications software makers to grow, rival SAP has been bulking up its sales force. Now it expects them to actually bring in some more sales.

The CIO Weblog: SAP to go slow on hiring

An article in Bloomberg highlights the plan to reduce hiring in SAP, as indicated by Claus Heinrich, an SAP board member in charge of personnel. The ratio of new software engineers to total new hires will drop in 2007 from more than 50 percent this year, said Claus Heinrich, in an interview. Expansion of the sales force will also decelerate as SAP relies more on the Internet to sell to smaller companies. “It’s clear that we peaked in 2006.'’

SAP plans to hire engineers at a lower pace next year and focus on improving employee productivity after expanding its workforce by about 20 percent in two years.

There is little doubt that application software is a maturing industry, and that more salespeople aren’t likely to translate into significantly higher sales. We prefer Oracle’s strategy, and wonder if the slowdown in hiring signals SAP’s realization that they aren’t as likely to get the productivity they were hoping for from new hires.

SAP 1-yr chart:

SAP 1-yr chart