Management consultancy Ernst & Young has been forced to lay off one fifth of its SAP consultants in the UK.
The redundancies have sparked fears that SAP is creaming off services in-house to refill depleted coffers due to shrinking revenue from ERP systems. This, combined with a market slowdown - brought on by factors such as Year 2000 - is damaging business for SAP's key partners, the big consultancies and system integrators.
Dennis Keeling, chief executive of Basda, said: "SAP is expanding its consultancy in competition with the Big Six and the Big Six are losing out."
Both Ernst & Young and SAP downplayed any possible rifts in their relationship. An Ernst & Young spokeswoman told VNU Newswire: "The management consultancy arm of Ernst & Young in the UK continues to work very closely with SAP and other third party vendors and our clients to ensure their needs are being met."
"To this end, we are continually reviewing the type of service that our clients require to meet those needs and because we have recognised that there has been a change in the market, we have unfortunately on this occasion had to make 10 people redundant," she admitted.
Peter Robertshaw, manager of product marketing for SAP UK, denied the company was stealing services revenue from its partners.
"SAP is not trying to cannibalise or eat up its service revenue. SAP UK only became as successful because of its partner strategy," he said.
"It is true that SAP is moving into doing more services and consulting, but we want to keep the figure at 10 per cent and keep it steady by expanding the size of the market," he claimed.
Analysts say the market is slowing down, as it is now too late for companies to solve their Year 2000 problems with time consuming ERP implementations, while other projects are put on hold until after the millennium.
Wendy Haylock, director of communications at Basda, said there was a gap between projects finishing now and new ones starting next year.
"ERP vendors are experiencing a slowdown as companies are waiting until after the millennium to make major IT decisions. Mid range people are feeling the draft," she said.
Ben Pring, principal analyst Gartner Group analyst, said: "The market place is cooler than it was. It has been driven by one issue in the last three years - Year 2000. Companies have replaced whole systems to become millennium compliant, but now it is too late to do Y2K using ERP."
"The growth rate figures are about 25 per cent year on year compared to 35 per cent the year before. The slow down in the market will be more aggressive next year," he warned.
Yesterday afternoon SAP announced results for its first half ending 30 June, showing profit down by seven per cent compared to the same period in 1998. (see Newswire 21 July)
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