No. of Recommendations: 2
SAP are doing all the right things, but their moat is crumbling and the sign of that hinge on rise and fall of professional services.
This may be so, perhaps implementations will be much faster and cheaper meaning much less gravy from overpriced consultants. But I don't see how that (by itself) would affect the revenue from license sales and leasing nor cloud charges. If anything, cheaper implementations might drive more sales at the margin, offsetting things a bit?
The point being that they are not primarily a consultancy. From what I can determine, the gross profit on the services segment is a smallish piece of the pie. Less than 10% of operating profit according to my wholly unreliable AI friend, though I don't trust that. It notes that services revenue is ~13% of the total and has a high expense profile relative to license/cloud, so it may account for a lower fraction of operating profit.
Jim
