SAP has pared back its own business travel. It probably had those cuts in mind when it lowered forecasts for its Concur unit, which offers travel expense management software.
Enterprise software giant SAP reported earnings on Monday and suffered the largest one-day plunge in its stock price in 24 years. While SAP saw weakness across its units during the quarter, its business travel brand Concur has seen the sharpest drops in revenue.
The company revealed noteworthy details about the performance of Concur, an expense-accounting and travel-booking platform mainly used by business travelers. SAP on Monday downwardly revised its forecast for the unit’s performance, saying it expected business travel and related software revenue would be worse-than-expected through December at least.
Concur’s revenue was down by 11 percent year-over-year in the quarter, executives said during an earnings call. That figure reflects a worse loss than it first appears. In typical quarters before the pandemic quarters, the unit had grown its revenues “in the teens” percentage-wise year-over-year, executives said.
The drop in business travel hits close to home for the Walldorf, Germany-based company.
“We are very cautious ourselves when it comes to business travel,” said Luka Mucic, SAP’s chief financial officer, in an interview with Bloomberg News TV.
“To be quite open, we are going to save at SAP the lion’s share of our discretionary spend reductions, which are going to amount to about $1 billion [for the year], the majority of this will come from reduced business travel,” Mucic said.
Executives were at pains to say they were satisfied with how Concur is being managed but were responding instead to poor sales prospects. Concur, which SAP bought for $8.3 billion in 2014, has been one of the company’s growth stars, though it’s still unclear if it had earned back the premium acquisition price.
“[Cloud-based] solutions like Concur will actually consolidate the market,” Mucic told Bloomberg News. “They’re by far the market-leading solution in travel and expense, and the end of the crisis will be an opportunity for them to increase their share.”
Many analysts agree that Concur will likely take share of large enterprise accounts in the long-term. Yet the sector does see increased cloud-based competition in the small-to-medium-sized segment of the market, however. TripActions entered the travel expenses segment this month. Certify, Chrome River, and Divvy have also been trying to take share in the so-called long-tail of businesses.
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Photo credit: Lufthansa Group's first-class lounge at Munich Airport. Business travel has been hurt by the pandemic. Software giant SAP reported that its business travel expense management unit Concur saw revenue drop 11 percent year-over-year in the quarter. Lufthansa Group