Planning for 2003: Still arguing over your 2003 EMEA quota?

Cambashi's econometric model suggests that 2003 will not be as bad as 2002, with revenue growth of just over 10% in Europe for the Enterprise Applications vendors, although this is still well short of the growth seen in the late 1990s. However, 2003 will see a further decline of 3-5% for the Engineering Applications vendors.

Cambashi's European projections for 2002 reveal another tough year for virtually everyone except SAP. We still expect a stronger performance in the fourth quarter, but users will not be in a "spend it or lose it" mood. The graph shows that seasonality still matters.

Enterprise Applications vendors are expected to see flat European revenues for the 2002 calendar year. Europe will have fared better than the worldwide average, with global revenues expected to decline almost 6% from 2001. License revenues have been hardest hit, Europe falling by almost 9%, while global license revenues will fall by around 16%. SAP's upgrade and cross-sell performance prevented European Enterprise Applications from suffering a serious downturn. Without SAP's contribution, 2002 vendor revenues in Europe would have been 12% weaker than 2001 (see the graphs).

Engineering Applications vendors will have seen an almost 8% decline in revenues in Europe during 2002. In Engineering, Europe is the hardest hit region. While global revenues fell, this was only by around 5%. Both traditional CAD and the newer design infrastructure applications suffered. In 2003, Engineering vendors are likely to have a tougher time than the Enterprise vendors whatever happens.

Despite this gloomy prediction, there will still be niches where there will be growth, even for the Engineering vendors. For example, higher consumer requirements in the food industry mean that food manufacturers have to re-equip. The key is to focus resources towards these niches, rather than attempting to serve the whole market equally.

The key input to Cambashi's 2003 forecast model is the forecast investment from the main scenario in PricewaterhouseCoopers (PwC) European Economic Outlook. PwC assumes that Germany turns around in 2003 (there is a gloomier scenario where Germany goes into a deflationary cycle and a war causes a new oil shock). This econometric model, applied to EITO data and vendors' quarterly results, predicts vendor revenue growth rates for Enterprise Applications and Engineering Applications.

As with all forecasts, this is not a recommendation to buy or sell shares either in specific companies or application areas.

By the time of our next e-zine we will have most of the Q4 2002 results from vendors and a new investment forecast from the economists to plug into our model. We recommend quarterly planning in the current environment, or at least quarterly arguing about the share of the quota that Europe should carry!

Dan Roberts

Also in this issue:

Feature Article: A fistful of orders?
Times are tough. The vendors have sent their toughest sales representatives into town, but they've come back bruised from the encounter saying they were beaten by "the user with no budget". What next? Mike Evans has some ideas to share.

Hot Topic: Euroland and Pricing Transparency?
The subject of European pricing and the implementation of the Euro-zone have never been more topical, with consumer strikes in Greece and German complaints about the "round-up" effect of the Euro. Nick Ballard takes a closer look.

Book Review: Convergence Marketing
Bob Brown reviews a book which lives up to the old adage; you can't judge a book by its cover.

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