Once software has been well developed enough to do almost everything users want, it becomes a commodity, but not necessarily fungible. I mentioned word processing as an example. Most packages do anything that a user could conceivably want (in fact are so full featured that they do more than most users want.)Theoretically they are equal, but despite this there is usually one or two big winners , and lots of small losers. They aren't truly fungible because while they are functionally interchangeable, they are not user interchangeable without a new learning curve. The costs of the learning curve, and the value of having the same program as others in your office insure that one company sells the most and makes the big profits. I seriously doubt that ERP has come close to reaching the degree of similarity seen in word processors or spread sheets. However, the market perception seems to be that ERP is headed in that direction and that profit margins will shrink. As you know, in the stock market, perceptions are more important than reality, at least in the short term.
Economists are the last ones to ask about recession. Their past record in forecasting these has been terrible. While the stock market has forecast more recessions than actually arrived, it hasn't missed any either. It's not so much that the market has written off PSFT, it has written off the whole ERP group. I've never been able to get a grip on how long ahead the market anticipates- it usually seems to be about 6 to 9 months but varies widely. I'm a long term investor, and plan to continue holding both SAP and PSFT, who I believe will turn out to be the big winners. You made a good point about the problem being more deferrals than cancellations. I think that competitive pressures will force most companies into ERP eventually. Recognizing market reality also, I have reduced my exposure in the last few months but will keep core holdings. I'm tempted to do some averaging down, but in the past this has usually turned out to be a mistake. Maybe I'll put it on my list for purchase if there is some climactic high volume capitulation day ending this bear.
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