SAP A.G. (SAP) reported weak software sales for its third quarter and forecast softness for the rest of the year on Wednesday; suggesting changes in the market for enterprise software are presenting challenges for the German giant and its key competitors.

Walldorf, Germany-based SAP makes accounting, payroll and human resources software used by big companies to manage their operations. For years, SAP made fat profits on both the initial sale of the software and lucrative maintenance revenue from support, fixes and upgrades.

Although SAP isn't the only company finding corporate customers unwilling to spend, the weak outlook suggests its model may be under pressures that go beyond the current economic situation. Faced with the worst slowdown in decades, many big companies have grown hesitant to buy big- ticket software items and are instead studying low-cost alternatives provided by Internet-based providers like Salesforce.com Inc. (CRM) and Netsuite Inc. (N). Meanwhile, there is evidence that some corporations are seeking to renegotiate their software maintenance contracts at lower levels or get more value for those contracts.

Together, the trends suggest a changing environment for SAP, as well as competitor Oracle Corp. (ORCL). SAP and Oracle have already penetrated most of the world's big companies. SAP, in particular, has little room to grow its software business with multinationals and other corporate titans. At the same time, the rise of the Internet-based software, known as "software as a service," is luring customers from both companies, because it can often be provided more cheaply than installed software.

"When you've already sold everything to the large enterprise, you've got to think of something new," said R "Ray" Wang, an analyst with Altimeter Group. Wang said software as a service was posting annual revenue growth at levels between 30% and 40%, while on-premise business software is falling at about the same rate.

SAP spokesman Saswato Das acknowledged the company's customers were changing the way they buy software, opting for smaller packages than in the past. "Customers are continuing to buy, but in smaller chunks," he said.

On Wednesday, SAP said software and software-related services would drop as much as 8% from the EUR8.62 billion in posted in 2008. The company had previously forecast sales would fall between 4% and 6%.

Worryingly, what SAP describes as "software and software-related services,"--primarily maintenance, accounting for over 70% of its sales-- fell 3% in the quarter to EUR1.9B.

The news fueled a selloff in SAP shares, as well as those of Oracle and other software companies. In late afternoon trading, SAP was down 10%, at $46.03, while Oracle had dropped 2.6%, to $21.31.

Maintenance is usually a stable revenue stream because customers need those services in order to guarantee their operations run smoothly. Analysts have recently indicated that challenges from third-party product support companies, like closely held Rimini Street, may be taking revenue. Rimini Street CEO Seth Ravin said about 30% of his new business pipeline was SAP customers.

Concern over SAP's maintenance revenues has mounted in recent weeks. On Oct. 21, SAP said it had renewed a maintenance contract with its largest customer, Siemens A.G. (SI) that was reportedly worth as little as half the original value.

SAP's Das declined to comment on the value of the deal.

Analysts say the deal could be an indication of a broader shift in the way companies negotiate with SAP and other software vendors.

"The Siemens negotiation may be a harbinger of change," Patrick Walravens, an analyst at JMP Securities, wrote in a research note. "Maintenance (revenues) may no longer be an entitlement."

Oracle also generates about half of its $20 billion plus in annual revenues from maintenance revenue, but the company's maintenance revenues have held up better during the recession. It also offers a broader range of corporate tools like databases, which may hedge it better than SAP. It is also diversifying into hardware through its pending acquisition of Sun Microsystems Inc. (JAVA).

Altimeter's Wang says that Oracle's broader product portfolio will likely help it protect these recurring revenues. Nevertheless, the implications of SAP's performance are worrying for Oracle too. "A lot of customers are getting concessions in maintenance contracts from both these companies," Wang said.

An Oracle spokeswoman declined to comment.

-By Jessica Hodgson, Dow Jones Newswires; 415-439-6455; jessica.hodgson@dowjones.com