IT budgets, artificially boosted by the fall in employee travel and the need for work-from-home solutions during the pandemic, are coming under pressure again as the world reopens, and SAP—which also owns online expense management service Concur—is seeing the shift in the numbers.
“We were benefiting, in particular in the first part of the pandemic, from obvious savings in travel, facilities, car fleet, and other areas that were not so much in demand. But this is already behind us in the second half-year. We have actually already returned to much more normalized spending behavior,” SAP CFO Luka Mucic said during a conference call to discuss the firm’s results for the fourth quarter of 2021.
Despite this shift, SAP is optimistic about demand for its enterprise software and related services, with cloud revenue up 17% year on year to around €9.4 billion (US$10.7 billion) in 2021, slightly outpacing the decline in revenue from licensing and support of its legacy products.
In comparison, in its most recent quarterly results, enterprise software rival Oracle reported cloud revenue (IaaS and SaaS) of around $2.7 billion for the three months to November 30, up 22% year on year and approaching $11 billion in annualized revenue.
SAP wants to accelerate the shift away from legacy products to more than double its cloud revenue by 2025.
CEO Christian Klein said more CIOs have been renewing their contracts with SAP since its introduction of the all-in-one, cloud-based RISE offering a year ago brought it closer to customers.
“We are much, much closer, and we saw this already has a very positive impact on renewals,” Klein said during the same conference call.
Migration motivation
Ever since SAP introduced its cloud-based ERP suite, S/4HANA, in 2015 it has been encouraging customers to migrate from the legacy Business Suite 7 offering built on its older ECC technology and typically run on-premises.
In recent years, it has multiplied the incentives for CIOs to make the move: In February 2020 customers’ reluctance to migrate forced SAP to extend support for ECC through the end of 2027—two years’ extra support, with a surcharge of 2 percent of the annual license fee. And a year later SAP introduced RISE, which Klein describes as “business transformation as a service,” with the goal of making it easier for customers to contemplate a move to the cloud.
If you’re still one of SAP’s 30,000 on-premises ERP customers, expect a call from the RISE reps soon.
SAP’s customers are answering the call to the cloud. 5,000 of them are running S/4HANA there so far: In the US and Europe, it’s the larger organizations that are driving the shift, but in Asia, Latin America, …….
Source: https://www.cio.com/article/304219/sap-sees-rise-in-its-fourth-quarter-revenue.html
