The atmosphere in a small conference room at the Ritz-Carlton Hotel in New York City was upbeat and relaxed when the SAP Executive Board met with around twenty financial analysts at the beginning of February. The guests were hand-picked.
We quickly got down to business: What is the real state of SAP? Everyone is pushing into the cloud. New and existing American customers are interested in the model, but skepticism prevails in Europe.
The latest investment survey by the DSAG user association puts it cautiously:
"The Hana cloud platform does not yet seem to have fully arrived on the market, with only one percent of respondents planning to invest in it."
Nevertheless, SAP CFO Luka Mucic announced breathtaking cloud growth and sustained revenue success (non-IFRS). At the moment, however, every better IT hardware and software provider seems to be celebrating sensational success with cloud computing.
A Gartner analyst recently took a closer look at this phenomenon in a research note. His conclusion: there is hardly any other IT area where there is as much innovative trickery as in the cloud.
For outsiders, the figures presented are hardly comprehensible and verifiable. Of course, cloud business will also change sales revenues, margins and the business model at SAP.
But it is hard to guess which direction it will take at the moment. And Mucic is not exactly making it easy for the financial world. The revenue areas overlap on one and the same slide, making it difficult to determine how successful cloud computing really is in the end, see the pie chart:
Cloud subscription and cloud support revenue is expected to account for around 29 percent of SAP's total revenue of EUR 26 to 28 billion in 2020.
The rest of the revenue (71%) comes from other products such as on-premise licenses, maintenance and consulting. At the same time, Mucic shows that general maintenance revenue and cloud subscription and maintenance revenue are expected to account for 70 to 75 percent of total revenue in 2020.
Where the rest of the revenue (20 to 25 percent) is to come from is not specified in detail. You don't have to be a financial analyst to realize that even in 2020, a large proportion of SAP revenue will still come from maintenance fees for on-premise systems.
As Sabine Gusbeth writes in Euro magazine (3/2016, p. 33), it is clear that the non-IFRS figures are being fiddled with almost at will. SAP is pinning almost all its hopes on the cloud, and if the ERP group's plans are anything to go by, it really could be an overwhelming success (see Cloud Subscription Model Simulation).
But who is prepared to pay 45 percent of the license list price annually for their SAP cloud from the fourth year of the contract? DSAG Chief Technology Officer Hans-Achim Quitmann, Group CIO at Carl Zeiss in Aalen, already called for a more realistic pricing model at an event in Hamburg in mid-February, otherwise HEC (Hana Enterprise Cloud) will not happen.
Mucic's figures shone and dazzled the analysts at the Ritz-Carlton, but it is still undecided whether they will also endure in the SAP community.
