SAP and the cloud - a success story?
And the providers also because they do not want to miss the boat on the coming cloud business and want (or need) to be technically innovative. The big players such as IBM, Microsoft, Oracle and SAP are investing heavily in the cloud business and impressing with positive growth rates; no one who does not want to become a cloud provider sooner or later.
"SAP is a cloud company driven by SAP Hana in-memory technology. We have 110 million cloud subscribers and 41 state-of-the-art data centers around the world."
it says on the SAP website in the "Cloud Solutions" section.
And then the numbers: In 2016, SAP's cloud subscription and support revenues reached approximately 3 billion euros, an increase of 30 percent over the previous year. Measured against the total revenue of 22 billion euros, that is still almost 14 percent that SAP now generates with its cloud business.
Cloud is still a long way from becoming the main revenue driver, but the numbers and growth rates show the trend.
So, ERP on premise - all water under the bridge? You might almost think so when you read all this. However, it is surprising that, for example, in the last DSAG investment survey, only 1.3 percent of respondents see S/4 Hana Cloud as a main area of investment; ERP in the cloud therefore does not (yet) seem to be the megatrend among users.
Now, one might assume that the survey was only conducted in the German-speaking area and that other countries and regions would be more open to the topic of cloud - and that this is precisely what is reflected in SAP's figures.
However, this cannot be deduced from the figures because there is no corresponding breakdown. Nor is it possible to find out from the annual report exactly which areas the cloud figures come from.
SAP is in good company here with the other big players in the industry, each of whom has its own definition of cloud and does not really provide a transparent breakdown of what is included in cloud revenue. This has already been criticized by analysts from Gartner.
SAP and its peer group cannot be blamed for this, however, because the breakdown, which would certainly interest users and market experts, is not necessary for accounting purposes.
Nevertheless, there is a strong presumption that cloud revenues are not yet generated in the core business, software rental for ERP use, but mainly come from recent acquisitions: SuccessFactors, Hybris or Concur.
This observation in no way diminishes SAP's cloud success; SAP is definitely moving in a forward-looking direction with these acquisitions and will certainly receive important impetus for its core ERP business from the new business areas.
However, as a user, provider and market observer, it is important to keep a sharp eye on this. The cloud business will only become a real success story without any ifs and buts when the core ERP business also benefits from it.
The first promising steps have been taken - but of course the user must also follow suit. S/4 Hana Cloud will come and noticeably gain market share, even if the solution may be called something completely different when the time comes.
Which also means that it will not happen in the short term. Particularly in the corporate environment, the traditional SAP clientele, there will have to be some rethinking, a new sense of security and a demand for clear migration paths before outsourcing the core ERP application to the cloud becomes a valid option.
The development of SAP in the next few years remains exciting - and so does the precise analysis of the annual cloud figures.
