SAP ramps up cloud play as pandemic bites

German software giant SAP is doubling down on its cloud ambitions, citing COVID-19 as “an accelerator for transformation”.

The vendor touted its SAP Business Technology Platform (BTP) as the foundation for all SAP applications, integration, customer and partner ecosystem extensions, as well as new innovations, such as ‘industry cloud’ and ‘business network’, in its third quarter financials, published on 25 October. 

“COVID-19 has created an inflection point for our customers,” SAP CEO Christian Klein told shareholders. “The move to the cloud combined with a true business transformation has become a must for enterprises, to gain resiliency and position them to emerge stronger out of the crisis. 

“Together with our customers and partners we will co-innovate and reinvent how businesses run in a digital world. SAP will accelerate growth in the cloud to more than €22 billion in 2025 and expand the share of more predictable revenue to approximately 85 per cent,” he added. 

The vendor said it was responding to market demands, as businesses look to move to the cloud at an accelerated speed for greater resiliency and agility, by providing the tools to help its customers migrate their existing IT environments to the cloud and transform their businesses, end-to-end.

In addition, SAP said it plans to accelerate the modernisation of its cloud delivery capabilities, resulting in a “harmonised delivery infrastructure” earlier than planned. As a result, SAP hopes to significantly increase the efficiency and resiliency of its cloud delivery operations.

Moreover, the company plans to increase research and development investments to accelerate its customers’ transformation in the cloud and to establish a leading position in new categories like ‘industry cloud’, it said.

The strategic update comes as SAP completed a third quarter with relatively stable total revenue and showing an improvement in operating profit and margins — at least in non- International Financial Reporting Standards (IFRS) terms, at constant currencies.

SAP’s cloud revenue for the quarter grew 11 per cent year-over-year, to €1.98 billion (IFRS), while total revenue fell by 4 per cent, year-on-year, to €6.54 billion (IFRS and non-IFRS).

SAP said some of its customers, particularly those in hard-hit industries, continue to be impacted by the economic consequences of the COVID-19 pandemic. 

As a result, there has been greater scrutiny of larger projects, with transactional revenue continuing to be impacted, especially in SAP’s Concur offering, where business travel-related revenues have yet to see a meaningful recovery. 

However, SAP said it continues to serve its customers effectively with an embedded virtual sales and remote implementation strategy. In the first nine months of 2020, for example, approximately 28,000 of the vendor’s customers went live with SAP solutions. 

Regardless, the company said that to protect profitability, it retains a disciplined approach to hiring and discretionary spend while capturing natural savings from things like lower travel, facility-related costs and virtual events.