SAP’s 2012 results foreshadow solid growth prospects for its European business, says the company’s EMEA president. Franck Cohen stated that the firm’s weakened 2012 profitability is a short term price to pay for longer term growth in the UK and the continent.
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The company’s preliminary financial results for the fourth quarter and full year ended 31 December, 2012 show that it made an operating profit of €4.06bn on €16.22bn revenue in 2012, a margin of 25%. This contrasts with an operating margin of 34.3% in 2011, a fall of 9.3%.
The company’s software revenue for the EMEA region was €937 million, compared with €865 million in 2011, an increase of 8%. Total software revenue was €4.66bn, of which HANA sales were €392m, around 8%. The company’s relatively new and emerging areas – Hana, cloud, and mobile accounted for revenue of €1.464bn, 31% of software revenue, 9% of overall revenue.
“HANA is a significant part of our revenue, but it is an even more significant part of our growth”, said Cohen. “It is a growth engine for us in Europe. There are so many situations where real time can make a difference.
“Customers are looking to do new things with it, and with Business Suite on HANA”. He cited Faurecia, an automotive supplier, who is using HANA to reduce the inventory they need to hold to supply parts on a short lead time basis.
“The most data intensive sectors will have the most to gain from HANA, retail, banking and telecom”, he added.
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He confirmed that SAP in Europe signed up 3,700 new names in 2012, 500 of them above €1bn in revenue.
“There is a higher cost of sales to gain those new customers. But they will be with us for 20 years”.
Cloud investment, too, is having an “impact on short term profitability”, he said, “but this increase in market share is important for the future”.
As for what SAP is doing to make it more attractive for existing customers to migrate from on-premise to the cloud, he said: “we are offering to technically manage the transition”. And the firm is offering the capability to use on-premise and cloud in a modular fashion. “For example, you can still get the benefit of the Ariba procurement network as a subscriber to SAP on-premise. The same goes for SuccessFactors. You could just take talent management from the cloud. We try to be as non-disruptive as possible”, he said.
The company’s growth in EMEA (12%) lagged the Americas (24%) and Asia Pacific (20%). Cohen put this down to Asian dynamism and the US having a booming cloud market. He expects the UK, the Nordics and the Netherlands to adopt cloud more quickly than the rest of the continent. “But it will come. It is like the pattern of mobile penetration, north to south in the 1990s.
“Cloud is a necessity due to economic factors. The license model will more from perpetual to on demand”, he concluded.