SAP cloud revenue boosted by Microsoft deal

A deal with Microsoft has led to SAP’s cloud growth almost doubling, according to the company’s third-quarter 2019 results.

In its latest quarterly results, SAP reported revenue of €6.8bn, up 13% from the previous year, and cloud and software revenue of €5.6bn, an increase of 12%. Cloud revenue accounted for €1.8bn of the company’s revenue.

It also reported that new cloud bookings were up by 39% to €572m and up by 51% excluding infrastructure-as-a-service (IaaS). It said a new partnership with Microsoft had contributed 18% to the 39% growth in new cloud bookings.

SAP also reported that it had added 500 S/4 Hana customers in the quarter, and claimed there are now more than 12,000 customers for the cloud-based enterprise resource planning (ERP) platform, up 25% year on year. In the third quarter, almost 40% of the additional S/4 Hana customers were brand new customers to SAP, it said.

A new agreement with Microsoft is set to accelerate this adoption, according to SAP. “This partnership will both accelerate and simplify customer migration to S/4 Hana on Microsoft Azure,” it said.

Through the partnership, said SAP, a global network of system integrators will offer holistic bundles that provide customers with unified reference architectures for S/4 Hana on Microsoft Azure, roadmaps and market-approved journeys.

As part of the agreement, Microsoft plans to resell components of SAP Cloud Platform alongside Azure. SAP said the offering is aimed at easing the migration of SAP ERP and SAP S/4 Hana customers from on-premise to public cloud.

“This partnership is all about reducing complexity and minimising costs for customers as they move to SAP S/4 Hana in the cloud,” said Jennifer Morgan, co-chief executive officer of SAP. “Bringing together the power of SAP and Microsoft provides customers with the assurance of working with two industry leaders, so they can confidently and efficiently transition into intelligent enterprises.”

Judson Althoff, executive vice-president, worldwide commercial business, at Microsoft, said: “SAP’s decision to select Microsoft Azure as its preferred partner deepens the relationship between our two companies in a differentiated way and signals a shared commitment to fostering the growth of the cloud ecosystem.”

Earlier this month, Bill McDermott stepped down as CEO of SAP. At the time, Liz Herbert, a principal analyst at Forrester, noted that the company now had an opportunity to shift from a pure sales strategy to one that has more product focus. In a blog post, Herbert wrote: “Most customers are still primarily struggling with whether/when/how to move to S/4 Hana, defining the business case for the move, deciding which SAP products to keep, and figuring out their cloud journey as it relates to SAP.

“This change will likely result in a back-to-basics, increased focus on this generational product shift of ECC moving to S/4 – which could be a good thing for the many SAP customers worried about 2025 (the minimum date SAP has committed to continue ECC support) and feeling concerned about SAP’s ability to execute on promises.”