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SAP's financials point to boom in cloud and Hana

SAP is steadily growing its cloud business, but on-premise software licensing and support remain the cash cows

SAP grew its cloud business by a third in the first quarter of 2016.

Cloud and cloud support revenue increased to €677m, while it took 23% more cloud subscription bookings in the quarter, generating €145m cloud revenue.

In its latest financial report, the company stated: “The rapidly growing cloud business, together with solid growth in support revenue, drove a record share of more predictable revenue.

“The total of cloud subscriptions and support revenue and software support revenue reached 69% share of total revenue in the first quarter of 2016.”

In 2015, the company reported cloud revenues of €2.3bn,11% of its overall revenue for the 2015 financial year. SAP forecast its cloud business would grow to €3bn by the end of 2016, an increase of €400m compared with 2015. 

But moving to cloud-based subscription licensing takes time, and it remains half the size of its on-premise software business, which the company expects to grow to €6.7bn by the end of 2016.

SAP also increased the take up of its in-memory Hana database, which powers the latest S4 version of its enterprise resource planning (ERP) system.

SAP said it added more than 500 S/4Hana customers in the quarter, of which approximately 30% are net new SAP customers.

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Bill McDermott, CEO of SAP, said: “SAP’s fundamental growth drivers are rock solid, from our best-in-class S/4Hana applications to our completeness of vision in the cloud.”

Its success with S/4Hana is largely on-premise. In a recent Computer Weekly article, Cormac Watters, managing director UK and Ireland at SAP, said: “Most customers will want to move to the cloud in their own time. There are very few large customers who will move en masse to the cloud.”

Watters added that he was seeing a lot of interest in S/4Hana, describing it as “the digital core of SAP”, which he said was catching a new wave of ERP in the UK and Europe, the Middle East and Africa.

But in-memory databases, such as Hana, which powers S4, are hugely expensive. Some SAP customers, such as Centrica, are starting to invest in cheaper Hadoop cluster to power analytics for the ERP system.

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