The Six Five team does a deep dive into SAP’s financial results.
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Transcript:
Patrick Moorhead: But hey, let’s dive into SAP here. And my gosh, this is the second week that we’ve talked about SAP here. Two things here. First of all, stock got hammered because of a perception of risk about cash. And I got to tell you, that is one of the weirdest things, particularly of a fiscally responsible company like SAP. You literally, people, believed that the company is worth a lot less because it was down 9% on the Frankfurt because of how it talked about cash in the future. And for a company like SAP, that’s just, that’s bizarre to me. If Robinhood would make a statement like that, I’d be like, “Oh my gosh, something’s going on there? Something’s going wrong.” But I don’t want that to overshadow what the company did in cloud.
And I’ll reiterate, SAP and cloud were not two statements that you would ever use together a lot in the previous five years, but the different approach that they took. So first of all, they do have some SaaS properties, particularly in European payments. But the company leverages IAS players to deliver its cloud. And hence, it’s a hybrid cloud play and they’re crushing it. Fourth quarter, cloud back log up 32%. Cloud revenue up 28%. SaaS and PaaS, like I said, up 37%. S/4HANA cloud, up 65%. So dare I say it, SAP is a cloud play, Daniel.
Daniel Newman: Well, you bring up a really interesting point. And like I said, we don’t probably have to dig too far into this one because we talked about it last week, Pat. I mean, SAP’s a very fiduciary, thoughtful company. They’re not necessarily known for moving fast. They’ve made some inroads into cloud, some have been more successful than others.
Remember they still hold a big chunk of Qualtrics, but they did spin it off in order to provide and unlock more value from that acquisition. They’ve made some interesting SaaS-type acquisitions, companies like Ariba on the procurement side, companies like Concur on the expense side. That again, maybe the value you couldn’t say has been fully unlocked, but they’ve definitely been making these significant cloud investments. But the biggest investment has been migration of the SAP S/4HANA to the S/4 migration to cloud.
And there’s been a lot of criticism that it’s not fast enough or that hasn’t been easy enough. And that’s why the company has rolled out RISE, and RISE with SAP is showing really strong momentum. I think they got 650 customers just this quarter and some very large customers. You’re talking about coming with multiple hundreds of thousands of customers worldwide. And I think in their data point, Pat, they said the adoption of S/4 at this point is 18,000, so you have hundreds of thousands of migrations left to go. And they’re working hard to streamline and make that more available, but it’s a lift and there’s some significant work that companies are going to have to do. But as I see it, that’s a huge opportunity.
And I know these two companies hate being mentioned in the same sentence, but I’d be remiss not to take this opportunity. You look at the success that Oracle’s had and how the markets really look very positively at the company, despite not always being the most popular, and I see some similarities. Now, they haven’t embraced or offered any sort of public cloud the way Oracle has, but in terms of having that huge, steady, recurring customer database of license and cloud subscribers that they could migrate over to full cloud and SaaS solutions, these two companies have a really similar type of approach and opportunity, and that opportunity is very good type of approach and opportunity and that opportunity is very good. So as I see it, I think the RISE program’s going to be successful. I think right now, the market is bearish, Pat.
They’re looking for any reason to be negative. And so they found the reason here, but I think what the data SAP has, the customer’s SAP has, and little bit of continued ambition from CEO, Christian Klein, and I think he’s doing a lot of the right things. He’s taking some of those Satya like risks to flip the safe revenue to cloud revenue. I think if he can do it, there’s a bright future.
Patrick Moorhead: Yeah. It’s funny. First time I heard of RISE, I was like, oh, great, okay, another transition program, marketing, blah, blah, blah. But it’s actually like… It’s made a huge impact. Super impressive.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
