SAP Execs Eye AI Opportunities, Tout Cloud Strength in Q4

SAP executives Jan. 28 pointed to the growth opportunities they see in artificial intelligence, while touting the strength in the firm’s cloud business that provided it with a significant revenue lift in its fourth quarter (ended Dec. 31).

“With cloud revenue up 40 percent, we outperformed our major competitors” in 2019 and “continue to rapidly gain cloud market share,” Christian Klein, SAP co-CEO, said on an earnings call.

“We are proud of these results and energized by the many opportunities ahead,” he told analysts.

Noting that “customers across all industries turn to SAP to help them master the digital transformation and become intelligent enterprises,” he said the firm’s “winning product strategy of delivering the intelligent enterprise is in full execution and it builds upon” a few “key principles.”

One of those principles is integration, he pointed out, explaining: “As our customers introduce new business models, they need a seamless customer experience to support their success. This requires two elements: a strong business process integration across the entire value chain and a harmonized data model to provide a 360 degree view of the business using real-time SAP and non-SAP data.”

Innovation is also a key principle, he said, adding “new technology such as artificial intelligence is changing how enterprise is run.” Noting SAP has a long history of automating business processes across the value chain, he said: “By embedding AI into our applications, we believe we can increase productivity up to 40 percent.”

The third key principle is “flexible deployment,” he told reporters, adding: “Modern landscapes are hybrid, a combination of cloud and on-premise solutions, depending on customer priorities and preference…. Our flagship” Enterprise Resource Planning (ERP) suite, S/4HANA, is an “important building block of the intelligent enterprise and it had a record year” in 2019.

About 1,200 SAP S/4HANA customers were added in Q4, boosting total adoption to more than 13,800 customers, 24% growth from a year earlier, the company said. In the fourth quarter, about 40% of the additional SAP S/4HANA customers were net new, according to SAP.

Later on the call, Jennifer Morgan, SAP co-CEO, noted her company is “innovating every day,” adding: “We’ve built AI into other fulfillment using real time intelligence to get packages to customers more efficiently.”

The company’s total Q4 revenue grew 8% from a year earlier to 8 billion euros. New cloud bookings jumped 19% to 878 million euros and 20% excluding Infrastructure-as-a-Service (IaaS). Cloud gross margin increased 6.9 percentage points to 65.2% and increased by 7.4 percentage points year over year to 69.5%, SAP reported.

During the Q&A, CFO Luka Mucic pointed to the “proliferation of cloud in Europe, noting: The cloud is now prevalent here. The concerns around the cloud have largely vanished. Of course, it’s important to European customers that you have a tight handle on data privacy topics, that you have options around local data residency, [and] that you have the appropriate security certification and quality certifications in place.”