AWS and SAP have announced a new partnership aimed at helping customers accelerate their digital transformation.
SAP has been steadily reinventing itself with a focus on cloud computing. CEO Christian Klein made clear in late-2021 that the strategy was working.
“Our strategy is clearly working. Customers are choosing SAP for their business transformation in the cloud. We see record adoption of our applications and our platform. This has resulted in strong acceleration of our cloud growth.”
The company has been building partnerships with other cloud providers to help customers accelerate their digital transformation and cloud migration. SAP partnered with IBM in early 2022, and has now expanded its partnership with AWS.
“AWS and other infrastructure providers are becoming increasingly important to SAP’s business as we help our customers benefit from digital transformation in the cloud with RISE with SAP,” said Elena Ordóñez del Campo, senior vice president and strategic partner officer, SAP. “Building on our partnership of 15 years, we move into the new year with aligned go-to-market teams in every region, an industry-leading portfolio of solutions enabled by our joint reference architecture, and a growing selection of co-innovations — all ready to help accelerate value for our customers. We look forward to an incredible 2023 together and beyond.”
“This multiyear collaboration will facilitate stronger marketing and co-selling programs to complement our respective technologies,” said Kathleen Curry, director of AWS Worldwide Strategic Alliances. “SAP frequently leans in with AWS to deliver to customers a unified experience as they innovate and evolve their businesses in the ever-dynamic economic environment. This collaboration is an important milestone in our partnership and helps customers modernize faster with accelerated time to value, price-performance, reliability, and sustainability.”
SAP will release its fourth-quarter results next week, but the company has already revealed its Q4 cloud revenue grew a whopping 28%.
SAP is one of the leading ERP companies in the world and, like others, has been focusing its efforts on the cloud. Those efforts are paying off, with a 28% increase in its cloud revenue.
The company is also reporting an increase in its cloud backlog to €9.45 billion, an increase of 32%.
“The magnitude of our cloud strength is evident,” said Christian Klein, CEO. “More and more companies are choosing SAP to help them transform their businesses, build resilient supply chains and become sustainable enterprises as they move to the cloud. This momentum is reflected in the tremendous success of ‘RISE with SAP,’ our signature cloud offering, as well as excellent growth across our entire portfolio. Our growth acceleration points to even greater potential ahead.”
“I am proud that our team has delivered an exceptional year with strong results, far exceeding our expectations,” said Luka Mucic, CFO. “After three quarters of home runs with our cloud momentum, we hit it out of the park this quarter. We are confident that we will continue our Q4 current cloud backlog growth in 2022. This is reflected in our accelerated cloud guidance for 2022 as we make great progress towards our mid-term ambition.”
The company is scheduled to report its full earnings January 27.
SAP has raised its full-year outlook on strong cloud performance as customers increasingly move their business to the cloud.
The global pandemic has accelerated many companies’ migration to the cloud, especially as workers have transitioned to remote and hybrid workflows. Many companies, including SAP, have benefited greatly.
After its third-quarter review, SAP is now revising its full-year outlook, raising it as a result of its cloud performance. The company says its current cloud backlog is up 24% and its cloud revenue is up 20%. SAP now expects its cloud and software revenue to grow 2% to 4%.
“Our strategy is clearly working,” said Christian Klein, CEO. “Customers are choosing SAP for their business transformation in the cloud. We see record adoption of our applications and our platform. This has resulted in strong acceleration of our cloud growth.”
“This has been an excellent quarter across all key financial metrics,” added Luka Mucic, CFO. “We are seeing sustained, strong progress in SAP’s transformation. Our cloud business is growing at an accelerating pace and has led to our improved full year outlook.”
Microsoft and SAP are partnering to integrate Teams across SAP’s suite of solutions, with the goal of streamlining customers’ cloud transitions.
Microsoft Teams and Slack are the two dominant corporate messaging platforms on the market. Salesforce recently inked a deal to acquire Slack in a move that was seen largely as a way to fend off threats and remain competitive. It’s not surprising that Saleforce’s rivals would want to offer similar levels of integration. This is especially true for SAP and Microsoft, both among Salesforce’s biggest competitors.
The partnerships builds on a joint commitment by the two companies, and will see Teams integrated with SAP S/4HANA, SAP SuccessFactors and SAP Customer Experience.
“New ways of working, collaborating and interacting completely transform how we operate,” said Christian Klein, CEO of SAP SE and member of the Executive Board. “By integrating Microsoft Teams across our solution portfolio, we will bring collaboration to the next level, jointly determining the future of work and enabling the frictionless enterprise. Our trusted partnership with Microsoft is focused on continuously advancing customer success. That’s why we are also expanding interoperability with Azure.”
“The case for digital transformation has never been more urgent,” said Satya Nadella, CEO, Microsoft. “By bringing together the power of Azure and Teams with SAP’s solutions, we will help more organizations harness the power of the cloud so they can more quickly adapt and innovate going forward.”
The new integrations are expected to be available in mid-2021.
SAP turned in disappointing quarterly results, prompting the company to switch gears and focus on accelerating customers’ cloud adoption.
SAP revealed its Q3 2020 results Sunday, reporting revenue of roughly €6.54 billion IFRS. This was a 4% decrease year-over-year, and was down from €6.74 billion in Q2.
“COVID-19 has created an inflection point for our customers,” said Christian Klein, CEO. “The move to the cloud combined with a true business transformation has become a must for enterprises, to gain resiliency and position them to emerge stronger out of the crisis. Together with our customers and partners we will co-innovate and reinvent how businesses run in a digital world. SAP will accelerate growth in the cloud to more than €22 billion in 2025 and expand the share of more predictable revenue to approximately 85%.”
The company emphasized the impact the coronavirus pandemic has had on its performance, warning that some aspects of the business will likely not recover during 2020.
“SAP’s previous full year 2020 outlook issued on April 8, 2020, reflected its best estimates concerning the timing and pace of recovery from the COVID-19 crisis,” the company said. “This outlook assumed economies would reopen and population lockdowns would ease, leading to a gradually improving demand environment in the third and fourth quarters.
“While SAP continues to see robust interest in its solutions to drive digital transformation as customers look to emerge from the crisis with more resilience and agility, lockdowns have been recently re-introduced in some regions and demand recovery has been more muted than expected. Further and for the same reasons, SAP no longer anticipates a meaningful recovery in SAP Concur business travel-related revenues for the remainder of the year 2020.”
As a result of these factors, the company is focusing on the cloud and helping customers transition to it. In its mid-term guidance, the company is planning on €22 billion non-IFRS cloud revenue by 2025, a goal that reflects its new focus. At the same time, because of its focus on the cloud, the company expects traditional software licensing revenue to decrease as it moves forward.
SAP is just the latest company to pivot to the cloud. As the pandemic has changed how companies operate, the cloud has emerged as the single biggest factor in keeping companies and their employees operational.
Just twenty short months after SAP announced their intention of acquiringQualtrics for $8 billion just prior to their IPO SAP is taking Qualtrics public.
“The Qualtrics IPO is actually a win-win situation for both SAP and Qualtrics,” says SAP CEO Christian Klein. “When we are talking about Qualtrics let me first outline that Qualtrics was for sure one of the best acquisitions SAP ever did. They performed in the last 9 months above and beyond all the expectations we have set at the point of the acquisition. Now, three months back when I became the sole CEO of SAP Ryan Smith and I discussed a few options about how to move Qualtrics to the next level.”
“SAP’s acquisition of Qualtrics has been a great success and has outperformed our expectations with 2019 cloud growth in excess of 40 percent, demonstrating very strong performance in the current setup,” Klein stated. “As Ryan Smith, Zig Serafin, and I worked together, we decided that an IPO would provide the greatest opportunity for Qualtrics to grow the Experience Management category, serve its customers, explore its own acquisition strategy and continue building the best talent. SAP will remain Qualtrics’ largest and most important go-to-market and research and development (R&D) partner while giving Qualtrics greater independence to broaden its base by partnering and building out the entire experience management ecosystem.”
“When we launched the Experience Management category, our goal was always to help as many organizations as possible leverage the XM Platform as a system of action,” Qualtrics Founder Ryan Smith said. “SAP is an incredible partner with unprecedented global reach, and we couldn’t be more excited about continuing the partnership. This will allow us to continue building out the XM ecosystem across a broad array of partners.”
SAP agreed to acquire Qualtrics just four days before Qualtrics was to go public in 2018, recognizing the potential of bringing together experience and operational data (X+O) to help organizations take action. SAP currently owns 100 percent of Qualtrics shares. SAP will retain majority ownership of Qualtrics and has no intention of spinning off or otherwise divesting its majority ownership interest. Ryan Smith intends to be Qualtrics’ largest individual shareholder.
Christian Klein, CEO of SAP, discusses the reasons for their IPO and says that Qualtrics has been the best acquisition that SAP ever did:
Qualtrics IPO Is A Win-Win For SAP and Qualtrics
When we are talking about Qualtrics let me first outline that Qualtrics was for sure one of the best acquisitions SAP ever did. They performed in the last 9 months above and beyond all the expectations we have set at the point of the acquisition. Now, three months back when I became the sole CEO of SAP Ryan Smith and I discussed a few options about how to move Qualtrics to the next level. The partial IPO, we are both fully convinced, is actually a win-win situation for both SAP and Qualtrics.
First, it will allow Qualtrics to focus on the non-SAP customer base in a high closed market. Second, despite the IPO, of course, SAP will remain fully committed to Experience Management (XM) and we will develop further use cases for our customers. We will also continue with the joint go-to-market. SAP is fully committed and will be in the long run highly committed to to Qualtrics and also will remain a majority shareholder of Qualtrics going forward.
IPO Allows Qualtrics To Go After non-SAP Customers
We kicked off already in the last 19 months, great use cases for our customers. We launched Human Experience Management (HXM) which helped both to accelerate the sales of Qualtrics but also our core application success factors. We did the same for commerce. In our product strategy, it actually plans to really expand experience management across our solution portfolio.
Our employees are very excited about that because they see the benefits for our customers and this is something that won’t change with the IPO. This will allow Qualtrics more autonomy to also go after the market with non-SAP customers as this is a high quote segment.
Qualtrics IPO Is A Win-Win, Says SAP CEO Christian Klein
SAP Co-CEO Jennifer Morgan is departing the company, leaving Christian Klein as sole CEO.
Morgan has been with the company since 2004, and jointly held the role of CEO with Klein since October 2019. The company says that Morgan “mutually agreed with the Supervisory Board of SAP SE” to resign and depart, effective April 30. At the same time, the announcement makes clear that the current economic crisis was a driving factor, with the decision to get behind a single CEO being “taken earlier than planned to ensure strong, unambiguous steering in times of an unprecedented crisis.” A single CEO will give the company a clear, unified leadership structure.
“I’d like to thank Jennifer for her partnership over many years,” said CEO Christian Klein. “Throughout SAP’s transformation, Jennifer has always been laser-focused on customers, partners, shareholders and employees. It’s thanks to her that we have established a strong position in experience management solutions. I know she will always be a champion of SAP.”
“It has been a great privilege to drive SAP’s growth and innovation in so many areas and most recently as Co-CEO,” said Jennifer Morgan. “With unprecedented change within the world, it has become clear that now is the right time for the company to transition to a single CEO leading the business. I would like to thank Hasso Plattner for the opportunity to co-lead this great company, and I wish Christian, the Executive Board, and SAP’s talented team much success as they drive the company forward.”
It will be interesting to watch SAP to see if the change has a noticeable impact on the company’s operations.
