SAP ‘won’t let on-premise suffer from new cloud focus’

Enterprise Applications

by Joe Curtis| 21 January 2014

Co-CEO Bill McDermott delays operating margin target to invest in HANA.

SAP has denied its on-premise offerings will suffer as it bids to expand its cloud-based solutions.

The enterprise resource planning (ERP) firm today announced a 20% profit increase to €1.32bn during the fourth quarter - but delayed its goal to raise its operating margin to 35% until 2017 as it seeks to invest more in its HANA cloud technologies.

However, co-CEO Bill McDermott told Bloomberg that on-premise customers would not be neglected, saying on-premise remains an important source of revenue.

"The core will still grow, it's just that the cloud will grow much faster," he said.

"We're going to invest in market sharing gains against all competitors in the cloud space. By doing this we feel the mid-term target is best served by going to 2017 [from 2015]."

The German business's goal is to hit revenues of €22bn by then, with cloud profit contributing between €3bn and €3.5bn, giving it an operating margin of 35%.

SAP has witnessed huge growth since McDermott and Jim Hagemann Snabe co-chaired the company back in 2010 and its cloud platform HANA was built, but Snabe is due to stand down in May, leaving many customers fearful that Snabe's remit - product - will be overlooked in favour of sales - always McDermott's specialty.

Snabe used his keynote address at November's UK & Ireland SAP User Group Conference to assure customers that McDermott will ensure product development remains an important focus, while the UG chairman, Philip Adams, urged the ERP firm to ensure future innovations are commercially attractive to existing customers.

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