SAP: Those growth targets we talked about? Give us another 2 years

Cloud and maintenance OK - but no mention of actual new software


SAP has delayed its 2015 growth goal by two years because of an uptick in cloud and software maintenance at the expense of its core business.

The world’s largest maker of business software Tuesday announced final full year and fourth-quarter results in line with last week's preliminary numbers.

But SAP did reveal its target of between €3.0bn ($4bn) and €3.5bn ($4.7bn) in revenue from cloud and €22bn ($29.7bn) total revenue - excluding charges - will now happen in 2017, and not 2015 as earlier stated.

Its cloud sector made €758m ($1bn) while SAP's total revenue was €19.9bn ($26.9bn) excluding charges for the fourth quarter and year.

In a statement SAP said:

In order to capture the growth opportunities in the cloud, SAP now expects this target to be reached by 2017 rather than in 2015 as previously stated. SAP anticipates the fast-growing cloud business along with growth in support revenue will drive a higher proportion of more predictable, recurring revenue in the future.

The software company did not provide further explanation but it would seem SAP is caught between two hard facts.

One is that while its cloud and maintenance businesses are growing they remain relatively small compared to SAP’s main business of on-premises software.

That on-premises software engine is continuing to slow down – while cloud subscriptions and support reported a 66 per cent jump to €209m ($285m) for the fourth quarter from 1 October to 31 December and software and cloud subscriptions were up two per cent to €2.10bn ($2.87bn), on-prem software shrank two per cent to €1.90bn ($2.6bn).

New software hasn't been the largest part of SAP's business for some time, but less new software means less to support in the long term. 2017 should buy more time for more customers to tick over into maintenance mode.

Software and software related services - maintenance - grew three per cent to €4.37bn ($5.97bn) and six per cent for the year.

It is maintenance SAP was referring to when it talked about “growth in support revenue”.

Expect this figure to swell as more SAP customers go on support thanks to the usual cycles of upgrade inertia, customers park unused licences, or as users start to put more of their ERP or CRM and analytics in the cloud. ®


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