The growing number of customers buying SAP cloud products has driven SAP Australia’s return to profitability during the 2020 financial year. The software giant has attributed the uplift to the growth of its cloud division and reduced expenses in the midst of the COVID-19 pandemic.
Revenues from SAP cloud-based solutions significantly contributed to what SAP called “stellar” first-quarter financial results. According to the tech giant’s Quarterly Statement Q1 2021 report, cloud and software revenue in the Asia-Pacific Japan (APJ) region recorded an increase of 11{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd}. Meanwhile, cloud revenue grew by 14{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (IFRS) and 18{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} (non-IFRS at constant currencies) with Japan, Singapore, and Australia being particularly strong.
In Australia, SAP has announced that it turned around last year’s loss of AUD$20.4 million after recording an after-tax profit of AU$46.3 million for the year ended 31 December 2020. The direct subsidiary of German parent company SAP SE generates revenue from the distribution of SAP cloud solutions and services, SAP software and software licenses as well as related consulting, training, and maintenance services.
The company said that its recently reported boost was driven by the increasing number of customers buying SAP cloud products. In its annual report to the Australian Securities and Investments Commission (ASIC), SAP Australia stated:
“The company has delivered growth and is returning to profitability from total revenues as it continues to transition from upfront software revenue to subscription-based cloud revenue. In support of customer success, and in order to deliver increased profitability, the company continues to invest in its cloud capability.”
The uplift was notable in SAP Australia’s cloud and software revenue that came in at AUD$750 million. However, services revenue decreased from last year’s AUD$475 million to AUD$398 million. All in all, the company’s revenue came in at AU$1.15 billion, slightly lower than last year’s AU$1.19 billion.
SAP Australia Delivers Growth With More Customers Buying SAP Cloud Products
Damien Bueno, President and Managing Director at SAP Australia and New Zealand, shared in an interview that the recently reported increase in profitability had enabled the company to invest more in growth areas like cloud and customer experience as it continues its transition from legacy on-premise technologies.
Bueno further explained that the return to profitability was largely due to the cloud revenue growth and was supported by some lowered costs in expenses for travel and different marketing costs during the COVID-19 pandemic.
According to SAP Australia, the company’s expenses on its 1,198 employees reduced by AU$9 million each year to AU$379 million. In 2020, it has saved on travel expenses which fell to AU$7.74 million, a significant decrease from AU$35.7 million the company had previously spent in 2019. At the same time, the company stated that its entertainment expenses also dropped sharply from AU$2.68 million to just AU$612,000.
Moreover, SAP Australia said that it expects revenue from its rendering of SAP services and the sale of SAP core products to continue to be strong.
Last year, Mark Hettler, Head of Partners and Channels, Australia and New Zealand at SAP, projected Australia to become a hotbed of SAP partner activity as it is seen as a “real growth opportunity” by international partners looking to establish local footprints to cater for SAP cloud and S/4HANA demands. Hettler said:
“In ANZ, we’ve seen significant demand from customers for partners to support their move to SAP S/4HANA. We’re also seeing strong demand and take-up of the SAP Cloud Platform. As a result, we’ve seen a growing number of international partners looking to establish operations in Australia.”
