Ahead of the release of SAP’s Q2 financial results on July 21, we take a look at how the SAP for cloud strategy contributed to its business growth so far this year.
Gartner recognised SAP as a Leader in the 2020 Magic Quadrant for Cloud Database Management Systems (DBMS). The cloud DBMS market, according to the global research and advisory firm, consists of products that offer fully managed public or private cloud software systems for managing data in cloud storage.
As data management moves to the cloud, the landscape of providers and their products get increasingly complex, Gartner observed. As for SAP, the company makes significant investments to enhance its data management portfolio in order to support hybrid cloud.
Additionally, Gartner predicted that 75{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} of all databases will be deployed or migrated to cloud platforms by 2022, outnumbering the 5{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd} that will be repatriated to on-premises systems.
Just recently, SAP shares traded higher after Bank of America (BofA) upgraded it from Underperform to Buy. Global Research Analyst Frederic Boulan believes SAP’s push to migrate its customers to cloud-based versions of its flagship ERP software is gaining traction.
“Cloud migration is often seen as a negative for software stocks. But we argue the move is positive for software companies as it switches lumpy and unpredictable license revenues to a recurring and higher revenue stream over the life of the client,” Boulan stated.
SAP’s cloud migration, according to Boulan, will accelerate and gradually transform the company’s reputation in the software industry. He added that SAP’s revenue and pretax profits will increase by double digits, “supporting multiple expansion from sector lows” by 2023.
Earlier this year, the German software giant saw a similar spike in shares after the announcement that Alphabet and Google’s core financial systems will move to SAP from Oracle.
Reinforcing SAP for Cloud Strategy
Moreover, revenues from SAP cloud-based solutions greatly contributed to the tech giant’s “stellar” first-quarter financial results. According to its Quarterly Statement Q1 2021 report, cloud and software revenues in the Asia-Pacific Japan (APJ) region recorded an increase of 11{8bf2b29f36318f0ac46ab1cc03d7035abce669a1cea16c9ed62389a818fa22fd}.
As enterprises look to accelerate their transition towards cloud-based ERP applications, Scott Russell, Head of Customer Success at SAP, said the latest RISE with SAP offering is gaining traction in the APAC region.
Meanwhile, the rising number of customers buying SAP cloud products has driven SAP Australia’s return to profitability during the 2020 financial year. Damien Bueno, President and Managing Director at SAP ANZ, stated that the increase in profit enabled the company to invest more in growth areas like cloud and customer experience as it continues its transition from legacy on-premise technologies.
An uplift was also notable in SAP New Zealand’s cloud revenues that came in at $35 million, up from $31.5 million in 2019. SAP New Zealand Managing Director Phil Cameron said:
“Our cloud business has again grown significantly over the previous year, demonstrating that New Zealand is a strong driver of the accelerated cloud strategy SAP announced in Q3 2020.”
Reflecting the fast adoption of cloud in the local market, Cameron noted that customers in New Zealand were among the first in the world to deploy the SAP S/4HANA Cloud, private edition, which was offered as part of the RISE with SAP offering.
SAP New Zealand strengthens its commitment to helping businesses run in the cloud despite last year’s challenges, according to Cameron.
“We are confident we can continue our strong momentum. Achieving the benefits of flexible and agile access to secure critical business information, from wherever people are working, remains a priority for New Zealand organisations,” he concluded.
