SAP full-year 2020: Revenue down 1%, cloud growth up 17%

SAP has announced full-year financial results indicating a 1% drop in revenue to €27.338bn, with cloud revenue up 17% to €8.085bn.

It did so two days after announcing a new “business transformation” service, Rise with SAP, which bundles managed cloud infrastructure and managed services into one contract, and has 130 pilot customers.

SAP’s flagship enterprise resource planning (ERP) system, S/4Hana, now has 16,000 customers, according to the financial results statement.

It said around “900 SAP S/4Hana customers were added in the [fourth] quarter, taking total adoption to approximately 16,000 customers, up 16% year over year, of which more than 8,700 are live. In the fourth quarter, approximately 40% of the additional customers were net new.

“In the fourth quarter, organisations such as L’Oréal, Shell, Schwarz IT KG (Lidl), Co-op, Unilever, s.Oliver Group, Gilead Sciences, and Saudi Aramco chose SAP S/4Hana. Boehringer Ingelheim went live with SAP S/4Hana in 41 countries simultaneously.

“BT Group, A. P. Møller-Mærsk, Beijing Energy, the Coca-Cola Bottling Company of Egypt, and Bertelsmann also went live. A fast-growing number of companies of all sizes such as CureVac, Zespri, Oxford University Press, The Not Company, Nippon Cargo Airlines, BMW, Atos, and I-PEX chose SAP S/4Hana Cloud.”

SAP CEO Christian Klein confirmed, in a press conference, that part of the purpose of the new Rise package was to speed up S/4Hana adoption, but added that it is, in SAP’s view, fast-growing anyway. “With Rise with SAP, we are going to accelerate the adoption of S/4Hana Cloud … But we are seeing that the adoption curve is extremely good … much better than previous versions of SAP,” he said.

SAP’s chief financial officer (CFO), Luka Mucic, added, in the conference: “S/4Hana cloud is already approaching a run-rate of €800m, with 3,300 customers, of which 2,000 are live. The rate of adoption of cloud as against on-premise S/4Hana was at a different level to previous years, and with Rise with SAP will achieve a much different rate of adoption in a very short timeframe.”

The supplier has also completed its divestment of Qualtrics, the online survey company it acquired in 2018 for $8bn, by way of an initial public offering (IPO) on Thursday 28 January 2021. Qualtrics is now a subsidiary of SAP. Mucic said: “We intend to remain the majority owner of Qualtrics for a very long time.”

The statement mentioned the IPO as “maximising Qualtrics’ opportunity to expand the business and build the best talent while SAP retains majority ownership. At IPO, the company was valued at almost $18bn, more than double the original acquisition price”.

In the statement, Klein said: “The world’s leading companies are turning to SAP to become intelligent enterprises. We are reinventing how businesses run by accelerating our customers’ transformation in the cloud. Our strong finish to the year and the launch of Rise with SAP, our new holistic business transformation offering, position us well to meet our new outlook targets.”

Mucic said, in the same place: “In a uniquely challenging environment, 2020 was a record year for cash flow in every single quarter and the full year. Our better-than-anticipated top-line performance combined with our quick response on the cost side drove strong operating profit. SAP’s expedited shift to the cloud will drive long-term, sustainable growth while significantly increasing the resiliency and predictability of our business.”

On the press call, Klein said, in reply to a question about the restructuring of the SAP supervisory executive board, following on from the Bill McDermott era, from 2008 to 2019, highlighted the addition of Julia White, formerly of Microsoft, as chief marketing officer, Sabine Bendiek, also formerly of Microsoft, as chief people officer, and Scott Russell, an Australian formerly leading SAP’s APJ region, as customer success officer. Bendiek will also succeed Klein as chief operating officer during 2021, he reported.

“Julia will come with incredibly strong cloud mindset, Sabina seems like she has been with us for years, not a few weeks, and Scott I know as the board APJ sponsor, and an energetic leader who can make the numbers work,” he said.

In respect of the Covid-19 public health crisis, the supplier highlighted a “vaccine collaboration hub (VCH) for life sciences organisations to better manage vaccine supply distribution, and to help governments and their industry partners coordinate and successfully deploy mass vaccination programmes.

In the press call, Klein flagged the contact track and trace app SAP developed with Deutsche Telekom, the Corona Warn App. This has been downloaded more than 25 million times. He also said that 17 of the top 20 vaccine producers run SAP, and that they are helping Moderna, the German Red Cross and “many others to scale vaccine production and make the logistics work in times of country lockdowns”.

One Covid-related blackspot was expense management application SAP Concur, where revenue was down 20% to €341m year over year.

The supplier was also keen to emphasise the “expanded Microsoft relationship around Teams integration, Industry 4.0 and simplification of SAP ERP migration to the cloud on Azure”.