'Our strategy is working!' - SAP CEO Klein points to RISE adoption and S/4 HANA Cloud growth

Profile picture for user slauchlan By Stuart Lauchlan July 21, 2021 Audio mode
Summary:
SAP turns in growth for Q2, but shares slip on outlook.

SAP CEO Christian Klein
(SAP CEO Christian Klein)

A solid Q2 for SAP with revenues up 3% year-on-year to €6.67 billion on the back of healthy cloud business, up 11% to €2.27 billion.

More than 250 customers signed up for the RISE with SAP offering, more than double the number at the start of the year.  S/4 HANA Cloud revenue was up 39%  with an annual sales run rate of more than €1 billion.

The numbers were strong enough for CEO Christian Klein to declare:

Our strategy is working! Our teams are executing excellently and we are delivering incredible value to our customers.

Breaking down key areas of focus, Klein pointed to the uptake of RISE as a case in point:

 We see strong demand from both our installed base and from new customers, from companies of all sizes across industries and geographies and especially from our larger customers. AMD, for example, chose RISE to consolidate onto one single enterprise platform.

The success of RISE then drives uptake of S/4 HANA Cloud, he added, with roughly 50% of Q2 S/4 HANA cloud deals also correlated to RISE:

Strong RISE momentum leads first to strong adoption of S/4 HANA cloud and our business technology platform. And secondly, through our business technology platform, customers then adopt our integrated line of business applications. That's exactly the dynamic we saw play out this quarter. Our S/4 HANA Cloud backlog was, therefore, accelerated to an impressive 48%. 

He picked out Coop Switzerland, which chose RISE to move to S/4HANA cloud:

It's a large retailer, a large SAP customer. They actually did the move now with RISE. First, they want to move to a new platform. They want to move to the cloud. They want to get better cybersecurity capabilities. They want to move back to the standard, receive regular innovations, regular upgrades on the fly.

Why they need to do this now is because we're also offering them new ways of license models. We’re also offering them a significant automation in traditional process, which require today a lot of manual workloads. We're also offering them, with the Business Technology platform, new ways of doing certain industry-specific capabilities for replenishment, for connecting the supply chain to commerce, to deliver really a personalized experience to their consumers.

So there are a lot of reasons to move the core to the cloud, to also re-design the way these business processes will run in the digital age. And then, of course, also making sure that you have an IT landscape where you can be way more agile and we act much faster to new business requirements coming up. 

Overall, customers are looking for solutions to assist with major transformation programs, said Klein:

Many companies are looking to our human experience management solutions as they navigate a new normal in the workplace. Clarins selected our full HCM suite, including Employee Essential. And we won against our Oracle and Workday to transform their HR function and better support their more than 8,000 employees.

Our CX cloud revenues and current cloud backlog grew by strong double digits. Great customer wins this quarter include Dyson and DeLonghi. We also grew cloud revenue and current cloud backlog in our Ariba and Fieldglass business by double digits year-over-year. Alcan Vison chose our procurement solutions as their source to pay platform for direct and indirect materials, which no other competitor is able to offer.

Our digital supply chain business also had a strong performance with double-digit cloud revenue and CCB growth. These solutions are key to run resilient supply chains and customers this quarter included Stanley Black & Decker, and Cooper Lomaz. 

My take

Solid, if not spectacular.  SAP shares slipped after the results were announced, reflective of disappointment in outlook. That said, the RISE progress and its knock-on impact on S/4 HANA adoption is encouraging.