M+E Connections

SAP’s current investment focus includes the “accelerated harmonization of our cloud delivery infrastructures” and additional investments in R&D such as business process intelligence (BPI), according to Luka Mucic, the company’s CFO.

These investment areas were not entirely reflected in its prior “guidance framework,” he said March 1 during the online Morgan Stanley Technology, Media and Telecom Conference.

The harmonization of cloud delivery infrastructures had been expected to be spread out over a larger number of years, he noted. But SAP decided to accelerate that because its cloud business is now expected to make up a much larger share of its business than previously projected, he explained.

“We are now really doubling down on a predominantly organic growth strategy and we see great opportunities in adjacent areas of our portfolio where we can leapfrog,” he said.

For example, SAP is “investing significantly in building out an industry cloud applications portfolio that is going to be built natively on the SAP Cloud Platform,” he said, adding: “We are investing in areas like business process intelligence, where we’ve just made a tuck-in acquisition” but are also “building out our own organic portfolio in terms of business automation tools.”

The BPI acquisition he was referring to was its recent agreement to acquire Signavio.

In business networks, meanwhile, SAP is “running already the largest procurement network” with Ariba but it’s “expanding now into logistics and supply chain networks as well,” he said.

The BPI focus, he later explained, is “actually particularly exciting for me to see because I’m, within SAP, responsible in the executive board for this business area [and] there is a great deal of partner interest in BPI in basically doubling down on utilizing the output that customers can get from… business process modeling as well as benchmarking solutions and then drive… the actual transformation programs.”

That, he pointed out, is “not something that the software will do automatically for customers,” he said, adding: “It will pinpoint the areas where [customers] can double down on opportunities to improve and optimize. But then they would still have a transformation partner to help them redesign the processes [and] roll them out.”

SAP is “already having a number of very high-profile partnering discussions with very important ecosystem partners for how to actually combine those strengths and for them to build a business on top of the BPI solutions,” he noted. Signavio, for example, has a partner ecosystem that he said is “almost the same as our traditional partner ecosystem – so  they have all of the big names in there [and] this will be highly complementary.”

Turning to the ongoing journey that customers are making to the cloud, he said: “We would be extremely happy if everybody would be moving as swiftly as possible because that would ease… the journey of the transformation. And the sooner we are actually able to convert a significant part of our overall book of business  to cloud subscriptions, the sooner we of course will return to double-digit growth rates, both on the top line as well as on the bottom line.”

SAP, meanwhile, feels “very positive about the business momentum and the competitiveness of our product” portfolio, he also said.

Cloud growth slowed to 18% in 2020 but that “deceleration of growth really came out of one area, which is our Intelligent Spend group,” he pointed out. However, even there, it’s been “gaining market share” from rivals and has a “great opportunity” to pick up more share as we exit the pandemic, he said.

SAP is being conservative with its results forecast amid the pandemic but it’s “seeing signs of stabilization,” he noted.

Outside Intelligent Spend, the company’s Software-as-a-Service (SaaS)/Platform-as-a-Service (PaaS) category has been growing 27%, a “very strong growth rate,” especially when measured against rivals, he said.

Also, the SAP S/4HANA  enterprise resource planning (ERP) system had “great competitive wins” in 2020, including ViacomCBS in media, giving it strong momentum, he said.