Rise with SAP Gives Major Lift to Cloud Revenues, SAP S/4HANA Migrations

The Rise with SAP program, launched last year to accelerate its customers’ cloud migrations, paid off in 2021. SAP, which released its fourth quarter results on Thursday, reported higher than expected cloud revenues and anticipates that will continue.

Full year cloud revenues of €9.42 billion grew 17%, with 1,300 customers signing on to the Rise with SAP portfolio. One-half of those customers – 650 –signed deals during the fourth quarter. Cloud revenues of €2.61 billion rose 28%. The current cloud backlog of €9.45 billion, up 32%, also surged at a faster pace than SAP expected.

Many of SAP’s fourth quarter wins included big names such as Adobe, Panasonic, IBM, Allianz Technology, CVS, Unipart Group, Samsung SDS, and Siemens. SAP wins through smaller customers too, such as
Philippine Airlines, Software AG, Banco Sabadell, Amadeus, Standard Chartered Bank, Fisker and Europcar Mobility Group.

Bullish Forecast for 2022 and Beyond

SAP is bullish that cloud migrations will fuel faster growth this year. The company’s forecast calls for cloud revenues to rise 23% to a range of €11.55 billion-€11.85 billion. Meanwhile, S/4 HANA, the cloud-based version of SAP’s ERP solutions, grew even faster last year, though from a smaller base. SAP S/4HANA full year revenues of €1.09 billion rose 46%. In the fourth quarter, S/4HANA cloud revenue of €329 million surged 65%.

Launched just over a year ago, Rise with SAP is a portfolio of cloud migration and ongoing business transformation services. CEO Christian Klein and CFO Luka Mucic attributed its cloud growth to the program.

SAP’s Christian Klein

“You have seen from our 2021 results, that there is now a large movement of our installed base to the cloud,” Klein said. Mucic said that he is “absolutely confident” that SAP’s cloud revenue growth will continue to accelerate at the high end of its cloud revenue guidance for this year.

“We are at an inflection point, as we believe that we have scope to accelerate our cloud growth, even beyond 2022,” Mucic said. “As of 2023, the surge in cloud growth, as well as the success of our overarching transformation, will actually lead us to double-digit growth, first for operating profit, and then closely followed by total revenue growth in the double digits as well.”

Mucic added that SAP is gunning to have predictable revenue reach 85% by 2025. Last quarter, the share of predictable revenue reached 69%, up 5% year-over-year.

SAP for years has been under scrutiny due to the slow pace that it has migrated its customers from its on-premises offerings to cloud iterations. Last year’s launch of Rise with SAP, aimed at accelerating cloud migrations, was met with some skepticism.

Futurum Research’s Daniel Newman

“Rise with SAP is showing really strong momentum,” said Futurum Research principal analyst Daniel Newman, speaking during the Six Five Television podcast on Friday.

Noting that SAP has completed 18,800 S/4HANA migrations to the cloud, Newman added that there are still hundreds of thousands of migrations left to go.

“They’re working hard to streamline and make that more available but it’s a lift, and there’s some significant work that companies are going to have to do,” Newman said. “But as I see it, that’s a huge opportunity.”

SAP to Acquire FinTech Player Taulia

SAP on Thursday also said it has agreed to acquire a majority stake in fintech provider Taulia. The company provides working capital management and supply chain finance. Taulia will continue to operate as a standalone company and SAP CFO Mucic will become chairman of its board.

Taulia has partners with several banks including J.P. Morgan and UniCredit. An existing strategic partnership with J.P. Morgan will remain intact but SAP plans to add other financial partners, who provide suppliers with early payments.

Klein said adding Taulia to the SAP business network and procurement portfolio makes sense because it generates billions of transactions

“With Talia, we will enable our customers to finance these transactions and improve significantly their cash flow,” he said.

SAP this week also said it has expanded its partnership with contract management provider Icertis. As part of the extended pact, SAP has made a financial investment in Icertis, and the two companies will work together on a collective product road map.

The companies first partnered in 2020 by integrating Icertis Contract Intelligence (ICI) with SAP Ariba and SAP Customer Experience solutions. Now the companies plan to enable faster negotiations, improved compliance and AI-based automation to the contracting process.