SAP SE is a leader in the move to Cloud Computing. On-demand versions of Enterprise Resource Planning and Supply Chain Management software products are likely to witness faster adoption rates going forward. Given the market leadership position of SAP in both these software verticals, we believe the company should benefit from an industry migration towards on-demand software subscriptions.
Luka Mucic, Chief Financial Officer of SAP, provided positive outlook on the software vendor’s on-demand software sales. Mr. Mucic expects revenues from on-demand software products to outpace traditional on-premise licenses by 2020. Year to date, SAP has generated approximately €460 million and €1,581 million in sales from SaaS subscriptions and on-premise licenses, respectively. However, SaaS subscriptions grew 55% in H1FY14 from a similar period in FY13. During the same period, new license sales of on-premise software declined 4%. On-premise license sales have been in a secular decline across the IT industry, fueled by increasing demand for SaaS services.
In this research note, we take a look at key SaaS trends that could lift cloud revenues from SAP.
ERP and SCM Likely to Witness Stronger SaaS Adoption
The entire IT industry is migrating from on-premise installations to on-demand subscriptions. The CRM market has been at the forefront of this migration, with Salesforce emerging as a clear winner in the market. The SaaS-based CRM company has posted a revenue growth rate of over 30% for years. This has resulted in Salesforce overtaking SAP as the leader of the CRM market in 2012. At the end of 2013, SAP had a market share of 12.8% compared to Salesforce’s 16.1%.
We believe the CRM market particularly benefited from the on-demand migration by catering to the needs of sales personnel. Business-to-Consumer (B2C) and Business-to-Business (B2B) CRM suites witnessed strong demand by allowing sales personnel to track leads in real-time across various devices and provide personalized services. In addition to the strong surge in the CRM market, business intelligence software and data analytics tools have grown sharply on the back of rising demand to understand specific customer trends and build customized marketing campaigns.
This article has been extracted from http://www.forbes.com/, please click on this link to read the article in full http://www.forbes.com/sites/greatspeculations/2014/09/18/sap-cloud-sales-should-benefit-from-growing-saas-erp-and-scm-offerings/
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