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Cloud subscriptions boost SAP profit

21/10/2015 by


SAP has revealed that healthy cloud subscriptions have helped the firm to boost its overall profit over the past few months. At a time when cloud computing is seeing large investment, the figures from the enterprise resource planning (ERP) firm go to show that moving into the market can pay dividends.

SAP unveiled its figures on Tuesday 20th October, saying the third quarter of 2015 had noted a 2% rise in net profit. This gain was helped largely be new subscriptions to its cloud-based services. For the period until 30th September, net profit was calculated at €898m (£661m), up from €880m for the same quarter in 2014. Bill McDermott, the firm’s chief executive, said: “Clearly the third quarter is a beat.”

It was only last week that SAP reiterated its 2015 fiscal year forecast; at that time, the ERP firm said it was expecting between €1.95bn and €2.05bn from non-IFRS cloud subscriptions and support revenue operations and, as a result, non-IFRS operating profit for the year should reach between €5.6bn and €5.9bn. One of the most notable figures from the firm is that the revenue from cloud subscriptions and support services grew by over 100% year-on-year.

During the past few years Mr McDermott has moved SAP’s focus increasingly towards cloud technology rather than prioritising traditional on-premises software. Such a strategic shift has seen a lot of momentum for the firm, which has made a series of acquisitions as a result; for example, in 2014 the firm purchased Concur Technologies for $8.2bn. This US-based firm specialises in cloud expense management software. Earlier this year SAP launched a totally redesigned Business Suite. Using the firm’s in-memory database and real-time information, S/4HANA can be used on hardware, in the cloud or as a hybrid solution. At the end of the third quarter, SAP says it has already gained over 1,300 S/4HANA customers.

Luka Mucic, SAP’s chief financial officer, previously spoke to the Wall Street Journal and alleviated fears that the company would go completely into the cloud by saying that on-premises licenses remained important to the firm. “The scenario of the future will by hybrid,” he said, adding: “The world is not binary in that sense.”

The newest figures from SAP are in line with many expert forecasts. DZ Bank analysts, for example, note that the profits did “not surprise” and that the organisation is making movement in the cloud industry similar to that of its competitors.

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