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HANA Enterprise Cloud to turn around losses

26/04/2016 by

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It’s been reported that SAP’s HANA Enterprise Cloud (HEC) is set to roll out of start-up mode during 2016 and, as a result, stop making a loss. The private cloud business is expected to break even during 2017 as current infrastructure and features investments begin to pay off.

German software giant SAP has a two-year expansion plan for HEC, and during this time, the system is predicted to finally start making money for the company. In fact, “significant expansion” is set to see the income from the cloud system surpass that of traditional licences for the company’s on-premises software.

Talking of the latest plans, SAP EMA Chief Operating Officer Gonzalo Benedit said: “Where we’ve had negative margin last year was on private cloud. We expect to break even this year based on investments we made. We continue to spend on investment to support massive bookings and growth.” Although Benedit did not divulge further on the specific revenue of HEC, he did mention that SAP’s current software-as-a-service business operations are on a 70 per cent profitable margin.

Looking to 2017, SAP’s overall corporate goal is to expand cloud subscriptions and support income so that they’re close to the figures from current software sales. In 2018, they want the revenue to grow even more and exceed the money from traditional income streams. The news comes as SAP revealed it made €2.29 billion for cloud subscriptions and support in 2015, and €4.84 billion from new licence sales. To provide a boost to cloud figures, a number of additional features will be offered via HEC during the coming 18 to 24 months, including new tools for analytics and HANA scalable capabilities. “We expect not just organic growth but also adding new solutions to the cloud,” Benedit said.

SAP’s cloud service products have been growing by double-digit rates every quarter. Such is the significant rise of these tools that SAP has predicted that the use of this software will surpass its traditional licensed revenue by 2018. Growth has mostly been seen from the software-as-a-service market, with companies utilising tools for help with HR, procurement and customer engagement. However, HEC, the private cloud, is also seeing an increase in use. This cloud offering is a hosted version of SAP’s applications that run on demand through the HANA memory base. HEC also provides access to Business Warehouse and the SAP Business Suite, with users including NTT and IBM cloud data centres.

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