SAP reports strong growth in cloud amid slow overall revenue growth

The company had a dip in software revenue in the first quarter as the cloud business took off

By , IDG News Service |  IT Management

SAP reported a strong growth in cloud revenue and fast adoption of its HANA platform in the first quarter, while its software revenue dipped from the same quarter in the previous year.

The business software company said Thursday its revenue grew 3% to €3.7 billion ($5 billion), while its cloud subscriptions and support revenue grew 60% to €219 million in the quarter under IFRS (International Financial Reporting Standards).

Its net profit grew 3% to €534 million in the quarter.

SAP's annual cloud revenue run rate is now approaching €1.1 billion, and subscribers of its cloud applications now exceed 36 million, the company said.

Reflecting the transition in the market from on-premises software and services to applications delivered through the cloud on a subscription model, SAP's software revenue in the quarter fell 5% to €623 million. Its support revenue was up 5% to €2.2 billion.

Software and software-related service revenue, which includes the cloud business, grew 5% to €3 billion.

SAP is the only vendor "innovating in the core and transitioning to the cloud, and doing both profitably," co-CEO Bill McDermott said during a conference call Thursday.

The 2014 revenue and profit figures include revenue and profits from SAP's acquisition of Swiss e-commerce software vendor Hybris. The comparative numbers for 2013 do not include Hybris' revenue and profit until Aug. 1, 2013.

"We're about to disrupt the CRM business" with a combination of Hybris and SAP's CRM software, McDermott said on the call. "Why not?" he said, adding in an apparent allusion to the fast-growing but profit-lacking Salesforce.com, "the ones in the cloud now haven't made any money at it."

"CRM is no longer about sales force automation," McDermott said. "That's commodity. It's about managing your customers across every single touch point." What McDermott didn't acknowledge is that many other vendors, including Salesforce.com and Oracle, are also building out software portfolios aimed at that same goal.

McDermott also touched upon Fiori, a set of user-friendly, lightweight applications that expose data and processes from SAP's Business Suite software and can be deployed across multiple device types. SAP's ambition is to weave Fiori's "new and intuitive UI" into all its applications over time, McDermott said.

He did not allude to growing user resentment over the fact that Fiori must be purchased separately, rather than being included with the substantial annual maintenance payments customers pay for their Business Suite licenses. Suite customers have long bemoaned the software's clunky user interface and demand is mounting for SAP to change its Fiori pricing model.

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