SAP’s remarkable cloud performance got even stronger in Q3 as cloud revenue soared 38%, reaching $3.3 billion, sparked by a 98% spike in sales for the single-most-important offering in the company’s entire portfolio: the S/4HANA Cloud ERP solution.
That 38% number for the three months ended September 30 exceeds the 34% cloud growth SAP reported in its previous quarter and sharply underscores CEO Christian Klein’s contention that customers are choosing SAP “to help them future-proof their businesses.”
I believe these Q3 results (and I’ll share more details in a moment) reveal several important perspectives about SAP:
- Without question, the company has successfully navigated the transition to the cloud and has built a broad and deep set of cloud services and solutions.
- In spite of a massive effort by Oracle to dominate the cloud ERP (enterprise resources planning) market with its very successful Fusion ERP suite, SAP has been able to capture a significant share while also building an impressive cloud-ERP backlog that reflects future revenue.
- By winning a large number of cloud-ERP deals, SAP is strengthening the case it can make to its 25,000 on-premises ERP customers for why SAP is the best choice when those organizations move to the cloud. (And that will be soon!)
- SAP’s unique RISE go-to-market program — SAP calls it “business transformation as a service”— continues to be a great success and should serve as a model for other Cloud Wars Top 10 vendors as more and more customers commit increasingly larger parts of their operations to the cloud.
- CEO Christian Klein has done a masterful job of positioning SAP for the digital-business future in spite of beginning his tenure as sole CEO of SAP at the outbreak of the pandemic in early 2020.
- And, while I admit this is an offbeat point, I nevertheless want to share it because it underscores the achievement outlined in #5 above. Back in the deeply troubled times of 2020, a fair number of geniuses were calling for Klein to be fired, screeching about his clear lack of ability to handle the job, and forecasting SAP’s demise unless chairman and founder Hasso Plattner dumped Klein. I would like to see even one of those sniveling loudmouths step forward and admit he/she was wrong and that Klein has performed superbly. But I’m not holding my breath because this business attracts a lot of loudmouth know-it-alls who, underneath their bluster, don’t have the vaguest clue of what they’re talking about. I would just add that as this industry continues to change rapidly and profoundly, beware of the proclamations of the loudmouths because their arrogance is exceeded only by their ignorance.
And, here are a few other key figures underscoring SAP’s excellent Q3:
- The current cloud backlog — which includes contracted deals not yet recognized as revenue — rose 38% to about $11.3 billion;
- The current cloud backlog specifically for SAP S/4HANA ERP was up 108% to about $2.7 billion; and
- Share of more-predictable revenue was 80%, up four percentage points.
All in all, an outstanding quarter for SAP, and I’ll have more in-depth analyses later this week.
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