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Software Company SAP Targets the Cloud for Growth

January 21, 2015
by Staff Writer

Software company SAP is targeting the cloud for growth. The German giant, whose services include business applications and database and technology options, is recognized as one of the world's chief providers of enterprise-focused software. The company expects the cloud to fuel its future growth, with forecasts it will increase income by 50% by 2020, bringing the company to a total revenue of 26-28 billion euros ($30-32 billion) annually.

SAP's projections are based on its achievements in 2014, a year which saw "exceptional growth" for the company. The company believes revenue from subscriptions for its cloud services will exceed that generated from software license fees in 2018. Despite the company's optimism, its operating profit fell by 3% in 2014, reaching 4.33 billion euros, although this is thought to reflect the scale and cost of the company's investment in prioritizing the cloud.

"We had exceptional growth in our cloud business and have significantly lifted the total of cloud backlog and non-IFRS deferred cloud revenue to more than €3 billion," explained SAP's CFO Luka Mucic in a company press release. "This is committed business that will drive strong cloud growth in the future. We expect cloud subscriptions to exceed software license revenue in 2018. At that time SAP expects to reach a scale in its cloud business that will clear the way for accelerated operating profit expansion."

"In 2014 we delivered on our Run Simple strategy to help our customers transform their businesses," explained SAP's CEO Bill McDermott in the same press release. "SAP's strong growth is driven by the HANA platform, the broadest cloud portfolio and the largest business network in the world. SAP powers the clear path to growth for businesses in the 21st century: run real-time, run networked, run simple. We will continue to push relentlessly toward a much more predictable business model and are once again raising our cloud ambition to grow 7X from 2014 through 2020."

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