The night before its first-quar­ter earn­ings call for 2020, SAP announced that effec­tive April 30, Jen­nifer Mor­gan would step down as co-CEO and that Chris­t­ian Klein would be the sole CEO of the soft­ware com­pa­ny. As news made the rounds, Klein dialed in for an audio-only web­cast of the Q1 earn­ings (along with CFO Luka Mucic and Cus­tomer Suc­cess Chief Adaire Fox-Mar­tin) to report that, despite the COVID-19 pan­dem­ic, over­all prof­it was up 7% year over year.

“More than ever,” Klein said, ​“the cur­rent envi­ron­ment requires quick and deter­mined action from com­pa­nies, and it needs a very clear lead­er­ship struc­ture.” He went on to thank Mor­gan for her lead­er­ship and con­tri­bu­tions to the SAP ecosys­tem before jump­ing into the num­bers and fore­casts for the year ahead.

The com­pa­ny report­ed $7.1 bil­lion prof­it for the first quar­ter, with cloud rev­enue rep­re­sent­ing 31% of that. It also report­ed an oper­at­ing prof­it of $1.31 bil­lion, up 1%. 

Three Focus Areas for SAP in 2020

As busi­ness­es around the world nav­i­gate the pan­dem­ic, Klein iden­ti­fied three focus areas for SAP, includ­ing resilience, bal­ance, and emerg­ing stronger than ever before. 

“The cur­rent cri­sis shows that our intel­li­gent enter­prise strat­e­gy is more rel­e­vant now both for our cus­tomers and for SAP,” he said. ​“It enables busi­ness con­ti­nu­ity. Our more than 400,000 cus­tomers world­wide make the world run, and we enable them to do so.” 

SAP has posi­tioned itself to run as a vir­tu­al com­pa­ny with more than 96% of its work­force work­ing from home, as well as to make sure its essen­tial oper­a­tions such as data cen­ters remain func­tion­ing in accor­dance with pub­lic health ordinances. 

As for the rest of the con­ver­sa­tion, ASUG iden­ti­fied these five things that cus­tomers should know based on the dis­cus­sions in the SAP Q1 2020 earn­ings call.

1. The Cloud Busi­ness Saves the Day 

In the last quar­ter of 2019, SAP dou­bled down on piv­ot­ing its cloud busi­ness toward the soft­ware as a ser­vice cat­e­go­ry, which typ­i­cal­ly deliv­ers more pre­dictable rev­enue streams. The company’s cloud and soft­ware rev­enue grew by 7% year over year to $5.9 billion.

Although COVID-19 has caused some cus­tomers to post­pone cloud and soft­ware licens­ing con­tracts, Klein empha­sized the cur­rent cloud back­log has increased by 25%. ​“We expect cloud rev­enue to con­tin­ue its rapid growth in 2020,” Klein added. 

“As our ASUG mem­ber sur­veys show, SAP cus­tomers are seek­ing low­er costs, top-notch sup­port, and a reduc­tion in com­plex­i­ty and inte­gra­tion chal­lenges when mov­ing to the cloud,” said Geoff Scott, ASUG CEO. ​“Those val­ue dri­vers must be made crys­tal clear for soft­ware-buy­ing cus­tomers, giv­en the lev­el of busi­ness uncer­tain­ty today.” 

2. Is SAP S/4HANA Still on Track? 

Although some busi­ness­es have put the brakes on mov­ing projects for­ward, par­tic­u­lar­ly with on-premise deploy­ments, SAP reports it added an addi­tion­al 300 SAP S/4HANA cus­tomers in Q1, which was up 23% year over year. 

“We are con­tin­u­ing to build our cus­tomer base amidst this cri­sis, espe­cial­ly with SAP S/4HANA Cloud,” Klein said. ​“We saw about 500 cus­tomers go live with SAP S/4HANA Cloud in Q1, under­scor­ing our part­ners’ and our own remote ser­vice deliv­ery capabilities.” 

There are sev­er­al fac­tors that lead to post­pon­ing an SAP S/4HANA project, ​“but the time is now to move for­ward,” warns indus­try ana­lyst Josh Green­baum. ​“Com­pa­nies need to under­stand that a plat­form like SAP S/4HANA leads to a way to do more flex­i­ble plan­ning and more strate­gic analy­sis. That is what it’s for. I think the momen­tum for SAP S/4HANA con­tin­ues, and in fact, the jus­ti­fi­ca­tion for SAP S/4HANA becomes a lot stronger under these circumstances.”

Fox-Mar­tin remind­ed lis­ten­ers on the earn­ings call that the SAP S/4HANA Move­ment pro­gram is vir­tu­al, as are many oth­er resources meant to help cus­tomers with their implementations. 

3. Cus­tomer Suc­cess Is the Path to Success 

SAP con­tin­ues to put an empha­sis on cus­tomers and cus­tomer suc­cess — even more so dur­ing these uncer­tain times. As more com­pa­nies begin to hold back spend­ing and reassess pri­or­i­ties, the ques­tion came up as to where SAP falls in help­ing cus­tomers stay on track. 

“We will con­tin­ue to look to strike a healthy bal­ance,” Klein said. ​“We want to be empa­thet­ic with our cus­tomers, and we will look for prop­er solu­tions that dri­ve busi­ness con­ti­nu­ity.” He added, ​“We are look­ing at smart com­bi­na­tions of mea­sures to help our customers.”

SAP lead­ers claim that the com­pa­ny remains in lock­step when it comes to focus­ing on cus­tomer cen­tric­i­ty. ​“We rec­og­nize that all of our cus­tomers have unique arrange­ments with SAP, and we are deal­ing with each case-by-case,” Fox-Mar­tin said. She added that pri­or to the emer­gence of COVID-19, SAP had already made a sig­nif­i­cant change in its sales struc­ture and cre­at­ed a cus­tomer suc­cess board area. ​“We have set up our sales orga­ni­za­tion as well as our cus­tomer-fac­ing orga­ni­za­tion to intro­duce sim­plic­i­ty for when our cus­tomers and part­ners engage with us.” 

As the sole CEO of SAP, Klein is now respon­si­ble for how the com­pa­ny, as well as its cus­tomers, will nav­i­gate through COVID-19. 

“We will emerge even stronger by remain­ing focused on our cus­tomers and their suc­cess and by deliv­er­ing the intel­li­gent enter­prise,” Klein said. ​“Com­pa­nies need intel­li­gence to deal with dis­rupt­ed sup­ply chains, restrict­ed trav­el, and the new ways of work­ing. In short, only an intel­li­gent enter­prise can deal with uncer­tain­ty and rapid change. Dig­i­tal trans­for­ma­tion is no longer an option — it is essential.” 

4. A New­ly Uni­fied Lead­er­ship Strategy

The news about Morgan’s depar­ture took many by sur­prise, espe­cial­ly as they are deal­ing with changes in every aspect of their own businesses. 

Den Howlett of dig­i­nom­i­ca out­lined what the news could mean for the com­pa­ny going for­ward, not­ing: ​“SAP’s stat­ed plan appears opti­mistic. But what’s clear is that SAP has, once again, found that the co-CEO lead­er­ship mod­el does­n’t work well for them. My con­cern is that, if any­thing, the con­cen­tra­tion of pow­er with­in SAP back to Wall­dorf will embold­en those who believe ​‘SAP knows best’ at exact­ly the time when it needs to learn from others.”

Green­baum echoed the sen­ti­ment by say­ing SAP has had a com­pli­cat­ed lead­er­ship mod­el for a long time. ​“It is not what we have learned to love or at least tol­er­ate in the U.S., but I can under­stand the need to now stream­line every­thing. To the extent that Klein can con­sol­i­date the com­pli­cat­ed struc­ture and present one uni­fied strat­e­gy, then that’s a pos­i­tive,” he said. 

Green­baum added that SAP should be plac­ing a very strong empha­sis on cus­tomer empa­thy and cus­tomer suc­cess. ​“In fact,” he stat­ed, ​“it needs to be stronger than ever before.” 

5. No Cuts to Innovation

Over­all, SAP is posi­tioned to remain strong through this cri­sis and has adjust­ed where nec­es­sary. Its busi­ness out­look has been revised to account for any rev­enue decreas­es, and accord­ing to CFO Mucic, ​“SAP will slow hir­ing and restrict dis­cre­tionary spend­ing to ride out this crisis.” 

Although Klein not­ed that the com­pa­ny saw a mean­ing­ful amount of new busi­ness get post­poned because of COVID-19, there was no rea­son to believe the com­pa­ny had lost busi­ness. ​“We view most of it as just being pushed out,” Klein said. ​“I have no doubt that rev­enue will ulti­mate­ly come to SAP.” 

Klein con­firmed its 2023 ambi­tion pre­vi­ous­ly out­lined in the last quar­ter, adding, ​“We will not make unpop­u­lar trade-offs between 2020 prof­itabil­i­ty and future growth. Our cus­tomers have placed long-term trust in us, and they have every right to expect unchanged, high-lev­el inno­va­tion from us. We won’t cut inno­va­tion and R&D.”

Reg­is­ter today for ASUG­FOR­WARD on June 22 – 25 to learn, exchange ideas, and gain prac­ti­cal infor­ma­tion you can put into prac­tice immediately. 

Spe­cial note to ASUG mem­bers: Reg­is­ter to lis­ten on demand to the web­cast with ASUG CEO Geoff Scott and ASUG VP of Con­tent Strat­e­gy and Research Ann Marie Gray, who dive into the results from the ASUG Pulse of the SAP Cus­tomer 2020 study.