With one full quar­ter under their lead­er­ship, the two SAP co-CEOs — Jen­nifer Mor­gan and Chris­t­ian Klein — report­ed dou­ble-dig­it growth across all key rev­enue lines for Q4 2019. ​“Q4 was a strong fin­ish to yet anoth­er record year,” Klein said. ​“And once again, we have kept our promise and deliv­ered on our raised busi­ness outlook.”

SAP closed the year strong with total rev­enue at $30 bil­lion (up 12% year-over-year). CFO Luka Mucic said, ​“gross mar­gins were up for all busi­ness mod­els as SAP hit all its 2019 rev­enue and prof­it tar­gets.” Dur­ing the earn­ings call, the CEOs report­ed that oper­at­ing prof­it was also up 15% and cloud rev­enue was up 40%. ​“Our on-premise busi­ness con­tin­ues to grow, and our cloud busi­ness con­tin­ues to soar,” Klein added. 

When the two co-CEOs stepped into their roles just three months ago, they both agreed that SAP is best when it lis­tens to its cus­tomers. Those weren’t just idle words, as the duo has kept up the mes­sage, though cus­tomer sen­ti­ment and adop­tion will be the ulti­mate decider. ​“Suc­cess­ful and sat­is­fied cus­tomers remain front and cen­ter for achiev­ing long-term growth and prof­itabil­i­ty goals, Mor­gan said. ​“This starts with engi­neer­ing world-class products.”

ASUG iden­ti­fied these five things that cus­tomers should know based on the dis­cus­sions in the SAP Q4 2019 earn­ings call.

1. The Cloud Floats In 

The Ger­man soft­ware com­pa­ny dou­bled down on piv­ot­ing its cloud busi­ness toward the soft­ware-as-a-ser­vice cat­e­go­ry, which typ­i­cal­ly deliv­ers more pre­dictable rev­enue streams. Cloud book­ings were up 25% — and 31% when exclud­ing infra­struc­ture as a ser­vice. Although that num­ber wasn’t quite as high as in Q3, it still reflects an over­all trend toward cloud adoption. 

The cloud gross mar­gin was up 5 per­cent­age points year over year. ​“We are steadi­ly increas­ing the effi­cien­cy of our cloud deliv­ery, and we con­tin­ue to lever­age our hyper­scale part­ners,” Klein added. 

Last year, SAP announced a Microsoft Embrace deal that posi­tioned the cloud provider as the pre­ferred hyper­scaler for SAP. ​“This was to help our cus­tomers not only embrace SAP S/4HANA,” Mor­gan said, ​“but to be able to accel­er­ate their move into the cloud with SAP.” The move has paid off, and SAP says it sees the ben­e­fits of the part­ner­ship show up in Q4 num­bers. ​“We’re off to a fast start,” Mor­gan said. ​“We’re also see­ing our part­ners and oth­er hyper­scalers cre­ate their own move pro­grams to help SAP cus­tomers accel­er­ate their jour­ney into the cloud.” As SAP looks ahead, it wants to more than triple cloud rev­enue by 2023, so ASUG mem­bers need to be aware of their hyper­scaler options. We will have more pro­gram­ming avail­able in 2020 to help SAP cus­tomers deter­mine the best option for their busi­ness needs. 

2. Mov­ing the Nee­dle on SAP S/4HANA

SAP S/4HANA remains a big play­er, as SAP announced 1,200 new cus­tomers in the fourth quar­ter. ​“2019 was an extreme­ly good year for SAP S/4HANA,” Klein said. ​“More than 7,000 of the 13,800 cus­tomers who have pur­chased SAP S/4HANA are now live.” That has more than dou­bled since the last time SAP released num­bers, which was dur­ing SAP­PHIRE NOW and ASUG Annu­al Con­fer­ence 2019. 

That trend will like­ly con­tin­ue into 2020 and beyond as more cus­tomers are begin­ning to plan a move to SAP S/4HANA. As Klein not­ed, and accord­ing to the ASUG Pulse of the SAP Cus­tomer 2020, cus­tomers are begin­ning to see the val­ue of the ERP solu­tion. ​“I’m very con­fi­dent that we’ll see these kinds of results going for­ward,” Klein stat­ed. ​“Orga­ni­za­tions are turn­ing more and more to SAP to dri­ve their dig­i­tal trans­for­ma­tions, and the heart­beat of that is our core — SAP S/4HANA.

Of the SAP S/4HANA totals, 2,000 cus­tomers — from 20 dif­fer­ent indus­tries in more than 70 coun­tries — are on SAP S/4HANA Cloud. ​“We are now dou­ble the size of our next com­peti­tor,” Klein said. As for why more com­pa­nies aren’t live yet, Klein added, ​“the tech­nol­o­gy is not the dif­fi­cul­ty. It works. What takes time is the dig­i­tal trans­for­ma­tion. And togeth­er with SAP, we’ll work toward that.” 

ASUG CEO Geoff Scott acknowl­edged that SAP S/4HANA adop­tion is one of the most-dis­cussed met­rics today, but there’s much more to it. ​“It’s not just about acquir­ing the SAP S/4HANA licens­es — it’s about what you’re going to do with those licens­es,” Scott said. ​“The move should be about elim­i­nat­ing tech­ni­cal road­blocks and bar­ri­ers of the past, and then fos­ter­ing a cli­mate where com­pa­nies can take advan­tage of new busi­ness oppor­tu­ni­ties as a result of a nim­bler tech­nol­o­gy backbone.” 

3. Tap­ping into End-to-End Experience 

In Q3, SAP report­ed that seg­ment rev­enue in cus­tomer and expe­ri­ence man­age­ment was up 75%, due to Qualtrics and SAP C/4HANA. The $8 bil­lion ele­phant in the room — Qualtrics — con­tributed more than $500 mil­lion to the total rev­enue in 2019, and SAP will con­tin­ue to invest in it. 

“In the com­ing year,” Mor­gan said, ​“Qualtrics will be a real strong growth dri­ver, not just on its own, but to enhance and help us evolve cat­e­gories and oth­er parts of our port­fo­lio.” SAP plans to focus on inte­gra­tion, par­tic­u­lar­ly with cus­tomer expe­ri­ence (SAP C/4HANA), human expe­ri­ence (SAP Suc­cess­Fac­tors), and the intel­li­gent spend group (SAP Ari­ba, SAP Con­cur, and SAP Fieldglass).

“It’s clear our expe­ri­ence-man­age­ment vision is res­onat­ing with our cus­tomers and prospects, and dri­ving enhanced inter­est in our oth­er solu­tions,” Mor­gan added. ​“Com­pa­nies under­stand that if they are not com­pet­ing on expe­ri­ence, they’re on a race to the bot­tom. Qualtrics con­tin­ues to suc­cess­ful­ly dri­ve a ​‘land-and-expand’ strat­e­gy and has expand­ed to over 11,450 customers.” 

4. Echo­ing the Word on the Street

As expect­ed, there were mixed reviews about the earn­ings call. Accord­ing to Den Howlett of dig­i­nom­i­ca, ​“some ana­lysts will be jit­tery that pro­ject­ed cloud growth is not quite what the com­pa­ny has sig­naled in the past. I am less con­cerned. If any­thing, the tac­it acknowl­edg­ment that many of its cus­tomers are not yet ready to com­mit to a cloud tran­si­tion for core ERP reflects well on the com­pa­ny’s focus on lis­ten­ing to what cus­tomers are saying.”

Some close SAP watch­ers were less san­guine. Jar­ret Paza­han­ick, SAP Suc­cess­Fac­tors Employ­ee Cen­tral and SAP Pay­roll con­sul­tant (@SAP_Jarret) tweet­ed: ​“I like the repeat­ed ​‘cus­tomer first’ talk, but on the ground, I am not see­ing that. If any­thing, cus­tomers are more unhap­py than ever.” 

When asked to elab­o­rate, Paza­han­ick point­ed to major strug­gles with sup­port and issues with licens­ing and over­all trans­paren­cy. ​“While I def­i­nite­ly appre­ci­ate the co-CEO’s empha­sis on their cus­tomer-first ini­tia­tive, there is a lot of work to be done, and cus­tomers are still fac­ing a lot of the same chal­lenges they have been for years.”

5. New Year, New Decade, New Lead­er­ship: Now What?

Although still fair­ly new in their posi­tions as co-CEOs, both Mor­gan and Klein are sea­soned SAP advo­cates and have hit the ground run­ning. They have grand plans for the busi­ness but made absolute­ly clear that the SAP cus­tomer dri­ves all of their decisions. 

“We did a bunch of acqui­si­tions in the last decade, and now Jen­nifer and I, as well as the exec­u­tive team, will focus on real­ly har­mo­niz­ing our solu­tion port­fo­lio as well as har­mo­niz­ing how we engage with our cus­tomers,” Klein said. ​“This is what will help us achieve our 2023 goals.”

“One of the things Chris­t­ian and I will always do is be very trans­par­ent with where the busi­ness is head­ed,” Mor­gan added. ​“Right now, we’re very hap­py with the port­fo­lio that we have.” The duo will focus on three key objec­tives in the new year, which include inte­gra­tion, inno­va­tion, and sus­tain­abil­i­ty. ​“Our win­ning prod­uct strat­e­gy is to deliv­er the intel­li­gent enter­prise, and it builds upon these three key prin­ci­ples,” Klein added. 

Spe­cial note to ASUG mem­bers: Be sure to reg­is­ter to lis­ten live (or on demand) to the Feb. 11 web­cast with ASUG CEO Geoff Scott and ASUG VP of Con­tent Strat­e­gy and Research Ann Marie Gray who will dive deep­er into the results from the ASUG Pulse of the SAP Cus­tomer 2020 study.