With just under one full year under his belt as sole CEO of SAP, Christian Klein delivered a number of remarkable announcements leading up to and during the SAP fourth-quarter 2020 earnings call.

First, customers learned more about RISE with SAP, which SAP launched to help customers make the digital transformation journeys they need in order to become intelligent enterprises, according to Klein. Next, we heard about the successful IPO of Qualtrics, which raised $1.55 billion on the Nasdaq, valuing the company at $27 billion (up nearly 110% from the $8 billion purchase price in 2018). And finally, SAP closed the year strong, despite weathering the tides of a pandemic, with nearly $34 billion in total revenue (up 1 percentage point year-over-year).

“If I had to find a headline for the last couple of months,” Klein noted, “I would say SAP is on the move. We have defined our new strategy, and we are in full execution.” Klein refocused efforts in Q3 to emphasize a move to the cloud. The company has since then doubled down on those efforts, signaling to customers that this move is a critical step toward becoming an intelligent enterprise.

ASUG identified five things that customers should know based on conversations with industry analysts and what we heard in the SAP Q4 2020 earnings call.

1. It Is Time to RISE with SAP

Earlier in the week, Klein shared details about RISE with SAP, and how the “concierge service” is designed to help SAP customers jump-start their business transformations. During the earnings call, he noted, “We have listened closely to our customers and launched RISE with SAP this week—a milestone offering for holistic business transformation as a service. As part of the new offering, we are unlocking the business process intelligence layer with the planned acquisition of Signavio.”

The program is meant for all customers—of all sizes and at all phases of their business transformations, according to SAP. The goal is to help move customers’ mission-critical ERP processes to the cloud along a tailored path that reflects the individual customer situation. “We make sure customers truly transform their business instead of just replicating their on-premise landscape on some public cloud infrastructure, as the destination is always to become an intelligent enterprise,” Klein said.

He laid out the three steps, which include business process redesign and intelligence, technical migration to a standard and modular solution landscape with fast time to value, and building an intelligent enterprise with SAP S/4HANA Cloud. “The offering is not only delivering our customers a superior business outcome and a return on investment,” he added. “It is a very simple commercial offering on a single contract, all without high upfront investments and up to 20% lower TCO.”

Industry analyst and SAP observer Josh Greenbaum stated, “If SAP can really execute on the program and do a good job with it, the company is going to have another good year. The momentum of 2020 really dovetails nicely into what they are doing with the RISE with SAP offering, and I see it as a testament to the viability of the program from a software standpoint. It simplifies things, and that is really needed.”

2. You Can’t Rise without Looking to the Cloud

SAP has been zeroed in on the cloud, and so have many of its customers. In Q4, the company’s cloud backlog expanded by 14% and reached $8.7 billion. Cloud revenue was up 13% in the quarter, but for the full year it grew by 18% to more than $9.95 billion, exceeding SAP’s revised 2020 outlook.

We have tremendously improved the integration of our acquired cloud applications,” Klein stated. “We doubled down on innovation. And we are co-innovating with our customers across 25 industries to turn them into more resilient, productive, and sustainable enterprises.”

Part of the cloud success story includes 130 customers who participated in the pilot program of RISE with SAP. This is surely expected to play a vital role in not only cloud revenue in 2021, but also in overall financial projections for the company. “Cloud revenue is now more than two times larger than our software licenses revenue,” SAP CFO Luka Mucic noted. “This cloud revenue growth, in combination with our steady software support revenue stream, testifies once again the resilience of our business model.”

“The RISE with SAP announcement should be a spark for SAP customers to take advantage of the new opportunities offered to them in the cloud. And if it makes sense to move forward, it could be a huge win and simplification for customers’ SAP portfolio and plans,” said Geoff Scott, CEO of ASUG. “All SAP customers should know that ASUG has them covered in February: We’ve got a series of RISE with SAP events so that they can hear from the experts and understand their options, and then capitalize on new ways of engaging with SAP and enhancing their technology capabilities.”

3. It All Comes Back to SAP S/4HANA

Everything SAP does will always come back to SAP S/4HANA—moving its customers new and old to the intelligent ERP, quickly and efficiently. And despite having to do so during a pandemic, SAP delivered impressive numbers at the end of the year.

The company added more than 25,000 net-new customers and delivered more than 35,000 go-lives. In Q4 specifically, Klein noted the addition of almost 1,000 SAP S/4HANA customers, of which 40% were net new. “That takes us to a total of around 16,000 customers, up 16% over last year,” he said. “We are clearly gaining market share with SAP S/4HANA.” In total, 8,700 are now live.

“I think another part of the RISE with SAP story that needs to be told is how important a step it is to help move the install base to SAP S/4HANA,” Greenbaum noted. It is clear that SAP is focused on meeting the needs of its customers to help them make that critical move to SAP S/4HANA.

According to Den Howlett of diginomica, the strategic acquisition of Signavio will position the company to do just that. He wrote, “This is by far the most aggressive move SAP has made since Christian Klein became sole CEO at SAP and started to reshape the company. We see this as a net benefit to all SAP customers as it helps those customers better understand where they have inefficiencies, but equally important, how they focus on business process differentiation.”

4. The $8 Billion Elephant Served Up Results

Earlier last year, SAP announced its intentions to take Qualtrics public. At the time, ASUG had spoken to several industry analysts about the news, and each shared their thoughts about the decision and what it would mean for SAP as well as customers going forward. No one predicted that once completed, the valuation would more than double at the end of the first day of trading.

This was remarkable news for SAP. “This is a fantastic success story for both Qualtrics and SAP, and it resulted in yesterday's successful IPO of Qualtrics,” Klein said. “Let me be clear: Ryan Smith and I are fully committed to experience management and the Qualtrics XM platform as a key element of SAP's Intelligent Enterprise. And we absolutely intend to keep up the pace of innovation, expanding our joint solutions quarter after quarter.”

Qualtrics’s segment revenues surged 17% to $222 million. SAP SuccessFactors, SAP CX solutions, and several other platforms within the SAP portfolio currently utilize Qualtrics solutions. “SAP will, of course, remain Qualtrics’s most important go-to-market and innovation partner in order to drive growth within SAP's customer base,” Klein noted. “But we are now providing Qualtrics with the opportunity to extend its business and serve customers also beyond the SAP universe. So, for Qualtrics, the future couldn't be brighter.”

5. Nothing Foggy About the View Ahead

Klein closed the call by emphasizing, “We have transformed the SAP organization to make it more simple, lean, and customer focused. But most importantly, we have put our customers first.” He added, “Now, we are fully focused on the opportunities ahead of us. The direction is clear. And we are executing our strategy to reinvent how businesses run.”

Looking forward into 2021, SAP expects solid business momentum as the worldwide rollout of the COVID-19 vaccine takes place. The outlook is based on gradual improvement that’s closer to the second half of 2021. SAP expects cloud revenue in the range of $11 to $11.5 billion (up 13% to 18%); cloud and software revenue in a range of $28 to $29 billion (up 2%); operating profit in the range of $9.5 to $10 billion (up 1% to 6%); and share of more predictable revenue to reach approximately 75%.

“Our strong finish to the year, the launch of our new holistic business transformation offering RISE with SAP, and the other key strategic initiatives outlined by Klein position us well to meet our new outlook targets,” Mucic said. “In 2020, SAP responded quickly to the crisis and demonstrated its agility. In an extremely tough environment, we grew the top line, while expanding operating profit and margin and delivering record cash flow. We are now fully executing on our strategy to drive long-term sustainable growth, while significantly increasing the resiliency and predictability of our business.”

ASUG is helping members make sense of RISE with SAP and figure out if this offering is right for them. Watch our Executive Exchange Virtual Roundtable: RISE with SAP – Analysts’ Responses and Perspectives on demand. Be sure to all register for our member-exclusive Breaking Down RISE with SAP series. The second webcast of the series, focused on the partner network, is set for Feb. 11, 3 p.m. ET/2 p.m. CT.

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