In what SAP lead­er­ship called ​“anoth­er out­stand­ing quar­ter,” ear­li­er this month SAP report­ed 2022 first-quar­ter rev­enue of €7.08 bil­lion, up 11%. SAP also report­ed a 12% increase in cloud and soft­ware rev­enue, to €6.06 bil­lion, for the peri­od that end­ed March 31. Cloud rev­enue in the Amer­i­c­as jumped 33%, lead­ing all regions.

Also for the quar­ter, SAP not­ed pos­i­tive key mea­sures of incom­ing busi­ness. The cur­rent cloud back­log was up 28%, at €9.73 bil­lion, and the recent SAP S/4HANA cloud back­log hit €1.92 bil­lion. SAP also reaf­firmed its 2022 fore­cast for cloud rev­enue to achieve between €11.55 bil­lion and €11.85 bil­lion at con­stant cur­ren­cy rates. SAP CFO Luka Mucic said that the com­pa­ny ​“absolute­ly, ful­ly” expects to fol­low pre­vi­ous guid­ance for dou­ble-dig­it prof­it growth in 2023.

How­ev­er, the over­all enthu­si­asm was tem­pered in exec­u­tive remarks express­ing sol­i­dar­i­ty with the peo­ple of Ukraine and by the report­ed finan­cial impact as the com­pa­ny com­plete­ly shut­ters its Russ­ian busi­ness oper­a­tions and pres­ence. Soon after the inva­sion, SAP stopped sales in Rus­sia and Belarus, and then shut down cloud oper­a­tions. SAP is now com­plete­ly leav­ing Rus­sia, drop­ping on-premise main­te­nance and sup­port, in what SAP CEO Chris­t­ian Klein called a ​“struc­tured exit.”

Giv­en this exit, SAP said it will expe­ri­ence a rev­enue hit of €300 mil­lion and that the war in Ukraine cut back­log growth at con­stant cur­ren­cy rates by 0.8 of a per­cent­age point.

RISE with SAP Highlights

Among oth­er high­lights, SAP report­ed more than 3,400 net-new RISE with SAP cus­tomers and more than 24,400 go lives in the first quar­ter — near­ly 80% of which adopt­ed the SAP Busi­ness Tech­nol­o­gy Plat­form. Klein said that such momen­tum is ​“estab­lish­ing SAP as a plat­form company.”

The SAP S/4HANA cus­tomer base hit 19,300 as of March 31, up 18% year over year, with 13,900 live on the sys­tem and 500 net-new cus­tomers. SAP show­cased sev­er­al brands on the RISE with SAP and SAP S/4HANA band­wag­on, includ­ing Microsoft’s high-pro­file shift, along with Accen­ture, Cit­i­zen Watch, Daim­ler Truck AG, and NEC Corp., among others.

Klein also high­light­ed a ​“par­tic­u­lar­ly strong quar­ter” for the Intel­li­gent Spend Busi­ness Net­work port­fo­lio; the return of growth for Con­cur giv­en accel­er­at­ing busi­ness trav­el; sev­er­al Busi­ness Process Intel­li­gence wins under the new SAP Sig­navio port­fo­lio brand, includ­ing Mod­er­na; and final­ly, the grow­ing inter­est in and strate­gic part­ner­ships for the SAP Cloud for Sus­tain­abil­i­ty portfolio.

Cyber­se­cu­ri­ty and Sup­ply Chain on Cus­tomers’ Minds

Dis­cussing ongo­ing cus­tomer con­ver­sa­tions, Klein said that ​“one of the biggest top­ics” across the SAP com­mu­ni­ty is ​“cyber­se­cu­ri­ty, as we’re see­ing a ris­ing num­ber of attacks.” Klein said that the ​“great suc­cess of RISE, ahead of [the] rev­enue plan” is, in part, based on the solution’s capa­bil­i­ty ​“to pro­tect your stack, end-to-end. That is a strong val­ue propo­si­tion.” He also said that con­tin­ued sup­ply chain chal­lenges world­wide are ​“push­ing more IT spend.”

In the ses­sion with finan­cial ana­lysts, Scott Rus­sell, the SAP Glob­al Head of Cus­tomer Suc­cess, high­light­ed prod­ucts and ser­vices sup­port­ing cor­po­rate ini­tia­tives. ​“S/4HANA Cloud dri­ves resilien­cy for all com­pa­nies; RISE brings scal­a­bil­i­ty and inno­va­tion,” he said, adding that SAP Busi­ness Tech­nol­o­gy Plat­form and SAP Sig­navio are also key dri­vers, with ​“all regions grow­ing strong. Amer­i­c­as’ growth is par­tic­u­lar­ly pleasing.”

Expert Ana­lysts’ Insights

In the SAP ana­lyst com­mu­ni­ty, the first-quar­ter finan­cials were seen as gen­er­al­ly pos­i­tive. ​“SAP’s Q1 results report­ed more than 500 new S/4HANA sales, of which more than 60% were net new. Q1 is nor­mal­ly not a strong quar­ter for SAP. How­ev­er, 500 is the high­est Q1 num­ber we have seen since S/4HANA’s intro­duc­tion. This is good news in terms of new cus­tomer acqui­si­tion, as is the fact that SAP is able to win com­pet­i­tive deals against Ora­cle, Microsoft, and oth­ers,” not­ed Fabio Di Capua, vet­er­an SAP watch­er and Gart­ner VP.

Like­wise, Dun­can Jones, VP and Prin­ci­pal Ana­lyst at For­rester, remarked that the 60% net-new SAP S/4HANA deals ​“shows the strength of SAP’s core prod­uct.” How­ev­er, he also won­dered whether cus­tomers’ SAP S/4HANA tran­si­tions were keep­ing pace with SAP expectations.

In his #Cloud­Wars minute last week, Cloud­Wars founder Bob Evans, who will give a keynote address at ASUG Best Prac­tices: SAP for Cloud in August, not­ed five quar­ters of strong RISE with SAP per­for­mance. Evans said that it is ​“kind of remark­able that none of the oth­er major cloud providers has tried to emu­late this or mod­el it because it seems to be a big win­ner with cus­tomers.” Evans cit­ed Klein’s mes­sage that RISE with SAP lets cus­tomers “[reimag­ine] and recon­struct busi­ness process­es; move to agile cloud (via SAP S/4HANA); and eas­i­ly adopt indus­try cloud” approach­es, among oth­er positives.

Mean­while, Joshua Green­baum, Prin­ci­pal at Enter­prise Appli­ca­tions Con­sult­ing, said that three fac­tors drew his atten­tion in the first-quar­ter report. He not­ed that ​“SAP’s efforts to shift its cus­tomer base to the cloud con­tin­ue to bear fruit,” with strong momen­tum as a ​“har­bin­ger of future cloud sales.” Nonethe­less, Green­baum is con­cerned about ​“the dis­ap­point­ing results relat­ed to SAP’s Sap­phire Ven­tures” invest­ment arm, as well as ​“no men­tion at all of CX in the earn­ings call or report.”

“SAP needs a strong CX offer­ing,” Green­baum added, not­ing, ​“CX’s no-show in the quar­ter­ly report is a sig­nal” to the CX team, includ­ing new lead­er­ship in engi­neer­ing, ​“that there’s some heavy lift­ing to be done.”