Last week, SAP released its full-year and fourth-quarter 2021 financial results, characterizing its performance as exceptional, and as a year of great execution, that far exceeded expectations.

For 2021, SAP reported a 17% increase in cloud revenue year over year, to €9.42B, which the company said reflected the high end of its full-year outlook. SAP S/4HANA cloud revenue was up 46%, to €1.09B. Software license revenue declined 11% year over year, to €3.25B. Cloud and software revenue was up 4% year over year, to €24.08B. (In its detailed report, SAP noted that the United States, its largest market, saw cloud and software revenue increases of 1% and 4%, respectively.) Total SAP revenue was up 2% year over year, to €27.84B.

For Q4 of 2021, SAP said that cloud momentum further accelerated, as evidenced by current cloud backlog numbers and cloud revenue—which SAP CFO Luka Mucic called the key “forward-looking metric” to “showcase momentum.” SAP reported that current cloud backlog has “accelerated faster than anticipated,” up 32% year over year, to €9.45B. The SAP S/4HANA current cloud backlog was up 84%, to €1.71B.

In Q4, cloud revenue was up 28%, to €2.61B, while SAP S/4HANA cloud revenue was up 65%, to €329M. Software licensing decreased 14% year over year, to €1.46B, and cloud and software revenue was up 6%, to €6.99B. Total revenue was up 6% year over year, to €7.98B for the period.

SAP CEO and CFO Comments

In his remarks, SAP CEO Christian Klein underscored the importance of more than 3,000 net-new cloud customers and more than 18,800 SAP S/4HANA customers in 2021, deeming it a “record year.” He also called RISE with SAP “a journey” that solves the “largest challenges” that customers currently face, such as business transformation, supply chain resilience, and sustainability outcomes.

CFO Mucic characterized RISE with SAP as a “stellar success,” given the 1,300 customers in its first year. He also reported that SAP closed out 2021 with a strong cash flow, at more than €5B.

Looking ahead, Mucic said he is “absolutely confident cloud revenue will accelerate.” The leaders project that SAP will see €11.55 to €11.85B in cloud revenue, an increase of 23% to 26%, and €25 to €25.5B in cloud and software revenue, an increase between 4% and 6% for all of 2022.

Across the Business

Among other highlights in its report, SAP noted that:

RISE with SAP is in demand from companies of all sizes; deals closed with more than 650 customers in Q4. Klein and Mucic particularly emphasized customer wins with IBM, Siemens, and CVS.

  • In Q4, about 50% of the year’s SAP S/4HANA customers were net new.
  • Signavio, part of the SAP Business Process Intelligence segment, had current cloud backlog growth in triple digits for the full year, with customers that included PwC, HP, Robert Bosch, Carl Zeiss, and R. Twining and Company.

During the business results call with analysts, SAP said that its planned acquisition of Taulia, a San Francisco–based financial services and working capital management company, will help SAP customers with better access to liquidity, improved cash flow, and automated transactions, particularly regarding supply chain solutions. Additionally, the day before its 2021 financial report, SAP announced an extended partnership with and an investment in Icertis. Based in Bellevue, Washington, Icertis provides AI-based contract management solutions.

Analysts’ Views

Last week, analysts conveyed generally positive reactions to these SAP results. For instance, Cloud Wars Founder and Chief Content Officer Bob Evans lavished praise in a post based on the release of preliminary SAP results. On the Q4 2021 front, he said that the $3B cloud revenue performance “means SAP’s cloud revenue for the quarter grew faster than the latest cloud results from SAP’s three primary competitors: Salesforce, Oracle, and Workday.” Evans also said that the SAP S/4HANA Cloud revenue increase of 65%, to $378.4 million, “could be a strong indicator that some of SAP’s huge ERP customers are starting to move to the cloud.”

Regarding SAP 2022 projections of cloud revenue being expected to grow by as much as 26%, Evans said that the “confident stance from Klein [is] perhaps the most impressive piece of evidence showing without question that SAP has not only gotten beyond the disruptions caused in the early days of the pandemic[,] but [also, it] is ready to outgrow some very accomplished competitors.”

Joshua Greenbaum, principal at Enterprise Applications Consulting, commented on the prominent results of one-year-old RISE with SAP.

“RISE is definitely working the way SAP had hoped, attracting a mix of large, existing customers and smaller net-new logos. It’s still sort of [a] kitchen-sink sales model; there’s a little something for everyone in the offering, so to a certain extent[,] SAP can push a lot of sales under the RISE rubric that likely would have happened without RISE,” Greenbaum said.

He added, “But having customers and SAP’s sales execs both focused on RISE as a program has accelerated deals, and the Q4 numbers definitely reflect that. Cloud growth is accelerating across the industry, and, RISE or no RISE, SAP is capturing its fair share, and that’s what counts.”

Greenbaum continued: “I think the main issue for SAP—and its competitors—is how companies will deal with the opportunity to rethink strategic end-to-end processes that span their heterogeneous environments. A lot of them integrate—and not always elegantly—SAP and non-SAP systems that are all candidates for an upgrade or even a migration to a net-new vendor: the intersection of technical debt and process debt makes for some complex strategic decisions. The Signavio results reflect some of the demand for process renewal, and this demand is a good example of the timeliness of that acquisition.”

Meanwhile, Duncan Jones, VP and principal analyst at Forrester, said that the 1,300 customers using SAP S/4HANA in Q4—50% of which were net new—align with Forrester survey data, which shows high levels of ERP inertia, but also a high propensity to switch vendors when firms eventually decide to replace legacy systems.

“It appears SAP gained revenue growth by winning customers from other ERP brands—not only Oracle[,] but also Infor, Epicor, IFS, etc.,” Jones said. “If SAP can continue to win a good share of those ERP replacements, then it can meet its growth targets without having to expand its footprint into new territories. … Customers want SAP to focus on enhancing the core products that customers use.”

Jones also remarked on how SAP increased its R&D spending, up 25% in Q4, to €1.4M: “This is 20% of SAP’s cloud and software revenue [and it is] slightly higher than others such as Oracle (17%), albeit not as high as some (e.g., Coupa at 24%). Hopefully most of this R&D is invested in enhancing existing products.”