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SAP's on-site apps fumble for the gearstick as cloud stamps pedal

This bandwagon is up and away, even if it's not carrying that much cash right now

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The decline in SAP’s software sales has accelerated while the company’s smaller cloud operation has continued to expand.

For the tech giant's first quarter of 2014, revenue from sales of on-premises business applications fell five per cent, year on year, to €623m ($860m), under IFRS rules, according to its latest financial report [PDF].

SAP is still milking the maintenance contracts associated with its flagging on-premises software: cash from support for installations in Q1 2014 grew five per cent, year on year, to €2.2bn ($3.03bn).

Over at SAP’s cloud subscriptions and support business, sales in the first quarter of this year grew 60 per cent, year on year, to €219m ($302m) – or about a third of on-site software sold.

Combined "software and support" revenue from on-premises applications was up three per cent to €2.8bn ($3.8bn). Include the cloud division, and "software and software-related service" revenue was up five per cent, year on year, to €3bn ($4.1bn).

Overall, for Q1 2014, SAP's total revenue (IFRS) grew by three per cent to €3.6bn ($4.9bn) with IFRS EPS also up three per cent to €0.45 per share. Total pre-tax profit for the three-month period was €723m ($998m), up 12 per cent year on year.

The numbers showed a reasonable consistency in the SAP business: in Q4 2013, cloud subs and support sales grew 66 per cent while on-premises revenue fell two per cent, year on year, to €1.90bn ($2.6bn).

The financial figures were published as SAP announced it is introducing subscription-based pricing for its entire business suite hosted in its data centers. Actual prices have not yet been revealed.

SAP’s new subscription push combined with the above numbers give the distinct impression the tech giant has committed to cloud computing at the expense of its on-premises license business.

But the company's bosses reckon they won't hit next year's cloud revenue target, and pushed that goal back to 2017. They instead concentrated on the positives of the first quarter of this year, and talked of fast growth in the cloud and broad adoption of its HANA in-memory database.

SAP claimed it has more than 3,200 SAP HANA customers since launching the software in June 2011, and nearly 1,000 customers on its SAP Business Suite running on HANA, launched a year ago. ®

Bridging the IT gap between rising business demands and ageing tools

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