SAP HANA enterprise cloud might even turn a profit in 2017

Rolling, two-year expansion planned for HEC

SAP’s private cloud business, HANA Enterprise Cloud, will roll out of start-up mode – and stop being a loss-maker – this year.

The German software giant’s private managed cloud will break even in 2017 as existing investments on features and infrastructure pay off, it said.

SAP also plans new features for HEC in the next two years that drive “significant expansion” so SAP finally makes more money from cloud than from sales of new licenses for its trademark on-premesis software.

SAP’s EMA chief operating officer Gonzalo Benedit told The Register: “Where we’ve had negative margin last year was on private cloud. We expect to break even this year based on investments we made. We continue to spend on investment to support massive bookings and growth.”

Benedit did not break out HEC's specific revenue, which is reported as part of new cloud bookings and cloud subscriptions and support. Benedit did say, however, SAP's public cloud, software-as-a-service business are 70-per-cent profitable.

SAP's corporate goal for 2017 is that cloud subscriptions and support revenue are "close" to the money it makes from the sales of software and exceeds that number in 2018. The goal is based on a CAGR of 30 per cent.

For 2015, SAP reported 2.29bn euro for cloud subscriptions and support and 4.84bn from sales of new licenses. To help that, HEC will see additional offerings for its private cloud in the next 18-24 months, Benedit promised. That will include new features in cloud for analytics, capabilities that help HANA scale as a cloud platform, and S4 Hana cloud for edition.

“We expect not just organic growth but also adding new solutions to the cloud,” Benedit said.

The firm’s online services offerings – labelled cloud – have, in keeping with those of its other on-prem peers and new, cloudier competitors, been growing at double-digit rates each quarter. Such is the growth that SAP predicted in January that by 2018 cloud subscriptions and support revenue would exceed its traditional software license revenue.

Growth has mostly come via SAP’s software-as-a-service offerings such as customer engagement, HR and procurement, according to Benedit.

HEC is the hosted version of its apps running on demand, through subscription and atop its in-memory database HANA. HEC provides access to SAP Business Suite and Business Warehouse and has been delivered via IBM cloud data centres and managed service-provider partners such as NTT.

Benedit denied there had been any erosion of SAP's mighty on-prem business by surging cloud. Further, SAP has been hiring staff to work with customers and ensure they keep using SAP’s cloud when contracts need renewing.

Renewals are an area where rival Oracle has struggled. It has been hiring so-called customer success partners as customers who had been sold that company’s cloud platform as part of their contracts have chosen not to renew. The database company's new hires are helping on architecture and training.

“We know this is core and that some of the players are struggling with this, so we are investing both on enablement and adoption,” Benedit said. ®

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