Software

SAP slurps up CRM biz Callidus for $2.4bn, pants: Look, cloud bookings are up!

*Cough* Bulk of sales still licences and support *cough*

By Rebecca Hill

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SAP has reported a boost in cloud bookings in its full-year results and announced a $2.4bn deal to buy cloudy sales tracking biz Callidus Software.

The German ERP giant has today released (PDF) its figures for the final quarter of 2017, along with its full-year results.

Total revenue for the year was up by 6 per cent, to €23.46bn, but operating profit dropped by 5 per cent, to €4.88bn.

For the quarter ended December 31, SAP’s total revenue was up 1 per cent year-on-year to €6.8bn, and operating profit also rose 1 per cent, to €1.96bn.

Cloud subscriptions and support for the quarter were up 20 per cent, to €995m, but the lion’s share of revenues - €4.8bn - still came from software licences and support. However, this represented a 2 per cent drop on Q4 2016.

But the thrust of SAP’s bragging was squarely in the cloud, following concerns about a drop of in new cloud bookings growth in the previous quarter’s results.

Such measures are crucial for investors and analysts who are closely watching SAP's efforts to move customers into the cloud and the way shifting from sales of up-front software licences to cloud subscriptions.

In Q3, SAP reported an increase of just 15 per cent in new cloud bookings - a smaller increase than the 33 per cent in Q2 and 49 per cent in Q1, forcing SAP boss Bill McDermott to reassure the market that Q4 would ring the changes.

The percentage boost in new cloud bookings for Q4 - 22 per cent - is just shy of his promise of "the low 30s", but reached €591m. For the full-year, new cloud bookings were up 26 per cent, from €1.15bn to €1.45bn.

“We promised fast cloud growth - we delivered!” crowed McDermott’s canned statement.

On the earnings call with analysts this afternoon, he added that in 2018, the biz expects to see cloud revenue beat licensing revenue for the first time.

At the same time as pushing its own cloudy success, SAP also announced a $2.4bn deal to acquire sales performance management biz CallidusCloud, paying $36 a share for firm, which offers solutions that help sales team generate leads, develop quotes for potential customers and track sales targets.

It is SAP’s biggest acquisition since it forked out $7bn for Concur in 2014. Prior to that, it paid $1.4bn for Hybris in 2013, $4.3bn for Ariba in 2012 and $3.4bn for SuccessFactors in 2011.

Picking up Callidus - which has about 5,800 customers and reported a fiscal 2016 revenue of $207m - is part of SAP’s bid to boost its offering in the cloud.

The aim is to give the company an extra string to its bow in customer relationship management, where the biz is competing with the likes of Salesforce, and boost SaaS revenues.

The biz has said the move is a tuck-in and doesn't represent plans for more major acquisitions, and McDermott added that SAP needed to buy this tech in, as it would take "a little too long to build" itself.

"Callidus really strengthens us in the area we need it most," he said, adding that the firm was planning to come out "very aggressive" in CRM.

"It's too big a market to leave alone... some of the [competitors] have had it too easy," McDermott added.

SAP plans to bring CallidusCloud products under SAP Hybris solutions, as part of its cloud business group, with Callidus’ existing management team continuing to lead the work.

Elsewhere, the biz claimed “record setting” adoption of its integrated business suite S/4HANA - although both the percentage increase in customers and the number of net new customers were lower in the year-on-year figures for Q3.

There are now 7,900 customers on S/4HANA, which SAP claims is becoming better understood after it suffered a slow start in life. SAP claimed a 46 per cent year-on-year increase in customers in Q4 2017, which included more than 400 net new customers. Q3’s results showed a 70 per cent year-on-year increase in customers, with 600 net new.

SAP's execs were also quizzed on the call about progress in getting existing customers to switch to the cloud - for instance, pointing to the recent decision to extend on-prem HCM support until at least 2030.

But the team said this was mainly to support public sector clients who had more concerns about the call. Execs added that they expected to have migrated at least half SAP's existing installed base onto S/4HANA cloud by 2020. ®

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