Cloud versus On-Premise
In the first quarter, SAP said its annual cloud revenue run rate was close to €1.1 billion, with billings up 36 percent year over year. At the same time, on-premises license sales fell 5 percent to €623 million.
SAP officials, like those at other traditionally on-premises software vendors, have framed the situation as simply the natural outcome of a transition in customer buying preferences.
That may be so, but observers will watch these two numbers closely when SAP makes its second-quarter report, looking for signs of weakness.
Officially, SAP's midmarket cloud enterprise-resource-planning suite, Business ByDesign, is still alive. It's just being "refactored" to run on Hana, as departed tech chief Vishal Sikka said late last year.
But since then, SAP has made very little noise about where this effort stands. Sikka's abrupt departure in May and the subsequent appointment of Bernd Leukert as development head didn't help, although some observers expect more of an application focus for SAP under Leukert's leadership.
Since its inception nearly seven years ago, ByDesign has been a disappointment for SAP. The company initially projected it would have 10,000 customers by 2010, but it has come nowhere near that mark even today.
Still, "it makes sense for them to keep ByDesign at the moment," said Jon Reed, an independent analyst and SAP Mentor, the name given to especially involved members of the company's community. For one thing, it gives SAP something to compete with when rivals such as NetSuite come knocking on its customers' doors, Reed added.
That said, if SAP manages to complete the Simple Suite vision, it may be able to use that code in a midmarket product, eliminating the need to continue developing ByDesign.
Next week's conference calls with reporters and analysts present a good opportunity to get the whole situation sorted out.
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