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28 Jan 2021
SAP outlines new services offering
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SAP outlines new services offering
SAP SE (SAP:ETR) | 0 0 0.0%
- Published:
28 Jan 2021 -
Author:
Slowinski Stefan SS | Castillo-Bernaus Ben BC -
Pages:
9
SAP''s Rise event focuses on new cloud services offering
SAP senior management hosted SAP Rise on Wednesday, an event to announce a new cloud deployment strategy where SAP will take on the management of large customers'' existing ERP estates, including existing infrastructure, and then assist in migrating to cloud based solutions. The process would see SAP: 1) provide business process intelligence services, 2) handle technical migration of the existing landscape to cloud, with less customisations, 3) swap the infrastructure for SAP or hyperscale infrastructure, 4) offer the SAP Business Technology Platform for customers to extend the new ''clear ERP core'', 5) give customers access to the SAP Business Network, an ecosystem of SAP customers and partners, and 6) eventually move over to S4 Hana public cloud.
New offering raises risks for SAP...and opportunities
SAP will be the ''one throat to choke'' or ''one hand to shake'' for the customer who will have one contract and one provider (so SAP will pass through IaaS revenue to hyperscale partners). With SAP taking ownership of potentially highly complex migration processes, SAP is increasing its execution risk, as well as risking stepping on the toes of services partners. On the flip side, SAP is increasing its TAM, and believes that converting maintenance revenue to subscription could result in 2x the revenues. By stimulating and controlling the upgrade process, SAP also hopes to drive usage of its Business Technology Platform, as well as cross sell its broad cloud application offering. No details have yet been provided as to how SAP will push this transition through salesforce incentives. The potential impact of the new offering is already embedded in SAP''s guidance for licenses to fall at ~20% annually, maintenance revenues to begin falling, and for Cloud revenues to grow 21% CAGR to EUR22bn by 2025 with 80% GMs, and 32% group OMs.
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