BERLIN (Reuters) – Business software group SAP said on Monday it had reached a three-year deal with Microsoft to help large enterprise customers on their business processes into the cloud.
It is a partnership, the so-called “Embrace”, will help clients carry out activities that are hosted on servers supported by SAP’s flagship, the S/4HANA the database, the new Co-Chief Executive, Bill Morgan, said, when the SAP is released in the third quarter, in line with the preliminary figures released on Oct. 11.
“We’ll be bundled in with SAP’s cloud-based platform of services for supporting customers in the expansion, integration, and orchestration of SAP-based systems,” Morgan told reporters, adding that Microsoft could be working as a vendor for the product.
SAP said it expects an annual turnover of around 75 million euros ($84 million) on the deal: “There is no downside to these numbers, only upside down,” she told analysts on a call.
In the third quarter, SAP reported a 10% increase in revenue and a 15% increase in operating income after adjustments of non recurring items and the currency, helping it to achieve a growth rate of 1.7% in operating margins. The company reiterated its forecast for the year 2023.
Morgan also praised the performance of the Qualtrics, the customer experience platform, SAP, which was acquired a year ago in an $8 billion-a deal that some analysts and investors have criticized as being too expensive.
She told me that Qualtrics was added to more than 300 customers in May, customers will often be buying together with the SAP human resources product Success. Qualtrics-founder, Ryan Smith, now an SAP board member said, its size was increased by 30% since the date of acquisition.
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Announcement of the Microsoft partnership comes after a long period of time, CEO Bill McDermott stepped down in order to make room for Morgan, the first woman to be CEO of a company, in Germany’s blue-chip DAX index and co-CEO Christian Klein.
The shares, which had rallied sharply on the news of the management, transfer, and then added another 2.3 percent in trading in Frankfurt on Monday.
The deal, which has helped to SAP double-a new cloud bookings in the third quarter to address a complaint from many customers is that it is difficult to make a shift in SAP’s traditional on-premise model to externally hosted services.
FILE PHOTO: The logo of German software group SAP is pictured at the company headquarters in Walldorf, Germany, May 12, 2016. REUTERS/Ralph Orlowski/File Photo
The partnership now had a close relationship with Microsoft and its Azure cloud division, even though the Walldorf-based company said all customers will be hosted on Google’s and Amazon’s Web Services, you can still buy it directly from the SYSTEM.
De-emphasize its own-brand cloud is turning out to be a factor in support of a pick-up in SAP’s cloud gross margins. This is picked up by 5.4 percentage points to 69% in the third quarter, compared with a 2023 target of 75%.
The SAP is due to update investors on its strategy at a capital markets day in New York city on Nov. 12.
Reporting by Douglas Busvine; Editing by Tassilo Hummel, Sherry Jacob-Phillips and Deepa Babington