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
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 Officer-Jennifer Morgan, said SAP has made the final of 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 the products would be sold through Microsoft’s distribution channels.
Announcement of the 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, together with a colleague, Co-CEO of Christian Small.
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.
The co-operation deepens SAP’s already strong relationship with Microsoft and its Azure cloud division, even though the Walldorf-based company is also working with Google and Amazon Web Services in the cloud.
The emphasis on self-brand, the 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%.
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. 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 and Sherry Jacob-Phillips