SAP's robust fourth quarter and end-of-year 2011 financial figures are highlighted by a 25% jump in software revenue and 4.8 billion euros ($6.2 billion) in profit on 14.2 billion euros ($18.6 billion) in sales (in constant currencies). SAP's gains have been largely at the expense of Oracle, which has lagged SAP as well as Infor and Epicor in application software growth rates--at least in the most recent quarter.
The real news during SAP's Wednesday press conference was SAP's five-point plan to extend the company's momentum in the applications, analytics and mobility markets while significantly increasing its presence in the database and cloud computing markets.
[ Want more on SAP's financial results? Read SAP Leads, Oracle Lags In Enterprise Apps. ]
The plan expands on SAP's in-memory, mobile and on-demand theme of the past two years. Apps and analytics were always there as part of the "stable core" that is, in fact, the backbone of SAP's revenue. In-memory, a stand-in for the Hana in-memory database, is a big part of the innovation story that will help drive customer demand in all five areas, said Co-CEO Jim Hagemann Snabe.
Hana is no longer just a stand-alone in-memory appliance. It will run a bunch of new applications that are part transactional and part analytical, like Sales & Operational Planning (a supply chain module that's soon to be released) and Smart Meter Analytics for utilities (released late last year). Hana can also now run SAP's core CO-PA (Controlling-Profitability Analysis) module, thereby accelerating financial analyses. And Hana can serve, as announced last year, as the underlying database for the SAP Business Warehouse, an analytic environment used by some 16,000 SAP customers.
SAP is getting right in the face of Oracle with these uses of Hana, and with its planned next step, expected as soon as early next year, to offer Hana as a replacement for the databases running its apps. There's more to SAP's database story, notably Sybase ASE and Sybase IQ, which have solid and growing shares in financial services and big-data analytics, respectively. But Hana is the biggest bet. When SAP floated the database plan last month, it described it as "a great big, audacious goal."
The question is whether Oracle customers will buy Hana. An estimated 60% of SAP customers use Oracle database to run their applications. Oracle has its own in-memory appliance, Exalytics, that is a fairly low-cost incremental add-on to any company that already owns Oracle Exadata and Oracle Business Intelligence Enterprise Edition (OBIEE). Exadata and OBIEE are both six- to seven-figure investments in their own right, and both are required for Exalytics to make sense. It's going to be a hard sell to get an Oracle shop that's in that deep to add SAP Hana and the separate hardware required.
If an Oracle customer running SAP apps isn't using either Exadata or OBIEE, I'm guessing sales reps from both companies are crawling all over them trying to move them into one camp or the other.
ConAgra, Verizon and Broadcom were cited by SAP Co-CEO Bill McDermott as recent Hana converts, and he described it as a "category killer" in accelerating executive decision making. "It can show you what's happening with pricing at the deal level and where you're at against your original forecast." It's the idea, he said, of total transparency into business conditions delivered to an iPad in real time.
Getting Serious About Cloud
As for SAP's new urgency to be a leader in cloud computing, that's where it will go head to head with Salesforce.com, among others. Hagemann Snabe said the goal is for SAP to become a $2 billion player in cloud computing by 2015. That's about where Salesforce.com is today in terms of revenue, but McDermott tried to put that in perspective by pointing out that SAP added more new software license revenue in its fourth quarter--1.7 billion euros ($2.2 billion)--than Salesforce.com has revenue across all categories in an entire year (true last year, when it reported $1.6 billion in revenue, but Salesforce may well top $2.2 billion when it reports the latest annual results in a few weeks).
In the cloud, however, and without its planned acquisition of SuccessFactors, SAP wouldn't hold a candle to Salesforce.com. Even with the addition, SAP likes to talk about SuccessFactor's 15 million end users, it's acquiring a broad-but-shallow footprint. That big number is based largely on a performance-review app that is used by every employee in a company--maybe two or four times per year. Is that really a big foot in the door for, say, Business ByDesign, SAP's cloud enterprise apps suite, which includes ERP, HR, CRM and other apps?
What's more, SuccessFactors has only about 3,500 companies as customers, whereas Salesforce.com has some 87,000 (with 3 milllion end users). Long story short, Salesforce.com is, in my estimation, in a better position to sell more licenses to end users and additional services to customer firms -- so long as it can broaden its portfolio of apps, which it has been doing quite steadily.
SuccessFactors CEO Lars Dalgaard, who will lead SAP's cloud strategy once the acquisition is completed, needs a plan to grow Business ByDesign and SAP's other on-demand apps much more aggressively in 2012 than SAP has managed thus far.
To SAP's credit, it's not overextending itself with its five-point growth plan. The goals on apps, analytics and mobility are nothing new. As for the database and cloud goals, saying "we'll be number two" isn't impossible, but some formidable, long-term players stand in the way. In database, IBM and Microsoft aren't going to step aside for SAP anymore than Oracle will. And in the cloud, Oracle, Microsoft, Workday, Netsuite and others will be fighting tooth and nail alongside Salesforce.com and SAP.
If you're going to offer a database, you're going to butt heads with Oracle. And Salesforce.com is to cloud computing what Oracle is to databases. SAP is simply setting its sights on the leaders and not shying away from the fight.