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SAP Tips Hand On Cloud Plans As Profits Soar

First-quarter financial results beat expectations; co-CEO McDermott hints at new cloud partnerships and on-demand offerings.
"If you look at the cloud computing scenario... we clearly get that it's a significant force and one that customers want," McDermott said. "We will announce partnerships at SAPPHIRE that make it clear to the world that we believe in the extended business network, that we believe in the ecosystem around SAP, and we will demonstrate our passion for the cloud, whether it's at the network, storage or virtualization layer."

McDermott would not divulge the names of the partners to be announced at SAPPHIRE -- simultaneous May 17-19 events in Frankfurt, Germany, and Orlando, Fla. But he did note that SAP will also demonstrate its own on-demand solutions for private- and public-cloud deployment.

Addressing SAP's financial results in this morning's call with analysts, McDermott pointed to strengths including the 12% increase in first-quarter sales to $2.55 billion (1.94 billion Euros -- all figures are according to International Financial Reporting Standards), up from $2.28 billion (1.74 billion Euros) in the same quarter last year. Operating profits increased 81% for the quarter to $731 million (557 million Euros), up from $403 million (307 million Euros) last year.

"Our growth was solid, driven by an increase in software revenues in all key regions, our established markets, our fast-growing markets and in key segments of business users, including small- and midsize-enterprises," McDermott said.

Software and service revenues increased around the globe, with SAP's European, American and Asian markets growing 11%, 9% and 8%, respectively. Leading industry-specific sales increases included a 31% increase in retail, 17% increases in financial services and consumer package goods, and a 14% increase in sales to utilities. SAP said retailers are moving from legacy back-office systems toward more modern core merchandizing and financial back-office platforms.

Pointing to signs that trust in the SAP brand is strong, McDermott said the vast majority of customers are now choosing the Enterprise Support option. SAP's maintenance and service plan became a flash point of customer anger in 2009, but McDermott told InformationWeek that nearly 100% of new customers and nine out of ten existing customers are choosing what is now the higher-priced option among two support plans.

"It seems like the debate is now behind us on enterprise support," he said. "The value is best-in-class in terms of the competition and it's the best offering we have."

On the topic of innovation, SAP promises were more plentiful than details today. But the upcoming SAPPHIRE event should provide fresh evidence as to whether the best that SAP can offer is best-in-class in delivering business value, a topic Bob Evans writes about in this analysis of today's SAP news and McDermott interview.