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SAP's Long-Term Growth Prospects Are Bright

August 24, 2014 | About:

Enterprise application software service supplier SAP (NYSE:SAP) is making solid moves in the cloud. The organization turned in an outstanding performance in the first quarter, conveying solid development in cloud and cloud-related products. Furthermore, SAP is progressing admirably in the customer relationship administration space, giving intense rivalry to Oracle (ORCL) and Salesforce.com (CRM).

SAP shares are down this year, providing investors an opportunity to purchase the stock for next to nothing. We should examine the various reasons why SAP looks set for long haul development.

Strong results and a stronger future

SAP conveyed strong results in the first quarter as its revenue surpassed its direction range. The organization witnessed considerable development in all areas. Cloud subscriptions increased 38%, in front of expectations. Indeed, its cloud business has accomplished a yearly revenue run rate of close to $1.5 billion, developing 1.5 times faster than its closest rival.

The organization is picking up footing with the appropriation of HANA, its continuous business stage. It boasts of 1,000 customers for SAP Business Suite on HANA. This is a momentous performance considering that the stage was dispatched just one year back. SAP is focused on continuously developing its center products, and this has prompted solid development in its customer base.

Also, SAP is also uniting Ariba and HANA. Ariba is a software and data engineering services organization procured by SAP in 2012. Ariba's Spend Visibility solution is presently running on HANA, and switched in excess of 5 million users instantaneously with zero downtime to the system. Presently, companies on this system will have the capacity to break down a lot of spending information in fractions of a second. The organization is also stretching its HANA Enterprise Cloud server farm to new locations, including China, Australia, Russia, Canada, Mexico, India, and Brazil.

Advancement, acquisitions, and partnerships to drive development

SAP's business model is not quite the same as its peers as it is more focused on advancement. SAP has helped retailers with omni-channel stage, banks with corporate-to-bank integration, insurance companies with universal administrative agreeability, and a lot of people more to make their businesses more effective.

Truth be told, today, SAP claims to give the most comprehensive end-to-end HR Cloud solution. To upgrade its capability here, it has procured Fieldglass, which will permit the organization tap the fast-developing business for adaptable workforce administration.

Hybris also operates on HANA, which is one of the key development drivers for the organization. It enables customers to profit from joining, be it an enterprise cloud, people in general cloud, or on-premise solutions. Consequently, more companies are embracing HANA from several domains such as telecommunications, utilities, fiscal services, retail and so on.

At present, SAP has more than 900 partners in its cloud ecosystem. It has collaborated with Accenture to structure the Accenture and SAP Business Solutions Group. In this gathering, experts from both companies will mutually create industry-specific solutions, which will be controlled by HANA. This will reclassify customer engagement and maintenance in the fast-changing and exceedingly aggressive consumer world.

SAP and the opposition

SAP faces rivalry from Oracle and Salesforce, both of which are attempting to aggressively tap the cloud. Salesforce is developing at a fast pace.

Determined by a strong arrangement movement, Salesforce increased its fiscal 2015 revenue direction by $100 million to $5.3 billion. In the event that the organization attains this much revenue, it will convey an outstanding development of 30% this year. Also, Salesforce expects its non-GAAP profit to increase 125-150 basis points. The organization is the heading player in the customer relationship administration space, in front of SAP, and given the quantity of deals it is making, it may pull ahead.

Prophet, then, is proceeding with its strategy of acquisitions. The organization as of late made an alternate expensive purchase, getting Micros Systems for more than $5 billion, its biggest purchase since Sun Microsystems. Micros counts enormous names such as the Hilton, Hyatt and Marriott lodging chains as clients, so this acquisition will bolster Oracle's presence in the hospitality industry.

Micros makes equipment and software for the hospitality and retail industries, incorporating engineering used in purpose of-sale cash registers. It has been an Oracle accomplice for 15 years. As a result, the acquisition should result in strong synergies. Henceforth, SAP needs to keep an eye on Oracle.


SAP's focus on development and the prevalence of its HANA stage are key reasons why the stock looks like a solid investment. Also, SAP also makes some smart acquisitions to strengthen its position in the cloud. The organization conveyed strong results the last time, and taking a gander at its prospects, it should keep doing admirably, making it a decent purchase.

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