The global market of Cloud services is anticipated to attain a CAGR (compound annual growth rate) of 17.7% from 2011 to 2016. The revenue of the cloud services is expected to grow from $76.9 billion in 2010 to $210 billion by 2016. Such growth figures and market size influenced various software companies to join the cloud bandwagon to leverage its top and bottom line.
SAP (SAP, Financial) is an established global leader that provides ERP (Enterprise Resource Planning) software solutions to various business segments. As the business houses are shifting from in-house software implementation to Cloud-enabled service, it provided growth drive for companies like SAP that are now more focused on providing Cloud-enabled services. The strategic move of the company to focus on Cloud was illustrated with launch of SAP HANA, which is now gaining momentum and increasing its global footprints. The company also provides various turnkey software solutions pertaining to other growth markets like data mining and data warehousing that supplements other services of the company.
Strong quarter
The company recently released it second-quarter results; revenue could not beat the consensus estimates, but it did surpass the consensus earnings estimates. Consolidated revenue increased by 5% year over year, to record $5,660.1 million, missing the consensus anticipated revenue of $5,768 million.
Segment wise revenue ($ in millions)
| Segment | Q2-2014 | Change(YoY) |
| Cloud Subscriptions & Support | $329.8 | 39% (Up) |
| Software & Support | $4,413 | 6% (Up) |
| Services & Software Related Services | 4,742 | 8% (Up) |
Furthermore, earnings surpassed the consensus estimate of $0.88. Earnings increased 10% year over year, to report $1.04 as compared to $0.88 in the same quarter last year.
SAP HANA continues to record growth for SAP Business Suite
SAP HANA has been like a steroid for SAP Business Suite, which now records over 1,000 customers at the end of the second quarter. With just over a year since SAP HANA was launched in the open market, SAP Business Suite powered by SAP HANA is witnessing an exponential growth in customer base. SAP HANA provides enhanced features to SAP Business Suite, mainly SAP financials that processes customer queries over voluminous database at higher. Furthermore, Cloud-enabled CRM solutions powered by SAP HANA has been embraced by diversified business segments like insurance, utilities and retails and is providing growth drivers to the company.
Adding more weight on Cloud portfolio
Sap has been known for its strategic acquisitions this further strengthens its product portfolio. SAP is now targeting to acquire SeeWhy, with this acquisitions SAP will integrate SeeWhy’s solution with its e-commerce platform “Hybris” and the bundled package will provide enhanced online marketing solutions. This further endorses SAP's focus on the Cloud market.
In addition, SAP already acquired FIeldglass for $1 billion to put extra weight on its Cloud portfolio. Fieldglass specializes in providing vendor manage system that provides a new experience enabling the organization to manage their suppliers is more streamlined manner.
Simplified licensing policy can provide growth
Licensing policy at times is an important factor for the success of any services. SAP has been regularly working with its licensing policy in the benefit of its clients, which also helps in low attrition rates of customers. This licensing policy also helps in sustained revenue for the company. At times licensing policies of various softwares are too confusing for a client to avail an optimum benefit from the licenses' cost. SAP's new licensing policy is quite simplified, and the customer is not lost in calculating a genuine break-even cost of the services availed in the software bundle.
Conclusion
SAP’s focus on Cloud has influenced the growth for the company and its future seems to be very bright. The strategic acquisitions by SAP will further keep the growth momentum for the company. The revised pricing policy will also help in acquiring new clients and prove to be have a competitive pricing advantage over it competitors. I personally feel these tech stocks can provide good returns in the future.
