Hello, good afternoon. Welcome to the SAPPHIRE NOW 2018 Financial Analyst Conference. Thanks for joining us here on the ground in Orlando. Also, a warm welcome to those of you who follow this event over the web. My name is Stefan Gruber. I am Head of Investor Relations. As usual, at the beginning, I want to give you a brief overview on the agenda for our conference for today. This is a clicker test now. To work, look at this. That is the agenda. We have three product-related topics at the beginning: Intelligent Enterprise, then C/4HANA, and then the SAP Data Hub. Intelligent Enterprise, the presentation will be given by our CTO, Björn Goerke, who made the quote of the day, which I am not going to repeat now. He might repeat it later on. He will talk about how SAP Cloud Platform provides a competitive edge.
We focus on C/4HANA, our CRM story. I know there is some skepticism in the financial analyst community as SAP is seen primarily as the king of ERP. Hopefully, Mr. Atzberger can change that perception today. The third product-related presentation today is SAP Data Hub by Franz Faerber. Those of you who attended Capital Markets Day in New York remember Franz was on stage, and he does a little deep dive on the Data Hub and how it helps customers to get better insight into data from all sources. I have, as usual, a couple of housekeeping items. Before I do that, I want to remind everyone there is an executive Q&A session at the end.
A classical element in our capital markets event, a presentation by our Chief Financial Officer, Luka Mucic, who will do a summary of the key announcements here at SAPPHIRE and also talk about our growth aspirations on the top and the bottom line. Luka will also provide an update on the currency impact on our 2018 numbers. This evening, we have an executive reception. This will be held at the Norman's Restaurant at the Ritz-Carlton. Please join us at the lobby of the Hilton at 7:30 P.M. Buses will depart from the Hilton to the Ritz, and there will also be buses that take you back after the reception. Finally, this event is also webcast on our Investor Relations website. All the slides will be available on the IR website soon after this event. At the end, that is my classical element.
It is the famous safe harbor statement. Probably over the next 10 years, there will be a point in time where this will be replaced by artificial intelligence. I was told I still have to read it, at least for this event. Please note that except for certain information, matters discussed during today's conference may contain forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect the company's future financial results are discussed more fully in our most recent filings with the SEC. Now I want to invite Björn Goerke to the podium. Thank you.
Thank you. Thanks, Stefan.
Thank you.
Thank you. Yeah. Thanks for getting that out of the way. Yeah, my pleasure being here. I want to share a little bit, after some of you probably or most of you, hopefully, have seen the keynote this morning, the keynote maybe yesterday from Bill, kind of introducing and presenting our company strategy around making our customers intelligent enterprises and supporting our customers in their ambition and their strategy to get to the next generation of business solutions that we foresee and that we see happening in the market. Now, if you look at the history of business solutions, it's definitely kind of major disruptive steps that the whole industry has gone through.
Hasso alluded a little bit about the origin of ERP and how R/3 was invented, and how SAP has always been at the forefront of bringing the latest innovations, and the next generation of these solutions to our customers to help them run their businesses better, and deliver better customer experience and better service. Now, what we see coming up right now, and some people may argue that it's already present but not evenly distributed yet, is the whole concept of intelligence, which goes kind of as a next iteration beyond what we've seen so far in digital transformation projects. Digital transformation has been changing markets. It has been disrupting business models of companies around the globe in any industry.
With the advent of new technologies, topics like machine learning, topics like conversational user interfaces, natural language-based interaction with systems, with things like robotic process automation, with a broad set of new technologies coming to play, which support the new workloads at scale anywhere in the cloud. We see that companies also need to start rethinking how they drive business solutions across their portfolio. If we look at how the interactions look like with our customers, what we've seen is that over the past years, while there was an enormous push towards individual best-of-breed line of business solutions.
We have seen that push towards individual line of business solutions, driven by the business individually, more and more customers realize that there's a big hurdle and a big effort necessary, a big headache involved in bringing and orchestrating all those solutions to deliver end-to-end business processes for their business and their enterprise, which has led somehow to the effect that best of breed in individual LOB solutions is not sufficient anymore. It's really about bringing end-to-end processes together, bringing intelligence into how you operate your business from front office to back office, and making all of that basically into an Intelligent Suite of solutions that can run business processes like lead-to-cash from end to end. That can run holistic workforce management from end to end. Procure-to-pay, end to end. It always involves more than a single LOB solution that needs to work holistically together.
Now, if you want to bring intelligence to this, it's important to see more than what's going on in an individual solution. I think that if you look at what makes human intelligence still superior to machine learning, it's definitely the fact that we can bring context into the picture. We can look beyond the particular problem you're trying to solve and apply context and come to the right decision in the right context. Similar things apply, of course, in this context as well. If you want to make the right automated decisions in your business, you need to be able to look broader than just an individual solution. It's not just looking at the front office. You need to see what's happening in the back office as well and correlate that together.
That's why we believe intelligent enterprises will need a framework to support them in implementing that intelligence and getting their business into that mode. That starts with an Intelligent Suite of solutions, and there's no other company on the market that has this broad spectrum from front office to back office, like SAP, to make that actually happen. Whether we talk about customer experience, Alex Atzberger is going to talk right behind me about our C/4HANA product in that space, whether we talk about the whole fulfillment that needs to follow any customer order, any customer interaction.
whether we talk about digital supply chain and manufacturing, whether we talk about the digital core with our S/4HANA and S/4HANA Cloud solution around the core ERP and finance space, whether we talk about how you empower your workforce and your contingent workers to deliver on your company's promises, and if we then look into the whole topic of your business network that reach beyond your corporate borders, with network and spend management, from procurement with Ariba, to the whole topic of travel and expense management with Concur, all of those solutions, in the end, need to seamlessly work together to make the intelligent enterprise happen. Now, that's the application side. That's the business process side of the house. Underneath, you need an enabler, and that enabler is number two. That's the digital platform.
This innovation will require agility, it's not a one-stop kind of activity to turn into an intelligent enterprise, and then you're done. It's something that will need you to be able to, in an agile fashion, adapt to changing market conditions, learn as you go, figure out what you can do even better, how you can deliver a better customer experience. The whole idea of a digital platform underneath is absolutely crucial to deliver on that promise. That's where two elements come together. One is the SAP HANA Data Management Suite that we heard about yesterday already, and also Hasso talked about it this morning, where we take enterprise workloads, enterprise scenarios in SAP HANA, but we go beyond the enterprise.
We go with SAP Data Hub also into the space of big data sets which are distributed anywhere in your corporate environment or distributed and coming from the outside into environments like an Amazon cloud, where you store big data out of IoT, where you tap into social sentiment data out of Facebook or Twitter. We're really kind of using SAP Data Hub as part of this overarching data management suite to combine your enterprise workload and correlate it and bring it together in a controlled and governed fashion with data sets which are coming from the real world, which are coming from the outside, to make sure both things fit together and you have a realistic view of what's going on in your business and around.
Franz Faerber will present also here later on what this idea of the Data Hub and how we work across those things will come together. That's part of, and to be at the core of our digital platform. On top, we have the SAP Cloud Platform. SAP Cloud Platform now is this agility layer. It's our platform as a service offering, where we deliver, first of all, flexibility to our customers to run this in a broad set of environments. We also bring a rich set of individual capabilities, so-called microservices, in a cloud-native architecture into the game that will allow you as a customer or a partner to quickly iterate and adapt your solutions in an agile fashion to the changing business needs. I have a little bit more of that later on. That's element number two.
Element number 3 is intelligent technologies themselves. Things like machine learning with our machine learning foundation, partnering also here with Google and others. The whole topic of IoT connectivity, the topic of analytics, prediction, and planning, the topics of big data management, those are all capabilities that we embed into our applications and deliver them through the digital platform underneath. These 3 elements, we believe, need to come together to help customers turn their enterprise into an intelligent one and make them ready for agile innovation in the future as well. As a little shocker to the audience, this is a little bit of a technical picture of what is this cloud platform. It remains a little bit kind of cloudy on all the pictures you may have seen before over the last 2 days here in the keynotes.
This is more of a technical architecture, an architecture picture. I will not go into all the details, what it, in the end, should show you is it's the central element that brings together all those capabilities that you hear of here at SAP, at SAPPHIRE, to make sure that we have this central enabler, this central fabric, this central orchestration layer to weave together our individual LOB solutions for integration purposes, bring the innovation in there, and deliver that in a flexible fashion. I'll quickly explain what's going on. First of all, SAP Cloud Platform can take, or we operate SAP Cloud Platform for our customers. It's a managed offering that we have. It's a public cloud, it's a public PaaS platform.
We have been partnering with Google, with Microsoft, and with Amazon to not only deliver that capability in SAP data centers, also benefit from the reach and the local presence and the scale and the elasticity of the hyperscale cloud providers to deliver SAP Cloud Platform provision services around the globe, also in their environments. Beyond that scale, what is relevant is that we are able to co-locate SAP-driven workloads now with innovations that are coming from those hyperscalers. Whether you want to use BigQuery from Google or machine learning from Google, whether you want to tap into Office 365 from Microsoft, or whether you want to use your big data services and IoT capabilities on AWS, you can combine them and co-locate them, taking latency, taking network issues out of the picture as we co-locate SAP Cloud Platform and its capabilities on top of those environments.
Second is we're pushing massively towards openness. Such a platform lives off the fact that you have an open environment that is accessible to developers. I talked this morning about, and as my second most liked quote is, "Cloud platform is where cool meets or hangs out with enterprise." It's a lot about making that platform accessible to a broad set of developers. That's why we engage in Cloud Foundry, which is the leading PaaS open source platform. We engage around Cloud Native Computing Foundation, around Kubernetes as a cluster management environment for container-based workloads, the next big thing to come. We add, of course, our ABAP environment into that as well because we have a broad developer ecosystem out of the past from SAP, and we make that the basis for all of the services we provide on SAP Cloud Platform.
SAP Leonardo, the innovation services you have heard about, are delivered through the SAP Cloud Platform. Our integration capabilities are delivered through the platform. We're moving up the stack into business capabilities as well, where we provide easy access to any of the master data objects that reside in the SAP systems. Not just the customer, but also elements like supplier, the employee, the third-party contingent worker, things like product, things like asset, which are provisioned on the SAP Cloud Platform in a native fashion to make it easily accessible to developers and to systems integrators to build into and around the SAP ecosystem. You combine that with a marketplace. We have a new commercial model for this platform, which provides you basically all of it in an all-you-can-eat kind of fashion of a menu.
Under a single contract, you can basically get access to any of the capabilities in the platform and consume them on a pay-per-use basis, which gives you the consumption flexibility, basically on the user side, where we can now deliver new capabilities into the platform in an ongoing fashion. We're delivering features in a two-week release cycle into the platform, and you can use any of it that we have in the platform as you need it in your transformation or implementation project. All of this is used to massively push APIs. The whole platform is API enabled. We talk about microservices. We're API enabling our solutions as well. The SaaS solutions that we have, from SAP S/4HANA Cloud to Fieldglass, SuccessFactors, and Concur. We believe that in the future, you need much more open systems that can be accessed from the outside in a standardized fashion.
That's a big push we have for the whole platform. Then you can start putting the capabilities flexibly together, and adapt how you support your business going forward. In the end, why am I so convinced of SAP Cloud Platform. Why am I so much convinced that SAP Cloud Platform is relevant to our customers big time? I talked about my five-finger pitch this morning. The first case, it's the best extension platform that you can have to extend any SAP solution. In the past, we had a lot of, let's say, learnings. Our customers had a lot of learnings about going deep into ERP and over-customizing the system. They started to tweak it to their specific process, added additional functionality, and basically locked themselves in to be able to upgrade to our latest releases.
Usually, they kind of lost the connection to the innovations that were coming from SAP because it was too hard and too difficult to upgrade. Big learning. In the future, we want to do things in a smarter way. We put open APIs around the core system, SAP S/4HANA is one of the most open systems we have ever had in the history of SAP. Through standard APIs, we make everything that is within the system accessible from the outside so that you can build extension applications basically outside the core solution, keep your core clean, keep taking the latest updates from SAP. In the cloud, we do that for you. You build your extension applications, your process extensions, basically around the system. That's number one. Number two, the big topic of integration.
Super important as we talk about how we bring that suite together and how you run businesses, kind of your processes, not only from SAP to SAP, but also from SAP to third party. Integration. One of our, let's say, most successful services on SAP Cloud Platform is our integration services. Which is, in the old days, we would talk about integration middleware. It's a holistic integration capability or a set of capabilities ranging from application to application, business to business integration. Data integration is part of it. We have IoT related integration capabilities. We talk about API management and open APIs. It's a holistic set of capabilities. Within 2 years, we've been able to grow that to 5,000 customers, using those capabilities to integrate our solutions. Now, what SAP is providing as part of the Intelligent Suite is out-of-the-box, ready-made, ready-to-consume integration content.
If we talk about providing an end-to-end process like lead to cash, SAP is provisioning and providing that integration content that goes into connecting your SAP C/4HANA system and your SAP S/4HANA system. If we talk about total workforce management, it's us who provides the necessary integration content to make sure that your contingent worker system with SAP Fieldglass works together with a SAP SuccessFactors HCM solution and connects into your finance system with SAP S/4HANA. SAP is providing more and more of the APIs and more and more of the integration content out of the box to provide customers basically with integration as a service for all the SAP solutions. In the end delivers an Intelligent Suite, an integrated suite, and not just individual LOB solutions. That's a big effort there. 3rd big case we're seeing is the build platform. It's a powerful platform to build new applications.
We have 1 customer who builds an airplane fueling application, getting rid of a paper-based process, replacing that with a mobile application on a tablet, which is used at airports around the world to actually manage the fueling of airplanes. They built that outside of the system. Of course, it needs to connect back into an ERP system to actually do the fulfillment and get the delivery done. This is where basically the innovation starts outside the SAP process, but it links back into an SAP driven process, to get the fulfillment done. This is where SAP Leonardo technologies are often used. Like we talk about IoT, we talk about analytics, we talk about big data. This is the classical build case. Number 4, I talked about that a little bit earlier already.
This is where we talk about a different way how you interact with systems in the future. It might be early on, but we see it already in the consumer space, with Amazon Alexa, with Siri, and other ways how you interact, let's say, as an end user in a consumer space, in your private life, with systems, with natural speech, where systems talk to you and actually explain to you the relevant things. Where systems start to have context that you will, of course, require if you talk to a system. We see that this is going to be a part of the intelligent enterprise as well. This is how enterprise solutions will look like in the future. What we need here is the basic kind of capabilities today, like mobile enablement, like multi-channel access.
But it's really also going into a broader set of new technologies like chatbots, like natural language processing, topics like conversational UIs. In our case, that product is called SAP CoPilot, where you have a central access point into any of those business solutions, any end-to-end process. And the system needs to understand the context of what is happening in your various systems to be able to interact with you in a meaningful fashion. Again, also here, SAP Cloud Platform is, in the end, the enabler, where we provide those capabilities to embed them into our own applications. Not only use it for us, but also provide it as microservices, as individual capabilities on the cloud platform so that partners or customers can use those capabilities as well to build their own solutions and enhance what SAP is delivering out of the standard.
The fifth element, which is not on this slide, and I talked about that this morning, is in the end, it's the agility platform. I talked about that earlier already. It's, in my opinion, where experimentation that is happening in many customers, actually meets predictability of a delivery that you need in an enterprise environment. It's where your proof of concept that you quickly build in the end needs to come to a robust productization. It's where your millennial software developer that you hired, is going to meet with your chief security, your chief data protection, and your chief compliance officer. Because whatever you build, in the end, if it starts to impact your business and becomes part of your enterprise solution, you have to be aware of security, you have to be aware of compliance, you have to be aware of data protection and privacy.
These things need to come together, in a meaningful fashion. One doesn't rule out the other, and you need a place where you can bring that together. That's why this morning said it's like where cool hangs out with enterprise. This is where the cool shit happens. Kind of growth wise, now I have it out a second time. Growth wise, Hasso mentioned that as well this morning. Platform has been developing very, very nicely. Over the last two years, we've been growing by roughly 230%. We really see strong adoption. We have more than 9,500 customers in the meantime. We have, for integration services alone, I alluded on that, 5,000 customers. Just to give you some perspective, with SAP NetWeaver integration, it took us a few years to get to 10,000 customers. With integration, it's so much easier to adopt the technology.
It's so much easier to put it to action because it's in the cloud, it's operated by us. After two years, we've already reached 5,000 customers for that environment. So it really is a proof of where we're going. We have roughly 950 partners who are certified for the platform, which are building industry specific, LOB specific extensions, who work with us on providing integration services, or systems integration services on the platform. There are big names amongst them. We have roughly 1,500 applications in our SAP App Center. That's our partner solution marketplace, which is out there. We manage roughly 40 multi-tenancy shared environments across the data centers around the world, and we update them every two weeks with a full release without any downtime for customers.
It's really a proof of how much such a central platform that only gives our customers agility, but also allows us to constantly bring new capabilities in. The result in the end is an intelligent enterprise where you can accelerate value creation, and that's what all of this is about. It provides you better visibility into what's going on in the enterprise, and Franz will talk about SAP Data Hub and the SAP HANA Data Management Suite. At the basis of all of this is consistent data. It's governed data. You need to know what's going on within your environment, and you need to get visibility into all of what's happening across those individual solutions. It's then focused, so you can spend efforts on the wrong things.
With solutions like SAP Analytics Cloud, we provide you with solutions to get right to where the problem is, to pin out where the exceptions are that you need to handle. Intelligence, like machine learning, can help you understand patterns in your processes that go south and that require attention, and then we can help you optimize. It's about kind of agility that you gain and agility that you need because it's not a one-time shot. I always say digital transformation sounds like it's going from zero to one. Reality is it's a pretty analog process to get there. It's kind of you're continuously improving, and that requires agility. The market is changing, your customers are changing, and you better make sure that you are not static and stay where you are. Outcomes, of course, in the end, it will all be measured by outcomes.
It helps you to become better in doing more with less, and empower your employees. To a large part, we will see that standard processes go away. They will be automated. They will be done by machine learning to an increasing extent, and we need to work with the workforce to upskill them and handle those special cases, work on the value-add capabilities that make you as a company deliver better value to your own customers and provide a better experience. That's the deliver best-in-class customer experience.
If you are able to get an end-to-end view, a holistic view about your customers as a company, how you can better serve their expectations, how you can bring down cycle times to react to what they actually want from you, and you are actually able by connecting front office with back office to deliver, that's what in the end will make your company become a great brand and become successful in the market. Alex Atzberger, if he made it, there he is. He will actually explain in more detail on what that means for us. With that, I would even say I'm done for my part and would hand over to Alex to take it from here. Thank you very much for your time. Alex.
Thank you, Björn.
Go.
Thank you, Björn. Thank you so much. Thank you so much. Good afternoon. Thank you for joining us at SAPPHIRE. Yesterday, we made a very, very important announcement, which is that SAP is going after the CRM market. Why is this an important announcement? Because this is the largest enterprise software market today. Last year, Gartner communicated that CRM as a market has overtaken both ERP and database as the largest market, with an addressable market of $45 billion, growing at 20%. We believe that market is far from being done in terms of evolving, in terms of changing, and we believe that SAP has an extraordinary opportunity to capture this market, capture market share in this market, and obviously provide tremendous value to our customer base. Why is that?
That's because today's customers are changing, and we made a case yesterday on main stage that they are changing around three key elements. One, customers are still trying to develop one single complete view of their customer. Second, we believe that customers want to develop trusted relationships with their customers beyond a transactional relationship. Three, that we believe that the connected experience from the front office, from that customer experience to the supply chain, truly determines the customer experience. All of you are probably well familiar with the market and the acquisitions that have taken place. We truly believe that SAP's unique value proposition comes from delivering the Intelligent Enterprise, where we connect the customer experience to the supply chain.
Those trends are shaping today's market today, and that's why we believe there is an inflection point in the traditional CRM system to today's fourth generation CRM. What you see behind me on the slide are a couple of the dimensions that are fundamentally changing today in the CRM market. Based on those changes, we designed SAP C/4HANA. This means it's not a transactional-focused application. It's one where we actually put the profile and the single view of the customer at the center. It's not one where we think about the sales opportunity only as the key driver, but we actually think about, again, the trusted, consent-driven customer profile.
Also from an architecture perspective, where we believe that our competition is actually now falling behind because they sit on a monolithic architecture, versus SAP embracing the SAP Cloud Platform, microservices built for big data, and obviously built for openness. Those are some of the key aspects that we believe are now changing and give us the opportunity to introduce SAP C/4HANA. We have a very clear strategy in regards to our SAP C/4HANA portfolio. We want to be number one or number two in every market that we compete in. That means solutions for marketing, solutions for sales, solutions for commerce, and solutions for service. We want to deliver one integrated suite that is SAP C/4HANA. Finally, we want to realize the core benefit of SAP's intelligent enterprise, which is the connection from the customer experience into the supply chain. How do we do this?
This is through the delivery of five core clouds. This is the SAP Marketing Cloud, SAP Commerce Cloud, SAP Sales Cloud, and SAP Service Cloud. Each one of these clouds, SAP has a unique, differentiated value proposition as well as a strong market position. If you take commerce, for instance, which was previously Hybris, SAP Commerce Cloud is the market leader globally for commerce, both for B2B as well as for B2C. We absolutely intend to keep that position in the marketplace by embracing cloud technology, by obviously leveraging a very fast and agile development platform, but obviously also continuing to expand our largest customer deployments for SAP Commerce. The second piece is the SAP Sales Cloud, through the acquisition of Callidus earlier this year, as now the most widely adopted system for incentive management, sales performance management, and is also a market leader in that space.
We combine our existing C4C solution, which was our cloud for customer, which is the sales force automation, with Callidus to form the SAP Sales Cloud. Again, we believe that is market leading, the highest adoption rate in sales you see around commissions. I'm very proud to also share with you that SAP itself has rolled out and is successfully using the SAP Sales Cloud for our own internal operations with over 20,000 sales and service professionals. On the SAP Service Cloud, we see tremendous growth opportunity because with the acquisition that we announced yesterday of a company called Coresystems from Switzerland, we have a differentiating offering for field services, which is by itself a multibillion-dollar market opportunity. In the field services space, the constraint for our customers is typically the availability of service professionals to deliver services.
What SAP does with the acquisition of Coresystems is actually provide our customers the ability to build their own private freelance network, thereby giving our customers the ability to tap into the gig economy, lower the cost to serve, yet at the same time create happier customers. Then on the Marketing Cloud, which is one of the fastest-growing solutions and also most largest market opportunities we see, we have developed the SAP Marketing Cloud that leverages SAP HANA from an analytical side in order to ensure that we actually provide targeted segmentation, not just at larger segments, but actually at people using the capabilities of geospatial capabilities in SAP HANA for better targeting. When you look at these four markets itself, again, they make up that $45 billion that I spoke about before. Two of those, I feel we are already market leading today.
The other ones, I think the suite always wins, which is really our approach to change the game in the CRM market. What brings it all together is actually the yellow line on the bottom, which is the SAP Customer Data Cloud. This was the previous acquisition of Gigya. This is now the SAP Customer Data Cloud. This was our fastest-growing part of our portfolio in the first quarter of this year. It's been not just driven by the need for GDPR in the marketplace, but also based on the fact that Gigya provides a unique approach to the market, which is through a consent-driven profile. Every customer that I speak to at this conference speaks about how to create a 360-degree view of their customer. What matters so much is that this customer profile grows with every interaction in the marketplace.
That what's the SAP Customer Data Cloud provides is this trusted profile. That tied to SAP's master data management strategy, that I'm sure you will hear more about as well, actually gives customers a single view. If you take a company like Nestlé, for instance, that has 300 different brands, they want to have one view of that customer across every brand interaction that exists. They accomplish this today through the SAP Customer Data Cloud. Once they have that profile view, that profile view feeds into their marketing activities, feeds into their commerce activities, and so forth. That's the power of the integration. What you see in today's marketplace is that there are hundreds of providers in each of these verticals.
Every company that I meet with, they are getting exhausted and tired by having too many choices that are not integrated, that create additional silos and additional data elements that they need to manage. What SAP provides them with is now one platform, one integrated process. Where the beauty comes from across the suite is obviously that it's based on SAP technologies that companies standardize their company on for the intelligent enterprise. That's really the key ingredient of why we believe the strategy is not just differentiating in every one of the pillars, but really as a suite. When you look at how we think about extending and giving our customers the ability to extend the solutions and give agility to them, that's where we leverage the SAP Cloud Platform.
The key here is that obviously all these solutions that you see, they move at a very rapid pace. That's why you need extensibility microservices to actually drive that forward. On top of this, the SAP Cloud Platform also gives you the integration into SAP S/4HANA. That combination of C/4HANA for every customer interaction and the customer experience tied to the supply chain is what other companies can't deliver on. That's completing the process from what we call leads to cash. If you take that, for instance, as an exemplary process, every company in the world has this process in terms of delivering value to their business. Right now, this process in every company is broken because when it stops at the order, you start to have the interface to actually the delivery and the fulfillment.
With SAP, companies as part of the intelligent enterprise have one end-to-end integrated process. Why are we so excited about the market opportunity for SAP C/4HANA? It goes back into what made SAP always differentiated in the eyes of our customers, which is the suite, the end-to-end integrated process. What the strategy also does, and through the acquisitions as well as the organic developments that we made in our portfolio, it gives us a very distinct approach to the marketplace, where we believe our competition is not at yet, which is understanding that trusted relationships matter. This is why the SAP Customer Data Cloud is so important. That recognizes that connected experience matters so much, which is the front end to the back office. It recognizes that the single view of the customer has to be achieved across the entire end-to-end process.
Stepping back from the technology and going at this conference, seeing the reaction, even over the last 48 hours, has been extraordinarily positive because I believe the market is ready for choice. The market in CM has gotten fatigued about a lack of choice and too many point solutions in the marketplace. I think SAP's announcement that we are going after the CM market again, has been received very positively by our customer base because our customer base recognizes that the intelligent enterprise needs that customer view in order to drive the rest of the company forward. I think a great example, obviously, for this are many of our customers here in attendance, but also SAP itself, where our journey to implement the SAP Marketing Cloud, our SAP Sales Cloud to create GDPR compliance, has been one of the most important things we have done internally.
That obviously also led us to have confidence in the acquisitions we did with Hybris, Callidus, Gigya, and now Coresystems. That's the strategy for how we plan to win in the CM market through that fourth-generation customer experience suite. We believe the time for this is now, and I would love to take any questions that you might have. Give it to Stefan if you want to make a question on that strategy, and how we move forward.
Time for one or two questions for Alex before we move on to the SAP Data Hub. Stefan Slowinski, maybe we can start here in the middle.
Thank you. Yeah. Stefan Slowinski from Exane BNP. When you say you're going after CRM, a lot of the products you have there, you've already had before today. You made a small acquisition yesterday, are you ramping up your sales and marketing efforts? Are you doing sort of special pricing in order to try and aggressively take share?
Yeah. Great question. First of all, besides the repositioning of the entire portfolio, we're obviously investing in the development, as Hasso said today, around the investment that we are making in the entire portfolio is obviously very significant around integrating the different clouds to develop that end-to-end process. From a go-to-market perspective, as you could tell even from this event, as well as our go-to-market investment, it's not so much about just one team taking this to market. It's really about 90,000 people at SAP talking now about the CRM market as well. Our general sales force will position SAP C/4HANA. Every industry account executive will speak about SAP C/4HANA, and then obviously we continue to invest in our sales and marketing and distribution organization around the capabilities to deliver C/4HANA.
Obviously, over the last couple of quarters, we've seen tremendous demand from our customer base around each of these solutions. Our expectation, obviously, is when we actually give a full view of the portfolio, that that demand will continue to grow and even get stronger as customers see that they can actually have opportunities to leverage larger parts. Our upsell and cross-sell opportunities in that portfolio are significant. Because again, in a lot of cases, if you're an installed base SAP customer, this is great news for you because you have an ability to expand your footprint with SAP also to the front office. If you are a customer who has a very heterogeneous environment with many different solutions, you will probably start at one or the other of the pillars and then slowly start to replace others.
We see a massive opportunity both in the core SAP installed base to both defend and grow our presence, also obviously to win a lot of customers over who have, again, a very heterogeneous environment in their front office. That's what I see, by the way, in most customers that I speak to. They have not made the decision on CRM yet. They have not made their decision yet in terms of the customer experience. Our view is that this is absolutely still a market that is up for grasp. When I look at the $45 billion that we are going after, we still see the potential to be, again, the market leader in that space. Yeah.
Good. Another question for Alex. I see one here from Monika Garg, and Walter Pritchard, then we move on to Franz. Monika, you first, then Walter.
Hi, thanks for taking my question. Could you talk about, if you look at your vision, what you talked about, C/4HANA, what are the verticals you are looking to target first and you think you could see more traction in?
Yeah. Obviously C/4HANA is available across all the industries that SAP does business in. The key verticals are aligned also with our priorities for S/4HANA, so that we go after similar verticals, including also for, very important obviously for the C/4HANA portfolio, consumer products, retail, professional services, and manufacturing. We have a lot of B2B customers where we think our portfolio is very differentiating it. Again, we go after all 26 industries, also through our partner and ecosystem. I think we have short time.
One final. Walter?
Okay. Stefan. Stefan, that's
Yeah.
Just a quick product question. On feature parity, are you at feature parity on C/4 with on-prem CRM and the Cloud for Customer? If not, when do you expect to be there? I'm just curious, qualitatively, how do you sort of get mind share from partners who, if I look at all the players here, they're all substantially invested in Salesforce, I think, or making a lot of money. How do you sort of get some of the mind share on the front end from their practices?
Yeah. First of all, on the on-prem CRM parity question, we are absolutely at parity. I think we are, again, differentiating what we do actually in the cloud to what's being done on on-premise. Yeah. Especially with the acquisition of Callidus, what we have now in the cloud in terms of capabilities of incentives, commissions, it goes beyond what's actually available in on-premise. The second part of your question on the ecosystem and the partners. I think the partners obviously see opportunity as well with an announcement like this. Again, there's a lot of customers that are still on the fence, and we work obviously through our relationships with those partners to expand our opportunities also for them expanding their opportunity in the marketplace.
All the big partners and the bigger size, as well as obviously smaller partners, see tremendous opportunity to expand as the SAP relationship in the front office as well. Yeah.
Good. Thanks a lot, Alex, for this overview.
Thank you so much.
Thanks a lot.
Thank you. Have a safe summer.
Thank you.
Thank you.
We move to the next topic, SAP Data Hub or the SAP Data Management Suite, and we bring Franz back to the stage. He was already participating in our program in New York. Franz, the floor is yours.
Okay.
Thank you.
Thank you, and good afternoon also from my side, ladies and gentlemen. In the last months, and especially in the last days, we had a lot of discussions with customers and especially looking into what we are providing with this SAP Data Hub. What we have seen there and what we also heard from analysis is these five points where customers are looking into when they speak about their SAP Data Hub, their data sets. First of all, almost every, here is the number, 75, 74%, almost every CEO is telling our enterprises, telling us that they don't have enough visibility into their data, into their complex data landscape. That's obvious. There are multiple reasons why the data landscape is so complex. First of all, we have different technologies where we want to treat data.
Of course, you want to store your transactional data in a transactional system, in the ERP system. You have a data warehousing system. Now with Hadoop and with big data lakes, there's another big system coming into play where you store data, especially non-structured, semi-structured data, but also maybe H data. Then you have organizational boundaries, where different organizations store their data in different sources and have different preferences. Then, of course, you have multiple cloud systems as well, where you can store your different data. That's obvious that in an enterprise, you are not able to control that.
That was a wish two, three years ago when we did a lot of discussions with customers, where the original plan of a data lake was, that is our method to bring all the data together into one data lake, and there then we have one view of the data. I think this dream nobody dreams anymore. It is obvious that this is not possible in an enterprise, this is also not really good in an enterprise because you have different requirements for different data and not everything can be done by a data lake in the traditional sense. More and more, we are looking into virtual data lakes, where you still have the issue that the data is stored on different places. Even if we improve that, we still have the problem that the data landscapes will be also, in future, quite complex.
The second issue customers are telling us is about data quality. Because much of the data is just stored there without a real process of how good the data is. How can I trust the data? Data quality in two senses. One is, are they really wrong data? Second is how much can I trust the data and who put the data there and who is able to really change the data? Very big worry from our customers. The third thing is about data innovation. The question is there, even if I have now the control over my data and even if I have enough data quality, do I really make enough out of my data?
Many customers just store tons amount of data or have tons amount of data, but they have the feeling, "I could do something with it, but currently I don't do it." They have the feeling that there is machine learning out there are tools out there, but really the step until I really get the value out of that, I don't have that currently. I have data, but I don't do enough with my data. For this data produced, if you have that just stored, a lot of costs, and I do a lot of copies, I do a lot of data movement back and forth because I needed somewhere. That produces a lot of costs. Now especially with GDPR, customers know that they have to take care of that.
That's an issue where they are worried about, they want to refine this compliance, and this is what customers are worried about. This is now what we want to tackle, is this Data Hub. Especially, and I mentioned that a few times when I presented already Data Hub before, is what we want to do, we want to do data management end to end. Where data is created to, we feed the data into a process, into a visualization, but especially into a business process where you really can create the value or take the value out of the data. It's not just a database, it's not just a data preparation tool, it's not just a data quality tool, it's not just an aggregation tool, it's really a tool end to end where you do the data governance and data preparation and data orchestration end to end.
It is, and we compare that sometimes, it's kind of an ERP for data, where we really take care of your data. Why is that so necessary? Because if you want to take results out of the data, and if you want to take value out of the data, of course, you have to be sure that you have a process in place which allows you to make decisions out of that. If you want to take decisions out of that, of course, we have to reproduce the process, and you have to do everything which you are normally used from transactional systems, now also with your data systems. First of all, of course, you need visibility inside the data. That means that we are connecting the different data sources without moving the data into one system, what we call Data Hub.
In Data Hub, and that's really important, we are now collecting the metadata of the connected system. That's the big thing of the system. That's kind of the heart or the soul of the system which we are doing. We are knowing about every data source, what is in the data source, and what the data is about. That you have central, this metadata. The data itself stay where they are. Of course, if you want to have a parallel data consolidation project, that's a parallel thing, but it's not enforced by the Data Hub. This metadata of, first of all, which kind of data do you have there? What is the semantic of the data? If we cannot crawl it automatically, then we have a mechanism how you really can specify that. But in many systems, we know the semantics.
From our SAP system, of course, we know the semantics of the data. Because we know the business value and the business information and the business object of the data. We can understand really the semantics. Of course, we can now use these semantics and apply that to data which we don't know. Look at the case where you have CSV files on your data lake with some columns where you don't know what it is about. Of course, we can do machine learning and learn from our ERP system what the data is about and apply that to the data which are just stored there. We can really derive metadata and semantics out of the data which are connected. Second is we provide processes where you can guarantee data quality of your data.
We are not just saying we providing data quality tools, where you can improve the quality and check the quality doing outlier detection and these kind of things. We even have processes, and we record the processes, and we take care of the processes in the lifecycle management that you really get a guarantee of the quality of the data. You know which data are on which state on the quality. We allow, of course, that you integrate now your machine learning algorithms, which you often have, and where you often have data scientists which are working on these machine learning algorithms. We allow you and the customers to integrate that into your standard process. Why is that so important? We have a lot of machine learning systems out there. We have tons of algorithms out there and a lot of research is going on.
The problem with all these projects is. How do we make them really productive and how do we really create value? When we look in the big data projects, which are currently going on in the industry, all analysts tell us, and that's also our experience, that 95% of these POCs of these projects, they are just stopping at POC level. They have a nice output, you can do a nice demo, you can show it around, but you don't make them productive and don't create value out of this project. It is easy to show a demo about a nice machine learning face recognition, whatever classification, whatever algorithm. That's easy. All those students can do that now. You install a TensorFlow, you install whatever, put a few data in which you can download, even your own data, and then you can do it once.
Have that operational and feed that into your processes, that's a big thing. Cost. We don't copy the data because our paradigm is we leave the data where they are. We don't produce additional costs. We just leave the data where they are. That's really very important because if you today go to the big cloud providers or other systems, what they tell you is, "First give us your data, then we take care of you." That's not our story. Our story is leave the data where they are. We take care that we extract as much metadata and semantics as possible. We allow you to model in addition on top of that, and then we take care of your processes and of your data. Leave the data where they are, no additional costs.
Of course, with that transparency and additional functionality, we allow you to be compliant. The first thing in compliance is transparency, that you know what you do with your data. That's currently not the case. Data processes and data storage is just not visible. Customers do not know if they have personal data in many, many cases. They just don't know. They don't know who is really accessing the data in many, many cases. Having the transparency allows you to put tools on top of that, which we are providing and doing compliance. That is what SAP Data Hub is about. Looking here a little bit at the very high-level architecture view, I come down a little bit more into detail.
We have, of course, on the left side, our traditional SAP systems, which are providing all the value, you have heard about that also during SAPPHIRE, what the new innovations are and so on. Of course, there we have huge amount of data, especially very high-quality data. On the right side, we have more the kind of big data storages, kind of algorithms, kind of semi-structured data, where you have a really complete different world also from the semantic point of view and the quality point of view. There, the quality requirements, the consistency requirements, and so on, are really different. There are also data coming in in a different way. The goal of the SAP Data Hub is now, besides the orchestration and governance, is bringing these data really together.
All the cases I have seen so far, we have seen so far, it's always about combining these kind of data. In order to create value out of your sensor data, they just make sense if you do something with the sensor data in your transactional system, or if you combine them with your master data in your transactional system. At the end, you want to create an order, you want to create a predictive process. You want to create any kind of other process, because just that creates the value. Not just staring at a nice UI where you see some curves loading and floating around. That does not create value. That is fun to see, somebody sitting in front of that is touching something. That's not the thing which we want to create. Just a combination of this data.
Therefore, we need SAP HANA, where we are running our traditional systems on that. Of the right side in order to process, we have SAP Vora as part of the SAP Data Hub, which is processing the unstructured and semi-structured data. In the middle of that, what is the glue of that is what we call as SAP Data Hub, where we bring the things together with orchestration, monitoring, ingestion, of course, data discovery and pipelines. Pipeline is our way really to model and execute data processes which allow you to bring data together from different sources and processes data. This is what we call pipeline, or data flows. Looking a little bit deeper into the architecture, there you see what we are in general doing. First of all, we are based on a cloud infrastructure.
Of course, the system can run on premise and also on cloud, but very important is that we are extremely scalable. That's really important if you want to run these kind of processes which consume huge amount of data and are able to consume huge amount of data, and therefore also need some processing capabilities. We are doing what a lot of guys are now doing, and which is really the technology of choice, is we are based on containers and then having a container management with Kubernetes on top. Based on distributed storage, we are running on the different cloud platforms and of course also on SAP Cloud Platform, but also on premise. We have in the middle, what you are seeing, we have the SAP Data Hub system.
What's important in there, without looking at the details is, this is not just a tool. Data Hub is not just a tool. Data Hub is a system. Data Hub takes care end-to-end of the data. Compare it more with an ERP system or with a suite system than compare it with just a tool. We need all the qualities such a tool has, which is privacy, which is access rights, which is taking care of user management and these kind of things. This is embedded into the system. Then on top of that, we have our runtime, which is a massively distributed runtime to provide the computing capabilities which you need in order to process your data processes with data pipelines as kind of the program code of what we are doing.
Then you have services on top of that, which is metadata as the most important scheduling and so on. Very important is, of course, also data discovery. That if you have really unknown data, that we provide services, how you can really understand and discover the data and giving the user help in order to understand the data. Then on top of that, as you are seeing, we have this data access governance. This is access right and especially self-services. The question is now, why Data Hub? First of all, we have a universal view. With Data Hub, you get a universal view of all of your data, including big data.
With a central metadata management, which allows you to have metadata across all of your data, including the transactional system, we are the onliest guys who can build such a semantic layer, which goes across your transactional systems and your other systems. That's really important because if you want to bring the data together, you have to have a common semantic model of your data. If you don't have that, how can you map the data? How can you bring the data together? We understand our business models and business objects, and we understand how to feed our own processes as a result of the processing of the data. That's really unique, and others cannot do that at all. We can intelligently discover data relationships. We know which data fit together, which are in our transitional system, transactional system, and in the external system.
We can do efficient data enrichment. We have HANA as an engine beyond that, we can do all these processes which you know from HANA, you have heard today in the keynote, what new things are coming with spatial, with OLAP, with graph, and so on. We can all do this processing in the system in extreme speed with HANA. We have massive scalability, I mentioned that. We are based on containers and cloud system. With that, with our new transparency, we have optimal compliance and data governance, which is based on transparency of the data. With that, I want to stop with a sentence from a customer, from PSF, which is saying, "SAP Data Hub has the potential to become SAP's next game changer." This is what we really believe.
This is something more than just, and I mentioned that a few times, just another tool, just another small application. This is a system where we believe that now customers can really create the value out of the data. They can really create business value out of the data, that they can trust the data, and they can build systems which take advantage of the data which they store already, or they will anyhow store in the near future. Thank you for that. With that, we come to the highlight of the session. Luka, about the financial impact of everything.
Thank you. Thank you very much, Franz. Must say, a big compliment, both to you as well as to Alex and Björn. It was really great to see how much you're in command of the very significant undertakings that you're driving to fulfill SAP's corporate strategy. When you have to follow these strong operators, you have actually a great job because you can play the role of the smooth operator, and can focus on just laying back and reaping the fruits and harvesting the fruits of all of this hard work. That's, of course, what I'm concerned about, ultimately, the financial performance of the company. As a CFO, that's what I care about day in and day out, and I judge the quality of our corporate strategy, obviously, through these lenses.
Now, I have learned over the course of the last 22 years that I'm with the company, that a successful corporate strategy should fulfill exactly three prerequisites and requirements, and not more than those. The first one is obvious. It should address the demands of the market and of customers. The second one is, it should be focused. It should not be convoluted. The third one is, obviously, in being focused, it should be differentiated at the same time. Does not serve a lot of purpose if you're focused on things on which you cannot differentiate at all. That makes me so excited about the corporate strategy that these three colleagues have laid out to you all. What is the address, the market demands that we are addressing these days?
Customers in the wake of digital disruption and digital transformation across all industries that we are serving want to become data-driven enterprises. They want to become intelligent enterprises. How are they getting there? Well, they need to devise a process landscape across their entire operations, end-to-end across the most significant company processes that is seamlessly integrated and intelligently digitized. This is what we are addressing with the Intelligent Suite, so check that mark. They, of course, have to have a robust understanding of how are they harvesting the huge amounts of data that they need in order to make these end-to-end business processes intelligent. That's what we are addressing with the digital platform, with the Data Management Suite. Check that mark as well.
We have now talked about the Intelligent Suite, about our digital platform that enables this through the SAP Cloud Platform and fueling, through the Data Management Suite, the data aspect of it. The intelligence is delivered through Leonardo. That's the focus. We have three priorities that we are going against, and if we do those right, I can swear to you that the financial performance, in terms of both the top line as well as the profitability of the company, will be great. I will show you why that is in just a minute. We need to talk about differentiation. Why do we have the right to win across all of those priorities? Why is SAP the only company that can bring this together? Let's look at the Intelligent Suite. I think the points have been made by Björn beautifully.
We are the only company in our industry that can, through the entire process chain of thinking about hire to retire, thinking about procure to pay, thinking about lead to cash, thinking about produce to stock, thinking about the core finance processes of the company, bring all of those capabilities together functionally. We have the leading digital core and manufacturing supply chain solutions, obviously. There is no debate about that. We have leading assets for network and spend management to drive total spend management processes. We have leading total workforce management solutions with SuccessFactors and Fieldglass, and we have a very strong portfolio by now in the customer experience area. What is different about SAP is that we have already today the best integration across those assets, and it's only going to get stronger. We are doubling down in terms of investment on the SAP Cloud Platform.
Internally, Hasso has talked about this a bit in the keynote today. There is no debate whatsoever anymore that this is the way to go across all of our LOBs. They're all committed and prioritizing the corresponding work to work together with the SAP Cloud Platform to converge on a common master data management solution on the Cloud Platform, a very, very significant step. To converge across the entire spectrum of our solutions on one common user experience paradigm that will also be driven via the SAP Cloud Platform. No other vendor in the industry can do that because they're lacking the breadth of the end-to-end process coverage of SAP. Now let's talk about customer experience. You might wonder, how can we differentiate in this space? Alex has been very clear about that.
First of all, count the vendors in the industry that have very credible and strong solutions across the entire spectrum of CRM as a market as a whole. Some are strong in marketing but don't have any solutions in sales or in services, or they don't have the commerce capabilities. SAP has very strong capabilities across all of those pillars by now, also driven through the acquisitions that we have made. Moreover, we have a game changer through Gigya in being able to drive a consistent customer identity management across that entire portfolio of solutions, and actually even beyond that, across the other solutions that also constitute the spectrum of end-to-end business processes of the company. Most importantly, we will take care of end-to-end seamless integration into fulfillment into the back end piece of the business through S/4HANA.
That's also something that no one of our competitors can do the way SAP can do it. When you have this end-to-end process coverage, you can go into intelligence. You can build artificial intelligence solutions that are not sitting somewhere as a sidecar outside of this end-to-end business process landscape. You can really build that directly into the end-to-end business process flows. I won't repeat all of the arguments that Franz has made around the data management pillar and why SAP is differentiated there. Suffice it to say, what Franz has presented today with the Data Hub is unique in the market. You cannot find another solution that allows you to have a central management of insight, visibility, transparency, quality of data in a decentrally heterogeneous setup where your data is stored.
This is groundbreaking and transformational and augments the capabilities that we have already built out with HANA, which have anyway been highly disruptive and positive for SAP. That's why differentiation is key and to the core to this product strategy. With those three elements come incremental growth on the top line and profitability expansion. That's a simple math that has always held true as long as I've been with SAP. When we have this differentiation, this focus, we will win in the market. Let me cover those elements that you have been waiting for, obviously, in terms of how this will translate towards continued outpacing growth that will exceed our competition, as well as the expansion of profitability that we have committed to all of you.
First, on the growth, I know that there have been discussions in almost each and every investor communication and dialogue that I've been having about, can we really sustain the 30% growth CAGR in the cloud that we have seen over the course of the past few years into the future, into our midterm ambition going through 2020? I think when you take a look at the picture that you've seen just before, the answer is quite obvious. So far, when you take a look at 2017, the vast majority of our revenues in the cloud have been driven by the scale assets that we had acquired basically before. These scale assets will continue to benefit from two things. First of all, the secular upgrade cycle to S/4HANA that is underway, that drives customers to also consider other elements of our portfolio that are highly complementary.
If you upgrade your ECC core to S/4HANA, chances are that you want to extend it to, for example, digital supply chain elements, that you want to extend it to procurement and to spend management. These forces will continue to be underway, but they will be augmented, actually, and strengthened through the focus on the Intelligent Suite, which will make these arguments just so much stronger and will drive continued growth in those assets. On top of this, our strategy now amplifies and augments the growth opportunities for our organically developed cloud assets. Be it the SAP Cloud Platform, be it solutions like the Data Hub, be it S/4HANA Cloud, be it Analytics Cloud. They're all elements and they are all components of the Intelligent Suite or the digital platform. This strategy will therefore drive exponential growth for a long period into the future.
Therefore, these growth assets that will grow at a substantially higher pace than 30% will make sure that we will at least lift our compound annual growth rate at the entire portfolio level to the 30% that we need. The strategy also does something that is equally important. Due to the scale that we are now about to reach in those organically developed cloud assets, which for the last few years, while they were growing very fast, have been dampening the gross margins for SAP as a whole in the cloud because they were still in an ascent mode. We are now reaching a stage where they are not dilutive any longer.
Therefore, this is one of the key factors why we are so bullish about the public cloud gross margin aspirations for the company and why we expect such a huge uptick in gross margins going into 2020. The second reason, as we all know, is that we are coming to the end of migrating our existing scale cloud assets from third-party databases to HANA. Once this is accomplished, as of next year, we will have significant savings there. Due to the fact that we are open, that we are collaborating with the hyperscale cloud providers, we will also benefit in our private cloud business in being able to utilize the elasticity, the capacity that these players give us, and therefore, also contribute to the gross margin progression in private cloud. Let's come to the profitability side of the house.
As you know, this has been a subject of strong debate for some time now. We came from a period in which our cloud transformation had a dampening impact on our company margins. It was actually overshadowing continuous efficiency gains that we continue to have in our established on-premise business. I committed to all of you at the beginning of last year at the Capital Markets Day in 2017, that we would see the trough of company margins in 2017 and would start to see an increase in the margins again as of 2018. The key factors that we talked about there was, of course, the conclusion of the migration efforts in the cloud, the technology platform migration to HANA would be accomplished and completed by the end of 2018.
We said as well that we see an opportunity to simplify our engagement model in sales and marketing, thereby drive a reduction of overhead and a reduction in capacity that in non-sales functions within sales and marketing. Of course, we wanted to make sure that we continue to increase the efficiency in our cloud operations through scale and data center consolidation to just talk about some means. Where are we now? At Capital Markets Day 2018, I reconfirmed this message, we said a couple of things about SAP's financial performance to be expected. First of all, we said that in terms of our cost ratios, we need to continue to invest in R&D, you see the explosion in innovation that we have all across the portfolio in S/4HANA, in the digital platform, in the Intelligent Suite overall. This is important.
Indeed, when you take a look at Q1 2018, it was hovering around at the same levels as the previous year. It is broadly in line with current levels. We also said, however, that due to the simplification in our sales and marketing structures, due to the focusing again on fewer categories and a suite approach, we would see benefits in the sales and marketing cost ratios. Indeed, in Q1 2018, we had quite a nice reduction in the sales and marketing cost ratio. Admittedly, of course, also a good part of that was driven by accounting changes to the cutover through IFRS 15, but not entirely. About two-thirds were driven by the accounting changes. The other third was those efficiency increases.
In G&A, we also said that we should continue to see slight benefits and continue to decline, and this is also what you have seen in Q1. On the gross margin side, we clearly stated that we want to start to see an improvement of cloud margins while the larger increases will come in 2019 and 2020 when the migration of third-party databases will be over. You see already that this trend is starting with a quite nice sequential increase that we have been seeing in Q1 2018. Software and support margins should continue to benefit from ongoing efficiency increases, as well as the fact that the maintenance piece of software and support is becoming bigger and bigger, and this is, of course, a highly profitable business, a very stable business as well for us. Exactly this has been holding true in Q1.
Finally, we said that services that had a very nice turnaround subject to a restructuring should stabilize at a relatively high level that it has achieved already. When you take a look at it from a constant currency perspective, actually, we have even been doing slightly better than that in Q1 2018. We are on a very good early track. Let's not call this war won yet and declare it won because this is the long-term fight that we are fighting. In Q2, Q3, and Q4, of course, software revenues have a higher weight on our overall result than in Q1. The volatility of software might now lead to even bigger increases of the margin or a slightly dampening effect there. Who knows?
We feel very comfortable taking a look at the strong results in also the core business that we posted in Q1 against a very strong prior year result, that the thesis that we had underlying our margin increase ambition actually is holding, and that we are in a position to definitely meet the margin targets that we had, which called, as you have seen on the previous slide, for around about 80 basis points in margin increase in 2018, with then actually significant incremental increases in 2019 and 2020. If you discount the fact that the IFRS 15 benefit that has contributed in 2018 positively will turn to a slight headwind in 2019 and 2020.
We also said that 2018 will be the last year with quite significant CapEx increases, and that as of 2019, when we are done with the database migrations, we should see very limited, if at all, any further expansion of CapEx needs. Here we are right on track. We said that we wanted in 2018 to end up slightly below EUR 1.6 billion. In Q1, we have been doing a little bit more, but this is mainly a spillover effect from CapEx that was already acquired in 2017, but only became payable in 2018. From a budget perspective for 2018, we are right at where we want to be. We're very confident that this will remain the status on CapEx. As of 2019, there should be no further meaningful increases any longer.
Which means at the same time that we are committed as of 2019 to quite significant expansions of cash flow, especially free cash flow, in line with the profitability increases that we expect as well in 2019 and 2020. 2018 should be rather roughly stable because we have some extraordinary effects and one-time payments to make in 2018. In particular, the payment for the IP consolidation of Hybris in Switzerland, which positively influenced the effective tax rate in 2017, but now has to be basically paid out. As you know, in light of that, we are also committed towards increasing shareholder returns. When you take a look at our dividend policy, we have updated it this year from more than 35% to at least 40% of net profits. We have paid out a 12% increased dividend in 2018.
Of course, we continue to target a constant increase of our dividend also in the years to come in light with our increased profitability across the company. Finally, the hygiene slide at the end of the day, just to let you know that nothing has changed in terms of our commitment towards our outlook for 2018, as well as our midterm ambition going into 2020. As you know, after Q1, we did a quite unusual step, and we updated our full year guidance and increased it already very early in the year. This was a reason of the closing of the Callidus acquisition in April, which is contributing roughly EUR 150 million to cloud subscription revenues, and therefore also to cloud and software revenues, and roughly EUR 200 million to total revenues.
However, we have also updated the operating profit guidance based on the very strong Q1 and have slightly moved it upwards. That effect is not only due to Callidus, which contributes around about EUR 10 million of those EUR 50 million, but also due to the strong momentum that we have gained in Q1 2018. Going into 2020, as we said before, we have ambitious growth targets. We want to reach up to EUR 29 billion in total revenues and up to EUR 8.5 billion in cloud subscription revenues and up to EUR 9 billion in operating profit. We have kept this midterm ambition stable despite the fact that we had experienced substantial currency headwinds in the second half of 2017 and also going into 2018.
We will evaluate this now at the end of Q2, whether in light of the Callidus acquisition and the current currency movements, we should update this already now or whether we will do this in early 2019. What is clear is that beyond 2020, our target framework will be very consistent with the commitment that we have given to you for the period from 2018 to 2020. We should see further continued consistent improvement of margins also beyond 2020 on a very consistent trajectory. We should see continued strong growth. We see no flattening of the curve there. We believe that we have a strong strategy, that we have the assets that we need to scale our business beyond 2020 and continue to post superior returns also in terms of our revenue progression.
Stefan has pointed to the fact that we have updated also our currency expectations based on the end of May results, if they remained the case through the end of the quarter or through the end of the year. We see now a slightly lower negative impact than what we had guided against at the end of Q1 for the obvious reason that especially the U.S. dollar-euro exchange rate development in the last few weeks was a little bit more pleasing than in the months before. We are gaining here basically roughly two to three percentage points of less negative impact than what we previously saw. You can take note of these numbers. We will file them as well after the conference. With this, let me end here. I'm not sure where our colleagues are, but let me end with the following statements.
We have, in my point of view, a trifecta, not Bill's trifecta that he's always talking about, but a trifecta that makes me very, very confident that SAP is poised to meet its targets and commitments to all of you. We have a strong corporate and product strategy. I think it is the most convincing one that we have had in a very long time. We have the right focus. We have the right ambition on both the top line as well as the profitability, we know what levers we need to pull in order to meet those targets. You have seen on the previous slides that we have met our commitments that we have stated, even last year at the Capital Markets Day and this year so far. In the last three years, SAP has always consistently met and outperformed the financial ambitions that it has set.
This should give everybody a lot of confidence. Most importantly, we have a great team. A great team, not only on the executive board, team members that I'm really very privileged to work with very closely and are really aligned across this strategy, as well as the need to deliver the profitability and top-line increases. More importantly, we have a great team at all levels of SAP. You have seen three of those great leaders just previously to me. We have lots of people more that are united. When you walk the show floor here today, you will see that there is great consistency in our messaging. Everybody is behind the strategy, and with this, we will win in the market. Thank you very much, and hopefully, we can come to Q&A now.
I think we should be able to continue soon. Your executive board member colleagues should have all arrived. Maybe one or two minutes to get them ready with the microphone, and then we continue with the Q&A session. Thank you, Luka.
Thank you.
Hello, Luka. How are you, Luka? Hi.
Let's start with the final session of our financial analyst conference today. We've heard a lot about the SAP strategy, the intelligent enterprise, C/4HANA, the Data Hub.
Oh, yeah.
Bill just asked me what we want to cover in this session. I said, "Well, we just take questions from the audience." As usual, the financial analysts are never shy to ask questions. I would ask you, raise your hands and please use one of the roaming microphones for the questions. I see one question here on the left-hand side from Kirk Materne, and then one here in the middle section.
Thanks very much. A lot of new announcements this week. Obviously, C/4HANA is one of the bigger ones. I was wondering if you could just talk to us a little bit about what needs to happen, if anything, from a go-to-market perspective around C/4HANA to put you in the position to start either taking some share or sort of building out the type of business you want to have in the broader CRM market. Thanks.
Sure. Well, I'll let my colleagues build, but maybe I could just start it off by saying we will not waver, we will not bend until we have taken full command of the CRM marketplace in the world. Please know that the entire company is committed to being the CRM market leader. That's the first thing. The second thing is we pretty much are following a similar go-to-market strategy with all the businesses that we think are super important. For example, within the cloud business group, Rob Enslin leads that initiative from development into the go-to-market, where he teams up with Jen and Adaire. Alex obviously has responsible for C/4HANA reporting to Rob, but there's specialists that are in every region on the go-to-market side.
These specialists are equipped to handle any conversation, whether it's a sales, a marketing, a field service, an end-to-end scenario that might be industry specific. They are really the specialists. They team up with the generalist, who's the account quarterback or the account executive, and this model has worked very well for us. This business has thousands of people in it, so this is not a startup. This is like a big business unit. One of the things that most encourages me, and I sincerely tell you from the bottom of my heart, best management team I've ever been with in my life. The teamwork across this group is truly remarkable. I love this team. This team is built to win, and that's really what makes the difference. Thank you. Let's take the next question here from the middle.
Hi, Bill. It's Keith Bachman from Bank of Montreal. I'll stand up since I think the lights are shining right in your eyes.
Thank you.
I wanted to ask you about your aspirations in the Data Hub. In particular, I think it's pretty clear that SAP has leadership on all the systems of records. I think if you ask customers, it's not clear that SAP has leadership in the marketing area by any stretch, or even in the post-sale support or what Adobe calls a services cloud. How are you going to be successful, you think, in grabbing more share in the broader CRM market without more competitive offerings, if you will, in the marketing area in particular, the Marketing Cloud?
Yeah, sure. I'll let Rob, Bernd, Jen and Adaire make any comments they want on this. In terms of the Data Hub, the one point that I would really call out is that SAP is going to be a very serious leader in not just the runtime database, not just the business model innovation concept of the application-oriented database as it attaches to S/4HANA, but as a full-use database. I think the fact that the Data Hub can get data from any source, including the hyperscaler sources, as we partner with these infrastructure-as-a-service partners, and processing that transaction on that information at in-memory speed and having all the security in the world because you're not moving the data from one database to another, gives us unique competitive advantage. Please, I really believe that the database future of SAP is underestimated in terms of its upside.
In terms of the C/4HANA specifically, I'll let Rob and the team answer that.
Yeah. How are we going to take market share? First of all, we have, I would say, the best go-to-market team in the world, between Jen and Adaire and some of the folks we've acquired from the acquisitions. Remember, when we launched C/4HANA, this is not day one for us. We've been working for nine months on how to put this into a CRM suite across all aspects. We already have sales, the Callidus piece, configure-price-quote, sales performance management. We've already had it completely integrated. We have plans on how to do that, and we've linked in the lead generation piece from the marketing piece. The process is already complete. We know how to take that to market. Together with Commerce, we've actually understood how we deal with the customer ID through Gigya and how we build.
When you look at sales, marketing, service, Commerce, our plan is to build a complete end-to-end suite that ties into the intelligent enterprise, that connects to the supply chain as well, and connects to the fulfillment engine to ensure that the customer gets the whole piece. I think there's maybe a piece missing on the field service. We don't want to be a me too player in the field service. We acquired Coresystems because they do crowdsourcing for workers. When you look at what we want to do in this space, we're talking about total workforce management. The future of enterprise applications is going to be around solving big problems, around total workforce management, employee, contingent worker, casual worker, and we are the only ones that can close that gap.
These are all added benefits that we bring with C/4HANA to the bigger enterprise, and that's how we'll change the game on the rest of the competition because they have a single play. By the way, the other piece that's key, especially the marketing piece, we've already got.
25 new partners lined up in that space, new partners, a new ecosystem, and we're driving that exceptionally hard because marketing is a massively fragmented market. There are thousands of companies out there. It's not only about Adobe and Microsoft. There are thousands, and somebody has to be the platform, and we will be the platform for the Intelligent Suite, and that's what's going to change the game in that space.
Okay, thank you. A question in the middle from Michael Briest, and then we continue with Charlie Brennan.
Thank you, Stefan. Michael Briest at UBS. Rob, just to go to one of the issues, which I've asked about a few times before, but on SuccessFactors, the migration to HANA.
Yep.
I think you said it will be done by the end of September, and Luka just said end of the year, all of the acquired clouds will be completed. Can we just get an update on that?
End of the year.
End of the year. For the more recently acquired Callidus business, et cetera.
End of the year.
All done?
End of the year.
Luka, I guess you've talked about triple digit million savings coming out of this exercise.
Michael, I can answer the full financial question. No, only joking. The piece with SuccessFactors, we have also re-architected, and this is really important to understand.
It's cool.
Not only have we moved the actual architecture to move on to HANA is done.
We get it.
The actual engineering, we are actually just migrating customers. At the same time, we rewrote the whole analytics piece to build on the SAP Analytics Cloud so that it could tie into the Intelligent Suite. When you look at SuccessFactors, you're looking at on HANA, fully built on the Intelligent Suite, completely connected to Apple iOS. It's a differentiated solution end to end. At the end of the year, all of that work's done, and then you'll see massive innovation also come out of SuccessFactors.
Massive benefits to margins, Luka?
Yeah, of course. You will always see us talking consistently about that as long as the plan holds. It's quite simple. We will have mid double-digit million EUR savings just purely from the retirement of the outdated legacy platforms, we will have another mid double-digit million EUR savings from the increased convergence that we can achieve, data center consolidation, the additional savings that we have through additional automation. It's a simple math, as long as we're done by the end of the year, that is what we will see next year. That is one of the key thesis that is underlying not only the profit progression, but also the CapEx straightening out, because that is the only reason why at the moment we still have such substantial CapEx increases.
Sorry, just a second one on C/4HANA , or sorry, Customer for HANA. That's obviously pitched as being integrated into S/4. What about for the majority of customers who are still on ECC? Will they get the same benefits, or is this a carrot to move them on to S/4?
Well, I would not call it a Actually, Bernd, you can answer. You want to answer this one?
Bernd?
Yeah. Why don't you answer it from an S/4 point of view? I can elaborate on the C/4 piece.
First of all, you need to understand that the integration is done via the cloud platform. Any system that can expose APIs is able to be connected. It is not limited to SAP system. We have embraced the openness. Of course, if you now look at the openness of an ECC, which was built at a time when SAP was having a proprietary approach, now the openness of S/4, there is significant more APIs available. Is it possible to connect it technically? Yes, but it is not coming out of the box. When we were talking about the Intelligent Suite, we committed to the customer that we will deliver the beautiful capabilities of consuming and digesting software as a service wherever they want to start.
While if you look at ECC, this is still a monolithic system, with technical capabilities to be connected, where I would say you need a service partner who is able to do it. Is it technically possible? Yes. Is it more effort? Yes. Okay. Thank you. We take next question here from Charlie Brennan in the second row, then Vijay Anand from Jefferies.
Hi, thank you. It's Charles Brennan here from Credit Suisse. Just a general question on licenses, actually. You continue to flag up some uncertainty in whether customers take licenses or cloud is adding some variability to your results this year. Investors are starting to ask me about the bonus depreciation aspect of the tax reform, as an indication that some customers are going to move back towards licenses. Are you starting to see any of that in your customer dialogues, and could we see a license surprise on that?
Maybe I could just start out, if you don't mind, and then give it to Jen and Adaire to give you perspective. One thing that you could say, first of all, we're not seeing it, if you wanted to make a leap, you could say, some of the booking activity might have been a little bit less than the revenue activity based upon that. I don't think that is the case, certainly, that would be something to watch out for in the future. We think we're unique in the sense that the core licensing business of SAP, unlike any of the competitors in our space, has remained robust and solid, and you know where the guidance is at, and we stand by that. While at the same time, we have a very fast-growing cloud. Jen, Adaire, are you seeing any change in behavior out there?
I'm not in my territory.
I mean, the United States, maybe here or there, one or two, I was looking for that trend as well and wondering if I was going to start to see that. I can't say I saw any kind of trend. Look, I think you see the on-premise because a lot of our customers, most of them are hybrid, as Bill said. A lot of them, when they're buying the on-premise, they're still moving large landscapes, including SAP, over to the public cloud anyway. You still see that hybrid environment, which is still driving some of the core growth.
Okay, thank you. Let's move to a question from Vijay, we have one from Monika Garg again.
Thanks. I wanted to go back to the on-premise CRM customer base. How should we think about the migration opportunity to C/4HANA? As this customer base migrates, how should we think about the impact on your support revenues and renewal rates? Thank you.
Yeah. Look, we have approximately 7,000 CRM on-premise customers. Many of them are living in a hybrid world in any case today with SAP. I believe that they will definitely start to migrate to our C/4HANA platform in a much bigger way because it's complete, it's a full suite solution. We have the extension plan that we put in to help these customers migrate, I think that'll have benefit. We haven't seen any significant drop-off in maintenance revenues because of customers migrating to SAP SuccessFactors, to any other solution, and I think the same trend will take place.
Yeah. Maybe to add to this, exactly right. We have now five years of experience with our cloud extension program, during this period of time, we've had whole market categories like HR, like procurement, increasingly already CRM, even today.
Yes
even before we have augmented the portfolio, migrating to the cloud. You've still seen very stable maintenance renewal rates and continuously positive growth in support revenues. That is due to various features. Our portfolio is really very complementary in that we have a very strong asset, especially for the largest enterprise of the world with SAP S/4HANA, where a secular upgrade cycle is underway. For customers that migrate, for example, their CRM solutions to our C/4HANA Cloud portfolio, there is so much opportunity to potentially repurpose some of those licenses to augment a sale, which is part of the SAP S/4HANA migration sale, in order to stay on a broader license scope.
For example, going into extended supply chain, extended warehouse management on top of what they have today, that we don't see any noticeable impact that would be different from what we have been seeing for the past few years.
Okay. Thank you. We have the next question from Monika Garg.
Hi, thanks for taking my question. A question on the cloud ERP side. Could you talk about the interest you're seeing in the cloud ERP, are you seeing larger enterprises moving to cloud ERP? Then, when a customer is evaluating a cloud ERP solution, which are the companies you see competing against, and what makes SAP win a deal or not win a deal? Thank you.
Want me to take this?
Yeah.
Yeah. One of the things that we've done this year to really make sure that we get the conversation really focused immediately versus on a product is cloud ERP. Most of our customers, they're wanting to move to the cloud. I'd say we see a few different flavors. We see a lot of our brand-new customers, I'd say almost all of them are starting in the cloud, whether it's S/4 public or whether they are starting with on-premise license and they're moving that into the public cloud. I'd say that's pretty much the profile of any of our new customers. From a competitive standpoint, who do we see? You'd see the usual suspects. Why do we win? I think a couple things. One is the industry aspect. We've always kept that really strong industry approach.
I think another thing that's definitely helping us is we've got a great ecosystem, and we continue to evolve the relationships with the hyperscalers. As an example, you heard some of the announcements Björn made this morning. You see the SAP Cloud Platform taking hold. Our SIs are really embracing it. They're able to then go into the customers and talk about the extensions, the industry accelerators that they're building on top. Those are a couple of the trends that I see.
I also think that there's a very strong value basis to the decisions that our customers are making. This element is core to their business. In conjunction with our SI partners, and of course, with the SAP sales org, it isn't just solving the how for the customers, we're also solving the why. Value-based selling based on our industry DNA is a very core component of our sales strategy and part of the reason why we're winning.
Okay. Thank you.
The one thing, if I could just build on Luka and Jen and Adaire's remarks. This completeness of vision in the enterprise really pays off because you are so relevant at the CEO level for the digital transformation and how those business models need to evolve, especially with this ever-mobile, digital consumer and their higher and higher demands for how they will insist vendors treat them. We have the complete relevance at the top of the house. If you think of things like your install base and protecting your core revenues, like maintenance, there are so many things that you can do. There are so many different solutions that we can provide. You are shielded from a lot of the risk that less complete vendors have.
As Jen said, in particular, these accelerators. I was in a meeting this morning with some very sharp independent research analysts, and they basically said what they got out of SAPPHIRE is so many of the SIs and the various partners want to get on board with these accelerators where they can use the SAP Cloud Platform to not only hold their water on the install relationships that they have, but to take their relationships with their customers to new places based on the SAP Cloud Platform. I do think you're 100% right on this industry reach, because we could be very honest and very open with our partners because we do go to market in 25 distinctly different industries. These are all fast-growing markets.
There is so much robustness to the SAP relationship plan. That's why I think if you look at the big partners that have lost in the marketplace, watch. The second they started losing is when they diluted their relationship or their focus with SAP, and they said, "Well, we want to have friendships with everybody." Once you do not have a very strong relationship as it relates to EAS with SAP, you will see over time, your overall health of your market goes down, your overall business model goes down. I think this completeness of vision and how we matter to the world ecosystem is becoming more and more, not less and less relevant.
Maybe Bill, if you're allowed to add?
Yeah, please.
When you ask about winning factors, when a customer is running today an ERP system and is making the decision to move to the cloud, that vision of bringing in, incorporating intelligence with our SAP Leonardo capabilities.
Yes
It is truly a winning factor. If we would just say we changed the deployment model, then it's, what is the value? What is the return on my investment? We have these cases. The moment we have started to incorporate machine learning, artificial intelligence, robotic process automation, that value is obvious, and they understand that with these technical capabilities, it's a massive advantage to consume ERP out of the cloud because it's more than just changing the deployment model. It's a redefinition of their processes, and that is clearly a winning strategy.
Yeah.
Okay. Thank you. Okay.
Well, thanks for that.
Okay.
Stefan, that's not a question.
The voice of God. We have time for two final questions. I have here Walter Pritchard and then Stacy Pollard, please.
Is that a question?
Hi. I think what strikes me coming to the event here the last three years or so with S/4 is you've had various drivers of the upgrades emerging with accelerator packs, with the cloud platform maturing. Even Bill's roadmap speech I think a couple of years ago helped. I'm wondering, as you look at the pace of migrations right now, and maybe for Bernd and Jen and Adaire, is there something that is still to come that you think customers are waiting on that will help with the pace of upgrades to S/4? Or is it just this is a complex upgrade, maybe these things just are going to go at a steady pace through 2025. I'd love to hear what you think affects the pace of upgrade from here.
I'll take that up first, if that's okay. I think that when we look at the opportunity in our install base, it is the opportunity to migrate them to the S/4 environment. When you look at the depth of customization that many of our customers have, we have to ensure that we are able to answer both the how and the why question. For many of our customers, that has to be a personalized approach because their starting position is quite unique depending on where they were. We're in the process of working on a very specific program right now targeted on moving our install base from the ECC 6 environment and bridging them to the cloud.
Doing that in a way that, first of all, starts with answering the business case scenario, the value-based outcome, defines the clear how for that customer based on their starting point. We've been building, along with Michael's organization and along with Bernd's organization, a series of tools and accelerators to help that process. That's something that I think you'll hear more from us over the course of the next six months. It's a very significant program for SAP, and we've already signed up 15 of our partners to help participate in that program with us.
Thank you. Now the final question from Stacy Pollard.
Thank you. If I'm the final question, perhaps I should ask the most forward-looking question. You mentioned margin upside potential beyond 2020. Is that mainly at the gross level or at the operating level? What drives that?
Yes. First of all, we definitely should have opportunities to both further improve on the gross margin level, as well as on the operating margin level. We should see consistency actually in both. When you take a look at what we want to achieve until 2020 On the Business Network side, we want to achieve already a situation where we will surpass 80% gross margins. Is this the end of the chain? No, not necessarily, because we see other players in the market that are operating at a similar scale that can do slightly more. Is there endless upside beyond that? Certainly not. Where there is substantial further upside is on the public cloud side, where we will have reached around about 70% right in 2020.
Clearly those assets, there is no reason whatsoever why they should not catch up with the Business Network assets over time, especially once they're catching up after the migrations onto HANA. There is definitely an opportunity on the gross margin level there and on the operating margin level. I think through scale come efficiency benefits. That has always been the case. I strongly believe on the sales and marketing side, that we are seeing now the, let's say, spike of specialization that we needed. The Intelligent Suite strategy, I think will give us an opportunity to become really integrated in how we go to market, how we play out those reduced sets of clusters that we have created at the beginning of the year, as we discussed at the Capital Markets Day as well.
As this will play out, we certainly have an opportunity there as well to contribute. At the end of the day, you will hear very soon, at the Q4 earnings, our view on the ambition beyond 2020. Because 2020 is more or less tomorrow, we certainly need to address the expanded horizon. We shouldn't be surprised to see something from us then fairly soon that will watch out to 2023 or even beyond.
To build on what Luka is saying, if there is $16 trillion that will be created by 2030, if we believe McKinsey & Company and several other research companies that state that, and there is another $4 trillion that comes out on the cost side through the massive efficiencies that comes with AI automation, the whole future of work scenario. Can't you, in a certain sense, imagine SAP Leonardo embedded in the enterprise applications and the business scenarios, the mega process scenarios? Can't you imagine a different dynamic pricing scenario where a company like SAP that adds billions in value and sometimes only gets millions in license from the billions in value?
Can we not fantasize for a second and say, is it not true that SAP would be the most likely company in the EAS industry to figure out a way to get the big win for the customer and find a way to more cleverly get themselves some advanced upside based on undeniable value? If you are willing to put a little bit of risk into the equation and not take as much upfront, but benefit from the sustenance of the value one can create, maybe we can get a bigger chunk of that $20 trillion than we have currently put in the plans. I believe this is absolutely possible. SAP Leonardo, the one office, not the back office or the front office, and the end-to-end mega process scenarios are most likely won by SAP if you see it our way.
Yep. Maybe just the last point to that, to augment what Bill has been saying, because I think he is absolutely spot on and right in that. We also see a growing trend that we move into more of these network type payment models. You see that with the SAP Cloud Platform as well
Yeah
where we go to consumption-based pricing. If you imagine that we win in this market, that we will attract a huge ecosystem to start to develop on top of the platform. This will be printing money while we sleep, basically, where we do not have the sales effort anymore, where the attractiveness of the platform itself attracts huge.
Yep
loads of developers.
Right
Ecosystem partners, which then will, through the consumption-based approach, drive the value for SAP.
I know we're done.
We're done.
Just to build on that. Let me give two stats that you might find interesting based on Luka's conversation here with the business networks. Every 60 seconds, a new partner signs up, and we're not out there with someone carrying a bag, signing them up. They're doing it online. The more and more relevant the networks become, and the more and more awareness there is for the networks, I think the more and more members that'll be on the network. Then think of us between the buyers and the sellers more and more, and doing it digitally at the lowest cost of sale possible. That's number one. How do you like that one? I'm serious. Like how, is that amazing? Like what that could actually be? That's amazing. I don't even think people have turned this button on in their minds around SAP.
I'll give you the second button. Facebook, they have a pretty good user base, right? We're not talking GDPR issues right now. I'm just saying. Their platform, they're getting 10 billion hits a day. We're getting 1 billion, and literally we just walked it out of the garage. Can you imagine when we're together next year at SAPPHIRE and we're talking about 5 billion hits on the platform, or even more? What does that create in economic value by having a whole new ecosystem? That's the thing on the C/4HANA side that I don't think people have factored in. The relevance in the CRM market right now has very little to do with first generation SFA that nobody likes to use.
It has much more to do with a platform approach that people are getting on to make it simpler to integrate to some of the back office applications so they can do some of the modern scenarios. Well, we'll own that. What does that mean to the competitive dynamic, the ease of doing business, and again, these mega processes in the enterprise? I love the question because I think it really does leave it open to fantasy and speculation as to what could happen if a company like SAP were to really organize the swim lanes for growth, we intend to.
Well, thank you so much. This concludes our financial analyst conference for today. Thank you all for joining.
Thank you.
We look forward to seeing you tonight.
Thanks, everybody.
At the reception.
Thank you.
Thank you.
Thank you.
Good job. Good job.