Ladies and gentlemen, and welcome from my side. I'm Stephan Gruber, Head of Investor Relations with SAP. Thank you for joining us here at the SAP Capital Markets Day. It's actually our 4th one in New York City. We're honored to be back at the New York Stock Exchange in this beautifully renovated the boardroom.
We also honor that the attendance is so strong on-site here in New York despite this little snowstorm outside. Us. We are a global franchise, and a little slow storm like this doesn't deter us from running ahead as we had planned it. Us. Now I would like to walk you at the beginning as usual through the agenda of the day.
We'll kick off the program with a fireside chat with our CEO, Bill McDermott. Us. The focus is SAP's strategy and vision as we help customers win the new digital economy. And Bill will be interviewed on stage by Maria Battiromo, the Global Markets Editor of Fox Business Network. Welcome, Maria.
Let us. We move to the product innovation side of the house, leading customers' digital transformation. We have Board members, Bernd Loeckert us. And Steve Seggin talking about the evolution of SAP's portfolio, both the digital framework, but also the extended cloud portfolio. And us.
Such an event like this would not be complete of having a strong customer perspective. The next session is one hosted by Rob Enslin, who runs Global Customer Operations at SAP. Us. And Rob will welcome on stage Ittaiya Srivazu Karan, the INSEE CEO. And INSEE is the IT arm of the 2nd largest us Cement Company in Thailand.
We are very honored having a customer traveling so far to New York City to join us here on stage. We'll continue after the break us with another customer deep dive hosted by Jennifer Morgan, the President of SAP North America. We have customers, Maui, Jim, Microsoft, HSBC Bank at the Bergman Group on stage. You can see that 1 third of our program is devoted to customer sessions, which I believe is a strong signal of the strong and strategic relationships SAP has with its customer base. And finally, the session with our CFO, Luka Muttich, us.
Driving Growth, Predictability and Profitability is the topic. I'm sure Luka will introduce another 3 letter acronym today. We'll see. Us, and we'll close the event with a Q and A with all executive board members on stage. And the courtesy treatment goes, of course, to all the attendees in New York City.
We invite you to our social hour from 5 to well, basically open end probably after 6 p. M. The usual Housekeeping items I have at the beginning is the webcast information. This event is being webcast on our Investor Relations website. We'll make the slides available for download after the event.
Us, and we also take questions by e mail later on this afternoon. The e mail address is investorsap.com. Us. And then the little highlight of my speech, I'm known for this as a safe harbor statement, and I'm going to read this. Us.
Please note that except for certain information, matters discussed in today's conference may contain forward looking statements, which are subject to various risks and uncertainties us. 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 the company's most recent filings with the Securities and Exchange Commission. And with that, it's my pleasure to invite Maria and Bill to the podium.
Us. Thank you
so much. Great.
Thank you, Stephane. Thank you. Us. Hi, everybody.
Great to see you.
Thank you, Maria.
Yes. Thank you, Bill. And thank you to everybody for making their way down here in the snow.
Thank you.
Bill, we want to us.
Talk about the past, the present and most importantly the future. Sure. And really take a look at how you're driving growth at SAP. Right. You started as CEO in 2010.
Correct. Us. Tell us how the company has changed under your leadership and what you envision the company to look like in the coming 10 years us. For 5 years.
Well, thank you, Maria. We wanted to make the company a highly purpose driven company. And if you look back at 2010, we came off the financial crisis of 'eight, us. Change in management in 'nine going into 'ten, and we determined ourselves to help the world run better and improve people's lives. Us.
So we wanted an enduring vision for the company. We also wanted a strategy that would endure the test of time. I've always said that leaders owe their company us. A good strategy without which the people dig a deeper ditch than nowhere. So we wanted to reinvent us.
The data model for enterprises with a HANA led world, a database that could do structured us. Information, transactional information at huge scale, but also predict the future with real time analytics on the same platform. Us. We felt that we could reinvent ERP because 70% of the world's transactions were running through an SAP system. Us.
So that data in the new economy was going to be really important to know the customer, but also manage the business process. And us. And we wanted to move the company to the cloud because we knew the cloud was going to be the computing theme of the 21st century. But moreover, us. We were focused on inter enterprise computing, transactions that would take place between companies.
And we wanted to build this situation us. To last a decade, decade and a half and then continuously evolve the strategy, which is basically what we've done. Us. If you look at the last 7 years in terms of the company's success, I think doubling the revenue, the profits, the market cap of the company us. Is essentially endorsing the fact that we have a good vision and we have a strong strategy.
And that's what we're executing.
Us. And part of the strategy is to upgrade the installed base that you have already, while also expanding the cloud. How do you do that simultaneously?
It's a really good question because 85% of our installed base has yet to move us to our next generation ERP system called S4HANA. So we're in the very early phases us. Of a generational sea change to a new ERP built on an in memory data platform. Us. And this is what's enabled us to be SAP, the cloud company powered by HANA.
We give the customer choice. Us. The customer basically has said our core business is run on SAP's ERP system. Us. And the things that we do with line of business executives, Head of HR, Head of Sales, Head of Procurement, Head of Finance, we're choosing to do in the cloud.
Us. And it's the combination of these forces that's enabling the company to grow so fast. Us. So basically, we have a multi generational opportunity on the upgrade path, but half of our business or our S4HANA product us. Is coming from net new names.
Okay.
Net new names. And today, we're making a bold announcement us on S4 Public Cloud Edition for the mid market, where we're going to initiate a whole new plethora us. Of new names and new customers across 25 Industries, 193 countries in the world. So we're talking growth company here.
Us. So let's talk about that a little more actually because these new names, I mean, I know the environment has changed a great deal just in the last year. Us. Where are these new names coming from geographies, industries and what kind of growth are we talking about when you consider that characterize the us.
What's very nice and I often really take great pride us. In SAP's business model, because we are in 25 distinctly different industries. So the diversification across industries is great, us. Because at any one time, some industries will go through struggles, oil and gas, oil prices down, us. Struggling industry.
But even in a struggling industry where you have change, you need technology and specifically business software to overcome that. Us. If you look at geographies, we have a fast, fast growing business in Europe. At the same time, us. People say Europe isn't growing.
We're growing very fast. Growing in the United States. We're growing in Asia. So everywhere in the global economy, us. Every company is going through disruptive change.
And they either need to take costs out of the equation or run more efficiently us. Or they need to connect with this consumer in any channel on any device. And the power of what's happening is they want to connect with that us. Consumer in any channel on any device and they have to have the data and they have to have the process us. To connect the demand chain to the supply chain, what's unique about SAP is we're the only company in the world that does that us.
Entirely. And we stayed true to software. So what I think the key message is where the growth coming from, it's coming from everywhere. Us. And I think the nice thing we're adding on today is really putting an extra emphasis on small and mid, because us.
Most all the Fortune, 2000 run SAP already. So we're going to upgrade them, extend them, us. Grow them, but now we're going to get lots and lots of new names.
Do you see an increased willingness on the part of the small and mid cap sector us. To spend more money right now. I mean, this is a key group, certainly that this new administration is trying to target, help in terms of rolling back regulations.
Yeah.
Is it us. Empowering that subsector of business.
No question. You know, one
of the guests that you'll see on stage today told me about her business us. And her core business is Cement, but she has to use digital business software to diversify her model us. And go into a new services space where the margins are better and the revenue growth is stronger. The other thing that made it easier for small and mid, Maria, is the cloud. Us.
Because now you don't need the infrastructure. You don't need to hire all the people. You just need to consume the software as a service. Us. And if you think about a lot of companies that might be capital constrained, if they can simply use it as an operating us.
Of course, to the business that gives them excellent returns. The question is why wouldn't they do it? There's no good reason they wouldn't do it. Us. And that's why I think software as a service for the mid market is the way to go and that's the way to scale and we're going to hit the accelerator on that.
Us. I want to get back to this in a second because I want you to tell the audience how financial analysts should look at the portfolio of solutions.
Us.
Try to pull out where the biggest growth is
and how
do you maintain 30% growth rates?
Us. Exactly, Maria. We've had more than 30% growth rates in the cloud compounded annually over a number of years. Us. What's very interesting about our cloud growth, if you look at the Q4 of last year and you look at the backlog of our cloud business, us.
It grew nearly 50%. And we have nearly €5,500,000,000 now in Cloud backlog, us. Not to mention a greater than 3,000,000,000 cloud revenue business. So that
business The backlog of space.
Has unbelievable
us. Growth potential. Here's what's interesting. We're the only company at scale in the software industry that's also growing the core, us. What some people call the on premise business because we give the customer choice.
Sometimes they want to run our mission critical software in their cloud us for another cloud that might be a private cloud. So you can run it in your data center, you can run it in a private cloud our environment. You can run it in a public cloud environment. We give you choice. And I think this choice is helping us because customers like choice.
And we don't us. Tell them what model they have to choose. We tell them choose the one that's right for you. And what we're finding is we're growing in all dimensions of our business model. Us.
In the end, the customer and the centricity around the customer is really all that matters. If you do that well, you're going to grow.
What do you think the adoption rate is in terms of this mid and small cap group to the cloud? Us. And talk the same with big business because I know that you're even taught you had a meeting recently with Ginni Rometty.
Sure.
I mean, I want to hear what you're doing for larger companies as well.
Sure. Us. Well, it was interesting because the day that since you mentioned Ginny, the day that I met Ginny, that morning, I was at West Point. Us. And the day before that, I was with 6 oil and gas company CEOs.
And basically, what they're telling me is, us. They're saying, okay, we need to recognize our industry is in a state of disruption. 1 us. Oil and Gas CEO told me that the price of crude per barrel has impacted their business so dramatically us. That he's got a choice to either finance the people, lay the people off or radically change the way they do work.
And he had 6,000,000 custom code lines us. Written into his current systems. And I explained to him that with the SAP Cloud Platform, us. We can reduce the complexity, move you to a modern architecture, consolidate all these legacy old systems, us. Radically lower your cost and perform better by coming up with new innovative ways to solve problems us.
With your customers and their customers. For example, in IoT and how you can use the data to shape new business models, us. Machine learning to do with machines what labor shouldn't do. We don't think machine learning should replace people. We think it should expedite decision making and the speed of an institution.
You mentioned Ginni. She would like to connect Watson to the SAP Cloud, us. So it drives her digital artificial intelligence business, but also it helps drive IBM's core business us because SAP is probably their biggest partner. So the relevance with customers in a state of change, us. Partners that need to innovate and make their new business models come through is all happening at once with SAP.
In fact, us. A CEO that you would know very well from the pharmaceutical industry, basically had 129 different ERP systems. Us. And essentially a system for every $1,000,000,000 in revenue, if you think of it that way. And now we're going with us.
Completely new way of thinking about how to run the business and run it simple. And that's why I think RunSimple was ahead of its us. And people are now catching on. Well, simple. Everything from the data to the process to the cloud to the extended network, us.
Driving new innovation in artificial intelligence and machine learning and blockchain and all things us. They can immediately deliver value to the business. That's what we're talking about here.
And you have to do it in a slow growing world.
Us.
Exactly. There's not a lot of growth. So companies have to achieve that and HANA and the cloud SAP is enabling them to do that.
Us. I think HANA has hit mass scale. You're dealing with 16,000 companies now running on HANA. Us. If you take as for Ohana, we've only had the product out a year and a half for all practical purposes, you have 6,000 companies running on it now.
Us. So everything is hitting mass scale very, very quickly. Why? Because the customer has to us. Their customer in an entirely new way.
And what we've learned about the core business called ERP of SAP us. That data might be the most precious asset in any company. So the data contained in those ERP systems us. It is necessary for all the change. We have one client that I met here today.
He's a smaller business. Us. He's got to deal with retailers that don't necessarily have all the options available to his consumer. He's got to have a direct to consumer business. Us.
That's razor sharp because he wants to consume it and know all the good things about the brand, the culture and the products. They've got to conduct e commerce. Us. They've got to really change in a brick and mortar world that's evolving so fast, as you know so well. So you have to have the data, us.
You have to have the single view of the consumer in every channel and you have to be able to conduct a transaction. 5 years ago, us. An SFA company talking about internal management of pipelines and forecasts was a popular thing. Now no one cares because everyone's got it. Us.
The new frontier is how do I connect with that consumer. We had another client here that's like, look, I want to optimize my supply chain, us. Connected to my demand chain and use a business network to basically buy goods at the lowest possible price, ship them in an efficient us. I have the part where it needs to be just in time to maximize the human capital that I have to do us. And that I have to use to deploy and preventatively maintain my products.
And the value chain in that and the savings that could go into a company And the revenue growth opportunity to go from a hardware to a services model is massive. So we don't need the global economy to grow us to grow. What we want to do is great work so we can help economies and societies prosper all over the world. Us. That's what we want to do.
So let's look all around the world for a second because we know what's going on in Europe. It's very slow growth. You don't need the backdrop us. To grow in order to see the kinds of numbers that obviously we're seeing.
Right.
Give us a sense of what's going on in Europe. Where are the weakest us. And where is the real growth opportunity?
Well, if you look at Europe, right, there's been a lot of change in Europe, as you know very well us. With the Brexit matter, you understand the elections that have gone on in Italy and France and upcoming in Germany. So there's a lot of us. I'm concerned overall about the strength of the EU and having an efficient network and a global trading us. Paradigm in Europe that in some ways mirrors the United States for efficiency and simplicity and of course the overall GDP and health of Europe.
Us. What we're learning is we have a strong point of view, and we're very relevant. So when these countries are going to change their governance, us. They're going to rethink how they provision services to the citizens. We're in the thick of that strategy.
When you think about trade or things that might change us. Between countries, we're in the thick of that strategy. It reminds me of the Greek debt crisis. People said when Greece was going through the debt crisis, us. SAP would suffer greatly.
That was the greatest year we ever had in Greece. When you think about Brexit, U. K. Is the fastest growing market that we had in Europe. Us.
So it's kind of like we chose just to be a business software market leader. We didn't go for hardware. Us. We didn't extend ourselves too much in services. We moved the company to the cloud.
The things we do bring immediate efficiency us. And in some cases, give people immediate growth. It's relevant. I wouldn't want to be a commodity player us. I wouldn't want to be a commodity player in the services industry.
I would want to be right where we are. Us.
So when you see disruption like we saw in Britain, that's an opportunity for you because whatever the situation, they need to upgrade us. And they need to move to the cloud.
Right. Exactly. They need to do all of that and they also have businesses within Britain that may need to us. And beyond the borders that they traditionally traded in to get new markets. So and there may be new trading dimensions us.
And new ways to think about channels and new ways to take your products to new markets. And you're going to need software us. And business software specifically, if you take a look at this picture, this shows you how you can manage the data on an SAP us. On a platform that data could be transactional. It could also be analytical, where you're predicting what's likely to happen us.
Based upon what's going on in that transactional engine, all those cloud assets are things that help companies to be more effective within the enterprise us. And between the enterprise and then the cloud platform itself that you're seeing is how you have an open platform. You have us. Open protocols that allow not only your company to innovate, but also other companies to innovate on your platform. And that platform can be extended.
Us. So we have great partners like Microsoft as an example. If you think about Microsoft, they have the Azure Cloud, they have Office 365, us. There's the integration effect between the knowledge worker and the enterprise and how you can bring massive productivity at scale, us. Not only to consumers, but also to new markets, new industries.
And these are the kinds of conversations that we're in. For example, us. If you just take Microsoft because I know that they're here today as well, they have a Dynamics product that works beautifully with our Hybris product. You can run all this in us. On Harkloud, you can run it in their cloud.
So I think you're going to see a lot of co innovation on that platform. And these are conversations, by the way, since you brought up 2010 us. They were impossible in 2010. In fact, 80% of our net new sales come from businesses we weren't in 5 years ago. Us.
So the pace of change and the innovation in the software industry is the one thing that you will be able to guarantee yourself is the only constant. Us. And I really think we're on the forefront of pushing the frontier of innovation now.
That's fascinating. I want to us. And get you to look ahead for us. Sure. And tell us what you see.
But first, let me ask you about that point that you just made. Which industry do you think is the most exciting us. You're dealing with all industries at SAP. Yes.
Give us a growth story.
Well, I think healthcare, it's not because it's going to be the most us. Operating income oriented story in the short run, but I think health care is a fascinating industry right now because us. If you just think about what we can do for humankind and how we can keep people healthier, how we can connect their bodies us. To devices and monitor the progress of how their health is going, how we can essentially disrupt a system that is so archaic us. With electronic medical records and paper based care for patients, how we can beat back that demon called cancer us.
And truly understand the genome of the individual and perhaps offer remedies that have never been possible us. Or just because we have something like HANA that can sequence data at breathtaking speeds and course factors never dreamed possible. That's why we partnered with us. CancerLinQ with ASCO in the United States and NCT in Germany and many other organizations. And one of the things about that platform, us.
We started something with start up health with venture capital companies where they're building innovation on this platform to come up with breakthroughs in health care. Us. And I think healthcare is interesting. If you look at anybody who's making a product today that has to market it through a wholesaler or a retailer, us. Complete reinvention.
And I say that because they have to know the consumer and today they're actually blocked us So they don't have that single view because they're going through alternate channels. Because those alternate channels are under such stress, us. They're saying I've got to leapfrog past the alternate channel. I have to have a direct linkage to my consumer. I need to know them on that device, What they're doing socially and how can I automate my supply chain with my data in any channel to personalize something for you at mass scale?
Us. And when you come into a retailer or a wholesale or you're buying online, I need to know exactly who you are because that's what you're used to us with all your social interactions with Facebook and other Internet channels. So I think that's going to be fascinating. Anybody that makes something us. And wants to sell something and really jump through alternate channels, you got to have our software.
And you talked about new industries. I mean, we hear a lot about artificial intelligence. Us. Machine Learning.
Yes.
Obviously, the Internet of Things no longer a new story.
Right.
Us. But
these are all opportunities.
They're all opportunities. I mean, if you think
about diversity, and as you know, Maria, one of the things that we both believe strongly in us. The power of diversity and particularly gender diversity. There was a study that was recently done by McKinsey that's a multi trillion us. U. S.
Dollar opportunity between now 2025 just to level the playing field between men and women in the workplace. Us. Well, in the workplace, you have to hire people. So a machine learning application that we already have is pairing the resume to the candidate and profiling the job. Us.
Humans have certain bias because we knew it, but machines don't. They just look at the facts. Now we didn't necessarily want to eliminate the human from the decision making us. But isn't it kind of ridiculous that somebody's manually matching a job and a resume in this 21st century? So we take care of that for you now.
Us. I was meeting with so you can get equality in the workplace and remove gender bias from the workplace. I was meeting with us. A company who does mass transactions on the Internet. Mass transactions.
They want to use machine learning to match us. The buy and the sell transaction have intelligence built into the buying and the selling equation and the way they invoice match. Us. So it goes on and on. And I think that machine learning could easily be one of the fastest growing spaces in the world for SAP.
But what's different about us? Us. What's different about us is we're building the intelligence into the application to make the work easier for the knowledge worker us. And to make the productivity built into the equation of how the work itself is done. We're not pushing a computer at you and saying, us.
Buy it. We're saying, let's make all the things that you do simple and easy and drive value and productivity. Us.
Come back to the U. S. For a second. We're going to see changes. I want to ask you about policy.
Sure.
Us. We heard that taxes are going
to come down with the new tax reform package, that regulations are going to be rolled back,
that
we're going to be
tapping into the energy space.
Us.
Will there be an impact to SAP?
SAP is going to prosper anytime this change.
Us. I
mean lower taxes, is that going to be an impact on earnings?
Yes. So for example, us. We have a very global company. A large chunk of that company is in the United States. We have 21,000 people in the United States.
Us. So if the United States is a lower tax environment, clearly, I do think that could give us a business opportunity us. If there's also investment in technology and infrastructure, there might actually be tax incentives to people to make such investments, us. Such as capital investments in software like SAP. If you are going through a technology infrastructure decision, us.
You're obviously going to have to enable that with software. That's going to be helpful to SAP. I also think that the government is going to have to do more with less. Us. If you're going to have a lower tax base coming in, you obviously have to increase the efficiencies, increase the jobs and increase the spending per human being us.
Because you've given more back to the people. All of that's going to need software and we'll be front and center in that change. You also have to remember, us. I don't think a lot of people realize SAP's involvement in the most significant agencies in the United States. Us.
You can't almost mention a single one that isn't running SAP. You can't mention 1 in 10 us. Significant companies in the United States that's not running SAP. So again, any time this change is there, there's going to be new ways to do better things us. And the software will be front and center.
Also think we have a massive opportunity with the midsized customers in the cloud us. Because in the past, it's just been too hard to buy the hardware, buy the infrastructure, get enough people that knew what they were doing us. For a small company to afford all that, but they can certainly rent a software to get a job done. And that's especially true when they can get a great return us. Our software returns investments and that's why companies have always invested in SAP.
So I really think us. The environment for SAP will be very, very positive.
And with the rollback in regulations, that's going to be real positive for that group,
us. Small and
kneecap as well.
Exactly. So anything again that's fostering change and that's business friendly will give people more to invest in the things that matter.
Us. You said the backlog is unbelievable earlier. Tell us about 2017. What does it look like? What are you expecting this
us.
I'm expecting more of the same. We're one of the few companies that not only give an annual guidance. Us. Last year and the years before, we delivered on our promises. Actually, if you think about the Q3 of last year, us.
We have actually upped our annual guidance and then delivered that upped annual guidance. And then this year, we delivered a very strong forecast. But we also have us. A midterm guidance to 2020. So we have tried to achieve a very high level of transparency us.
With our investment community, I think that they believe in our track record and they trust us. So we're looking for us. A very strong profit. We are only in growth businesses. We are only in high margin businesses.
Us. And the operating income of SAP is quite significant. We are going to grow our cloud business us. Very fast. And I really think we have a huge opportunity with the midsize with the Sfour Cloud Edition.
Us. We have a massive business network. If you think about spend management, if people do want to focus on expenses, us. Concur travel and expense.
Yeah. Ground,
air, hotel, food, entertainment, everything simplified, no expense reports, us. Beautiful savings. Great course takeout. If you think about business network, the way you procure things, buying it at the best possible price using an efficient network, we have $1,000,000,000,000 us. Running through the Ariba network.
If you think about the fastest growing labor force now, it's contract labor, temporary labor. It's a shadow workforce growing at 45%. Us. We manage all this in the cloud.
Very simple, low cost,
take cost out of the business, complement that beautiful digital core. Us.
So all these are
going to grow very, very fast. But here's the big one. S4HANA is the enchilada. Us. This is the fastest growing ERP system in the history of mankind and I actually see a limitless potential here.
Us. And what I love about it is not only the generational upgrade cycle, but the fact that so many
of the names are net new.
And I think we've only just begun. Us. And I actually think that you should think strong growth in the cloud, very consistent core, highly profitable company. Us. By 2018, our cloud business will actually be bigger than our core and the trajectory of bending the lines on margins us.
And operating income leverage as you look into the future is not a long part. It's a pretty short part.
I feel like in the last several years, companies have been sitting on cash. Us.
They were unclear in terms
of what was around
the corner when it comes to the demand side of the story. And now they've got policies moving their way us. And they maybe have a little more clarity on the demand side of the story. Do you think business starts to unleash now in 'seventeen?
Us. I actually
I'm one of the
guys that's really optimistic about this. So I think that I'll answer 2 ways. I'll do the SAP and then the market at large. Us. If you repatriate, I guess, what is $2,500,000,000,000 $3,000,000,000,000 us.
People are going to do some serious things with that money. Right. Right. And probably if you put a few rules around how you can use that money if you get such a big tax break, us. That could definitely stimulate growth.
And I actually think that that could stimulate a lot of M and A activity. I really do, because what else
are you going to do with
the money? Us. You're going to buy back some stock and put everyone to sleep? Or you're going to do something to put that money to work either on the innovation side or the M and A side? So I think that's going to be something to really us.
And then in terms of our story, we are very cash positive business us. And we have like near zero debt because we don't have to. And we have been very aggressive when it was our time to be aggressive us. On the M and A front, because if you look back in the early 2011 kind of era, we took a lot of the best us. I think we did it because we wanted to get the best ones before anyone figured out what we were doing.
And now that that's behind us, us. We don't have to do large M and A. We're largely organic, a few tuck ins to strengthen the story and then basically execute us. The plan that we've laid out that's been ever consistent. We give a great dividend.
We obviously haven't bought back shares in a while because we us. Have done other things with the capital, but in the second half of the year, could we? Sure. So I think our story is going to be organic, us. Very focused and very driven and count on a great dividend and don't us.
Be concerned with us surprising you with a large transaction or something that's out of the norm of what we told you we do.
This year? This year.
Us. Well, that was some good info there, Bill. Let me tell you, as we wrap up here, I owe you a long time. I don't think I've ever seen you stronger. Us.
Where does resilience come from?
Well, I'll tell you, in terms of SAP resilience, I mean, personally, I us. Thank you. That's wonderful. I think that on a personal note, I bounced back pretty good us. And I'm happy and I have just an immense level of passion and energy.
And I actually feel like us. I'm just getting warmed up.
That's great.
And then on the SAP side, I've never seen the company stronger. Us. And here's the big thing that I'm proud of with the company. We have the highest employee engagement scores in the history of the company. Us.
We're one of the most highly rated companies in the world on Glassdoor. The people are happy. And we also just won an Edge Certification Award us. The first information technology company to be recognized for gender diversity in the world. I thought it was a beautiful thing, really do.
Us. We have this hiring center for our sales department of Rob Enslin led. And there's 51% female, I think 49% male in there. And I don't know how you get to that math, but that's what they told me. But I think what's really nice about it is us.
It's a company that's on the move. And my Board colleagues here today, I really
The Executive Board is following you.
I'm very proud of this us. I told you earlier when we were talking backstage that I don't like kind of baby games. And this Board is very immature. Us. I also told you backstage that I think there's a perfect correlation between steady management teams that don't have a lot of turnover, us.
That have inspired executives that really care about people and ultimately the sustainable performance of those companies. I really believe us. And I give these guys so much credit. I mean, you're going to see Vern Moicker today, who runs development, doing a great job. Us.
You're going to see Steve sing. I'm so proud that we were able to acquire a great company like Concur and then give Steve off of the Business Network Group. Us. And you'll see a really fine gentleman, Rob Enslin, who was one of the sales department for the company and has been for so many years, worked with me for 15 years. Luka Muchich, a financier extraordinaire.
And I think a guy that speaks plain us. And people trust and understand that he knows those numbers inside and out at every level and every department of the company. Us. And the best thing is you also get to see the fact that we got our customers with us today. And I see that we have Jen Morgan, who runs us.
North America for us, and she'll be hosting our customers. So I mean, I defy anybody to find a better management team than this. Us. So honestly, I think I've lucked out. I think SAP has a great, great business.
And most importantly, we stick together and we want us. To achieve all of our dreams and we keep coming up with new dreams, but they're both on one core foundation. Us. It's all about the people. If we could just never forget it's all about the people, we'll be fine.
Bill, thanks for sharing the story.
Thank you
very much. Thank you. Us. Thanks a lot.
Us. Thank you very much. We've heard a lot about innovation SAP. And as Bill said, we're just getting warmed up. And it's my pleasure to introduce the next speaker, the Executive Board Member, Bernd Wolpert, who is in charge of Products Innovation SAP.
Dan, the floor is yours and you brought us through the Innovation Store at SAP.
Thanks, Stephan. Us. Yes, warm welcome. Thanks for coming. It's not easy, Bill, after us.
The superstar who shared the vision, the strategy and
I think for the community here, the growth drivers, to continue and talk about product. Us. But therefore, I want to share with you that I'm coming from the Silicon Valley. And we had the development kickoff meeting beginning of the year. Us.
And I was on stage together with executives from Facebook, from Uber, from Slack and guess what the topic was that we were talking about. Us. The topic was the enterprise is the new black. And it was interesting, us. Yes.
It was interesting to hear from these companies that are best known for leading the digital age, especially in the consumer business, us. How they approach the enterprise segment. And whether it was Facebook who engaged with us, sharing their consumer data us. And linking it to our high risk marketing, building the best in class marketing product or whether it was Uber evolving from a service us. That is all known to you of a personal service with transporting people from a to b into a service that is us.
Transporting everything and linking that service to our retail shopping experience. This is what Bill said, connecting us. The demand chain to supply chain and I would say linking as well the leading enterprise company with the leading digital companies in the consumer space. Us. And now you might ask, why are these companies engaging with SAP?
Us. Do they have to? And the answer is, if 70% of the global business transactions run through our systems us. And the data sits in that systems. It makes us the undisputed leader in the enterprise segment.
Us. And there is no doubt that with the technology they own and the capabilities and the technology we have, us. We can jointly together define the new enterprise space. We are enabling with that us. Collaboration, co innovation our customers to lead in that what many call the digital transformation.
Us. And we enabled them to ultimately differentiate and create new value, not just transferring what they have today on the on premise world and transfer this to the cloud. I know some other companies are doing this. We are doing this as well, but we go beyond. We enable us.
Our customers in co innovation with Facebook, with Uber, with Slack and many more others to build new business processes, to build new business models us. And digitize their business and make them win in a new digitized world. Us. And I think Bill elaborated this very well. Only if you are able to link the demand chain us.
That goes across several channels with the supply chain and in many industries with manufacturing. Us. You are able to lead the digitization of enterprise processes within and beyond companies. Us. And I would like to focus now how our portfolio is enabling our customers to win in that digital journey.
Us. In translating this digital business framework into products, we give customers a clear answer to us. A question everybody has on his table. How do I make sure that us. I'm not disrupting my perfectly running existing business, which I have built over 1 or 2 or sometimes 3 decades us.
We were perfectly running mature IT system and in combination not miss the trend to the necessity to react very quickly us. To changing market dynamics, to new business models, to new business opportunities. And these are, I would say, the 2 questions us. Our customers have to answer and we are lucky that we are in a position to serve them in both aspects. Us.
On the one hand side, we are able to provide them on an ongoing basis end to end business processes. Us. And the original idea of SAP to deliver standard software is more than ever relevant in the Cloud. Us. It is less a technical transformation.
It is significantly more a commitment of customers us to run standardized processes, best practices consumed in the cloud. While in on premise world, they had the chance us to modify, to customize, to enhance, to add. That time is over.
And now us.
They are in the situation that some of them say never touch a running system and we are proud that we are serving more than 70% of the business transactions globally. Us. And on the other hand, we are as well proud that we are able to lead to lead the disruption us. That is necessary, and there is Darren. He said it this morning very nicely in an interview that, up to the CEO, if they are not us.
Buying into that opportunity. They might not be a CEO of a company very soon or their company might get out of business. Us. So we at SAP have to give them an answer to fast innovation, to ease of consumption, I would even say to freedom to build us. Completely differentiating solutions.
And these are the 2 separate modes of IT every company has to deal with. Us. And each of these modes has to be perfectly integrated. We had that conversation with some of you this morning. Us.
It would be completely wrong not to build on the strength on the best practices you have built in the past and build these new opportunities completely separate us and reinvent what you have already as an asset. And therefore, integration, which was a strength in the past, us. It's more than ever relevant as well going forward. Let's begin what is,
us. I would call the core
of that digital strategy. And the core is that we help our customers us. To bring ERP, to bring where we have defined market leadership into the cloud. Of course, by permanently optimizing existing us. But more important, more important, by simplifying them, by making it scale, us.
And by enhancing it with new capabilities like machine learning, like an award winning user experience, us. No of you would have guessed that SAP has won a couple of prizes in user experience a couple of years ago. I would not have bettered on that. Us. But that's reality today.
And we have with purpose decided to invest a significant amount of money us into machine learning capabilities to make the existing processes and the new ones more intelligent, to have us. Contextual reporting and analytics as part of any application. Us. And together with our strong domain expertise across 25 industries and us. Not to underestimate this with the strong and loyal relationship, the 300,000 customers, us.
We are able to lead and enable them to win in the new digital world. Just take an example, I was with Jen at Nike us. And Nike committed to us to transform them into the digital age. Us. But there were others like Coca Cola, there were others like Thyssen, very traditional companies.
There were others like Emeco Beijing who are on their journey already us. And these close to 6,000 customers who already on the path of using Sfour or will soon use Sfour Live, us. We see that the market momentum has outpaced our own expectations. And we see as well that the move to the cloud us. Our entire ERP has just started now.
The number of customers who we got with our S4HANA Cloud ERP us. Only in Q4 was the same number as we had in the 6 quarters before. This means time is relevant now. Us. Hi.
It's the moment where the ERP, not just of small enterprises as well of midsize and even of large enterprises is going to the cloud. Us. Of course, with our commitment to, let's say, expose APIs of the rich portfolio us to a cloud platform. Of course, with the significant value proposition that time to value and time to implement is the big advantage. Us.
Of course, with the commitment that we permanently embed machine learning and artificial intelligence on an ongoing basis us into the product. We will do the same in on premise as well, but it will take customers 15, 18 months at least in order to consume it. Us. So if time matters, cloud is the only way to succeed. And therefore, S4HANA Cloud is the natural choice us for any company looking and taking advantage of core ERP Cloud Computing.
Us. But it is not just S4 Cloud alone. In the meantime, we have decomposed the richness us of what was formerly called the Business Suite into more than 80 cloud applications and I have just illustrated a few of them here on the slide. Us. And to enable our customers to run as well in the cloud and on the transition to the cloud, us.
Complete end to end processes. We have committed that integration is coming with the HANA Cloud integration out of the box. Us. Of course, anybody of our customers can choose, pick and choose between several solutions, but then the us. They again have are in the dilemma of hiring consultants of building integration projects us.
And instead of letting their IT focus on value creation, they are busy with integration of a bunch of cloud solutions. Us. I think integration out of the box is more relevant in the cloud than ever before. We have as well us. I understood that in that digital age, what I said before, transforming is more than just taking an existing process us from an on prem to the cloud.
Take omni channel e commerce or take the traditional order management, which we had in ERP and still have. Us. In future, it's not enough to have order management for selling physical goods or for selling services. In many cases, us. In the digital age, you sell a product combined with a service and you have to have the configuration, the pricing, the quoting us.
Embedded in order management and of course integrated into billing and entitlement. And this is what Hybris Revenue Cloud is all about, us, which we just launched, Carsten, I think, 4 or 6 weeks ago. And this should just act as one little example that us. We are completely, yeah, demonstrating, redefining existing processes us. We are leading in the market as well today.
So with the holistic portfolio of best in class applications us. And with our commitment that the application itself are perfectly integrated out of the box, us. We go beyond and expose the richness of the portfolio as well on our cloud platform. Us. As the architecture below these applications follows a micro service approach, a micro service approach that allows us, us.
But more important, our partners and our customers to massively scale. To scale that sizing of hardware, us. That consumption of services is not limited by individual solutions and that the combinatorics of these services us. Enable our customers in many cases across industry to build new applications. It is not a secret that the digitization us.
We'll as well kick out certain elements, certain steps out of the value chain. There will not just be us. Industries that are winning. In many cases, steps will be eliminated. And our approach to address this us.
And to innovate new solutions, to enable our partners to innovate new solutions is with a platform as a service us. That will become the center of gravity for anybody who talks about enterprise software. And therefore, that digital platform, which we call platform as a service, us. Of higher value than many of you know from the infrastructure providers. We use infrastructure providers us in infrastructure as a service on our own.
We partner with others, but the cloud platform, us, which will be renamed or which will be officially announced to be renamed, but the HANA Cloud Platform will become the SAP Cloud Platform. Us. As the comprehensiveness of the offering of that platform as a service was not reflected in the name. Us. And when I said it was not reflected, of course, HANA is the foundation.
HANA is the foundation of everything we do in future. Us. But when we talk about user experience, when we talk about collaboration, when we talk about integration, when we talk about machine learning, us. When we talk about analytics, when we talk IoT, all of these services are incorporated in that platform and we make use of these services for our own services, us. But more important, we give them for consumption to the entire ecosystem.
Us. And our customers embrace that strategy. They embrace the openness us, which we have never had in-depth order of magnitude as SAP before. It is as well that us. These services can come from SAP, but you see here as well that we have HANA, we have Vora, we have the link to open source like Hadoop.
Us. We did on purpose an acquisition of Altiscale that we are able to provide Hadoop as a service in a big data scenario us. To everybody who needs that and that the strategy is the right one can be proven by numbers. Us. We have added more than 200,000 software engineers on the SAP Cloud Platform over the last 6 to 9 months.
Us. We have triple digit growth in bookings and I would say with platform as a service, we are just getting started. Us. So there is no doubt that when people talk about digitalization, about the next big wave, us. That Internet of Things comes into your mind, that all physical equipments, buildings, us.
Air conditionings, any kind of product will be in future equipped with sensors. So connecting things, connecting human beings us. And I think Bill announced just end of September that we as a company will invest 2,000,000,000 us. Alone in that business segment. And we have combined our assets, which we have already today, in the new IoT portfolio.
Us. And we just recently announced the brand for that and Hana gets now a new brother or son us. And it's Leonardo. So SAP Leonardo is that innovative solution portfolio that enables all companies us and building new business model with the connectivity to individuals and to products. We will provide, of course, packaged solutions us.
That are sometimes industry vertical specific, that are sometimes LOB specific. We will as well provide services us on our platform that are able to connect future solutions to any product us. And we will enable as well our customers with the big data architecture to have, let's say, an architecture blueprint which is essential that us. Customers get and support what data is stored on a device, what is stored eCentrally and what is stored centrally. Us.
These questions will have to get answered in any IoT scenario. And we will add these scenarios with machine learning. Us. And machine learning brings the intelligence into these applications and not just into IoT applications us as well in any line of business and industry application. So our commitment is that on the one hand side, we will enhance us.
With machine learning, any existing application and making it more intelligent, more intuitive to use. Us. But more important, we will add these capabilities into our platform. And what does it mean when we add these capabilities into our platform? Us.
It means that some IT companies think that the old paradigm of extracting data, us. Moving it into a machine learning platform, running algorithms, neural networks, getting insights, putting analytics on top of it us. And then transferring that back into an execution system will be the future. This will be the road to failure. Us.
In a real time business, you have to incorporate these services into your platform. And therefore, I am happy to announce that SAP CLIA, which
us. Yes, quite
a few of them. The family is growing. As business is growing, the family is growing. Us. And CLIA stands for Computers Learning Enterprise Applications incorporated into our platform.
Us. And we have a few of these applications ready to be released. We have a cash application. We have Brand Intelligence. Us.
We significantly have invested in service centers. We have invested with Mike in investment we matching in HR SuccessFactors us. And there is more and more to come. This is just the starting point. And the key differentiation is that us.
We believe that machine learning is well documented in books, in libraries, you can go to any university. Us. So that software itself, which by others is in many cases open source, is not the differentiating thing. The differentiating thing is us, making them applicable in applications and applying them into a platform which will become the center of gravity us for the enterprises in future. So let me briefly summarize before I hand over to my friend Steve.
Us. We have with S4HANA Cloud, the leading software as a service ERP. We have us. E componentized, though, resulting in a modular suite in order to simplify consumption, in order to optimize processes us. And in order to digitize any end to end process a company has within and beyond their boundaries.
Us. We will continue to provide all these capabilities, the business capabilities, the technical capabilities us on the SAP Cloud Platform.
And with that platform,
we will address those challenges us. I introduced it to you at the beginning. We are able to serve customers who have an urgent need us. We build completely new businesses and business models. And on the other side, we help with Sfour Cloud us to transition from an existing ERP in a best practice cloud ERP going forward.
Us and we will provide integration through the new line of business specific cloud applications. Us. That modular suite is the overall visualization of our entire portfolio, and therefore, this is the moment where I would love us to hand over
to
Steve. My friend, us. Welcome. I want to hand over to Steve explaining other parts of the portfolio. Us.
Sounds great. At least as relevant as the one I have talked about.
It's more relevant, buddy. We will see. I love competition. Us. So thank you.
And I have the privilege of working with Verint across the SAP product portfolio. Us. I also have the privilege of working with Mr. Ensign across some of our go to market activities. And today, I'd like to share a little bit of business detail around our heads of our products as well as some product details, some innovations that we're driving.
And the thing I would ask us. I'm going to share that detail in the context of 4 principles. And so whether you're talking about our core ERP, S4 Cloud or Business by Design, us. Or the line of business applications that sit on top of those core ERP systems that extend across the enterprise and frankly into our supply chains us for our customers. There are 4 principles that we try to ensure that we live to across all of our products.
And these principles fundamentally are customer facing. Us. They are really designed to make sure that we're best in the world at what we do. And very simple four principles. We want to be best in class for obvious reasons, us.
As the suite decomposes into its component parts, customers have incredible choice and we want to make sure we deliver us. A set of choices that the customer says, given all the major choices in the world, I'm going to pick this. And I'm going to pick this because it actually meets my needs and it does a wonderful job for the company. Us. Number 2 is as much as we want to be best in class, the real value of SAP to our customers
us. Is when all of our products and
services integrate seamlessly and integrate without any effort from the customers. Now here we have some work to do still, us. But we're committed to this objective. We want to make sure we're phenomenal for our customers on this. 3rd is, look, as much as SAP us.
It's at the epicenter for most of our customers. It's the epicenter of the digital core and the digital strategy. The world us. The great thing about cloud computing is that more and more business processes can get solved. More and more business processes can be automated.
Us. And that automation is occurring not just at SAP, but around the world. So we want to make sure that the SAP platform, whether you're talking about the core or the line of businesses, us. Our open so others can add value on top of that, including by the way our customers. And the 4th objective is really that us.
And this is aspirational for every company in the world. We want to be easier to do business with.
We want to be more connected to
our customers. And this is a wide range of topics, everything from the obvious, us. Which is, it ought to be easy to buy, easy to interact with our customers. But we also want to make sure that we're pushing the boundaries us on delivering value to our customers, even how they consume our services or how they move up or down the consumption of our services. Us.
So with that, my team is already confused because I'm not following the slides in any way, shape or form. Us. So let me just move really to our first principle, which is best in class. So you guys can catch up, right?
Come on.
Us. All right. I'm going to just you can just ignore the slides and I'll just keep going. With our best in class, let me maybe hit across a couple of themes. Us.
So let's take Ariba as an example. Oh, that's the problem. It was me. Us. There's no service here.
It's a user error, big user error.
So us. Invest in class, one of the real successes that I've been privileged to be a part of is the incredible progress that the Ariba team has made us over the last handful of years. And this is led by a gentleman named Alex Asberger, who when he took over the repo organization said, look, I want to make sure that we have delivered the most delightful user experience, the most integrated set of services and frankly, I want to drive innovation us. Above and beyond just what our customers need, but frankly, into what our customers should need in the years going forward. So whether you're talking about guided buying us.
Or Reba Pay or our extended supply chain management. This is a set of innovations that we've just us. A small set of innovations that we've delivered over the last couple of years that are pushing the functionality set not only to where our customers want it, but frankly, us. Where they will actually need in the coming years. Now when you drive innovation and when you drive a great customer experience and frankly us.
I'm really focused on delivering an NPS improving NPS environment. Guess what happens? Sales take off. Us. And that's effectively what's happened with the Ariba business.
In fact, the bookings of the Ariba business have almost doubled over the last couple of years, right? Us. And so that just it's a reflection of the fact that we focus on the customer, focus on what the customer needs in innovation, results follow. Us. Look at the if you look at, for example, the fieldbus business, another this is a business that I hope you'll learn more about over time.
Us. This is a business that's focused on contingent labor and services management. And when you think about a context where us. Every company in the world, about 30% to 50% of the team of people that work with that company tend to be outside us. What Fieldglass does is allow you to do the same thing with your continued labor workforce, the SuccessFactors allows you to do us with your internal workforce.
So manage them, hire them, pay them, everything. And this is an incredible business where our product is not only the innovation leader, us. Literally, we win 85% of the time we actually enter into an account. And so because the service is that valuable to the customer and the product is that forward us in innovation. Also, AAM and think about retention.
This field definitely sets the bar for what retention rates ought to be. Us. In fact, as much as some of you know, the Concur retention rates from the back when Concur was a public company, Pure Glass is actually higher than that, us, which I didn't think was possible, but apparently it is. So in fact, one other innovation I'd like to talk about within Fieldglass is that us. This last December, we launched Fieldglass Flex, which is a middle market version of our product.
Us. What it allows you to do is actually consume the product directly over the web and deploy it over the web. In fact, typically, we can deploy Fieldglass Flex in a matter of hours. Us. So a customer can be live entirely over the web in typically less than a couple of hours.
Us. Concur obviously continues to drive the innovation agenda within corporate travel. I won't get into a lot of detail around that. I'm obviously very happy with Concur us. And where it's at, it continues to see its growth rates improve.
It continues to be at the same win rates and retention rates us. We were at prior to our acquisition of by SAP. The thing that has improved is our growth rates and I'm very happy to see that. Us. Actually, there is one innovation within Concur, I would love to touch us.
And it's an innovation that you don't often see, but it's an innovation that's equally important to our customers. And that is this past June, we went live us with real time integration into Sfour and real time integration across a number of our other products. Us. And this really touches upon the statement of integration, which is critically important. I want to make sure that all the products and services we deliver are integrated across all us.
All the other SAP products and services that we deliver out of the box. Right now, that's an ongoing set of objectives because this is obviously a very large us. So let's move to this concept of 1 SAP. Us. Obviously, Derek shared this slide earlier to highlight our broader portfolio.
But I think it's a good visual across the integration objectives. Us. And as I mentioned, we're delivering against set of objectives. But it's not just the integration across things like Concur and Test 4, right? Us.
When you think about the complexities of some of the companies that we deal with, some of the biggest companies in the world, they're running S4. Us. They're using S4 to run their core business, but their subsidiaries might actually run the business by design. And so the integration isn't just from Concur to us. From Ariba to S4 is CYD into S4.
But we want to make sure that there's a nice migration path across those products us. And there's an easy roll off of financials for our customers. Okay. Let me move to an open platform set of comments. Us.
So now you guys are moving the slide. Thank you. This is a as I mentioned, it's a critical part us. We will always be that digital core. We'll always be that percent of our company of our customers.
Us. But there has to be acknowledgment that our customers are going to use other products and services. And so when we think about open platforms, us. There's a couple of examples I'd like to just share to give you a sense of what we mean by open platforms. By the way, you know that Concur have built an open ecosystem and we have literally hundreds of partners on us.
On top of that ecosystem, what you may not know is SuccessFactors has also built an incredible ecosystem of partners. In fact, I think Mike announced at the last Success Connect us. We have about 140, 150 partners sitting on top of the SuccessFactors platform. Combine that with the integration us. Across Fieldglass, and you really start to solve a wide range of HR problems and business issues for our customers.
Us. But the integration goes I'm sorry, the open platform goes well across that set of objectives. So think about us. We've made this shift from effectively, I would say, at mainframe computing to cloud I'm sorry, to cloud server to cloud us. There's an ongoing shift over to microservices.
And what that means is that the way applications behave and the way that we want them to behave is starting to shift.
Us. So let me give
you a simple example that kind of puts that into context. Right? Today, I may go into Concur to book travel. Us. But the natural way for us to do that would be if I send an email to Rob and to Mike and to Alex and say, hey, look, you know what, let's meet us in Wichita to go see this customer around a number of opportunities.
Why couldn't that email us. Automatically call into Concur and say, I see that you want to go to Wichita. I know all your travel policies. I'm going to go ahead and start that booking process for you. Us.
In fact, that's the way that we see technology continuing to evolve. So we want to make sure we open up the entire not just our core services, but all of our LLBs, us. Open up those platforms so integration and value can be driven across any number of opportunities. Us. So an example to help make that more accessible?
Us. Obviously, one of the things that I think that it's important for us to bring out is that integration or I'm sorry, that open platform integration is us. It's available not just within our line of business applications like Concur, Viva, Fieldglass and SuccessFactors, but across SAP Cloud Platform. Us. And so whether you want to use SAP Cloud Platform or you want to use an external cloud platform to integrate across and extend SAP applications, we're open to any of those environments.
Us. Obviously, the best way to do that is across SAP Cloud Platform. I'd like to now move really to talk a little bit about what I mean by connected to our customers. Us. We'll go move beyond the Concur and SuccessFactors slide.
I'm going to try to catch up on the time. Us. Okay. So, okay, we're going to talk about sorry, leave it there. Leave it there.
Us. Let me highlight this. So as we open up the platform, there's a number of interesting opportunities us. They become available to our customers. One of which I'd just like to quickly highlight is the SAP Business Data Network.
Us. And what this service really allows you to do, and this is an opt in service for our customers that will be delivered later in 2017. Us. It's an opt in service for our customers. It says, if you want to put your data in a pool that can be used in an anonymized model us across other customers of our products and services.
You can get some incredible value. For example, if you happen to be using Fieldglass us. To look for contingent labor to solve a particular project problem. Imagine being able to look at us. How you can staff that project in any city across whatever set of resources you want, looking at availability, us.
Pricing and skill set information on a real time basis. That's the power us. Of a company like SAP. That's the power of scale. And when we've had a chance now to show us.
Show this to our customers on a beta model. The responses are phenomenal. They would love to be able to understand this information and use that to drive better business decisions, better business behavior. Us. Now we're going to move to next slide.
Actually, I will touch upon this. This is us. This is a topic that's near and dear, not just SAP's heart, it's near and dear
to my
heart. And this concept of business beyond bias us. It's a concept that we really need to start folding into how we operate. But one of the things, when I first heard about how software can drive us. A change in how we operate around bias.
You don't really understand the detail until us. Just kind of dig into it. So for example, if you think about when you just open up a job rec, right, something as simple as saying this is a job that requires you to come to the office. Us. This is a job from 9 to 5 based on this location.
It actually has a bias in the people who actually apply for those jobs. Us. This is critically important. If we want to fully engage the entire world in a model that says these are opportunities that are available to you us. And you want to get the best candidates for a position, you've got to think about how even our core basic processes, us.
Whether it's at the application level or at the human level, it effectively drive embedded bias. And what I love about what Mike us. The SuccessFactors team have done with the SuccessFactors is using technology to drive that bias out to allow us frankly to enable better decisions. Us. So let me move now to really the 4th principle and this is one that I think is critical to how we operate us.
We want to find a way to be more connected to our customers. And this obviously us. It's more than the obvious that we want to provide better service. We want to provide us. A better quality set of products.
What we really are targeting is, how do we become so good in our products and services us. It's so easy to do business with that our customers can actually buy from us digitally, that our customers can actually move up and down their consumption on a real time basis. Us. One of the things that we did at Concur in the early days was when we went after the SMB market, what we said was, what if we got rid of us. The concept of a contract.
And we didn't quite get to that, but what we did do is we got to a 90 day contract. So instead of the 3 to 5 year contracts we were signing the large enterprise, us. What we said, it will be 90 day contracts. What it did is it required all of us in the company to go deliver a product that was so reliable, so good us. That we could make sure that if the customer decided to leave in 90 days, we could still not lose money from that customer.
Right? But us. So when we try to put in policies like, hey, let's make sure that we allow our customers the incredible ease of how they do business with us, us. It actually improves the performance of our company and frankly, we deliver better service to our customers. So when we talk about being connected to the customer, when the way Bill refers to as empathy for our customers.
That's what we're talking about. We want to make sure that no matter what across any of our products and services, we're literally the best choice in the world for our customers. Us. And that's the other objective that we're committed to. So with that, I think it's helpful to put all this in the context of a real customer relationship us and see how we're doing against that set of objectives.
And if you'll join me please in welcoming my colleague Rob Ensign to the stage.
Us. Thank you, man.
Okay. Good afternoon. Man, I want to listen to some customers now. Us. That was lots of products.
Great job, guys. Thank you. It's great to be here today. I'm delighted to provide us. Customer context to what you saw or heard in the last couple of minutes, that Bernd and Steve showed around the innovations us.
To support our customers, I'm going to actually try to bring it to life. And I'm not going to speak about it for a long time. I'm actually going to show you us. Some customers and then we're going to bring it to you up on stage to really, really talk about it. So I'm really proud to do this in a manner us.
Let's surpasses any of our closest competitors, providing customers with a comprehensive, transparent, end to end view of their business and allowing them to be us. And we're going to talk about digital disruption, digital transformation and how SAP is enabling that. It's us. It's easy to agree that all of our customers start their journey in a different place and often differ on the expected outcome. Us.
Through the course of thousands of customer engagements that I've personally been on, we also see a distinct similarity in the elements required for success. Us. These elements make up what we call the business framework that has been shown at least 5 times today. Us. So what I'd like to do is just spend a couple of minutes digging into this framework, but mostly especially in the digital core, us.
Which is represented by the middle section there. Well, now it's no longer the middle section. It's actually the centerpiece, the Infinity model. Us. Here you can see how they expanded core representing continuous information flow that is fundamental to any digital enterprise.
Us. In general, this data flow begins by connecting the world of business processes to the explosion of sources of generating data. Us. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] These connections and the resulting unprecedented abundance of data they create is what makes data management us. One of the most significant challenges in the future.
And as you all aware, SAP plays a critical role in bringing this all together. Us. Helping customers address this data space through HANA, Vora, Spark, Hadoop and other technologies that were shown earlier today. Us. We continue to provide customers with an outstanding analytics portfolio to ensure collected data is wrapped in intelligence to drive smart decisions.
Us. Also, declining cost of technology has enabled many businesses that were not able in previous us to move into a digital world. Many more businesses are now able to focus and implement digital strategies and actually see them come to life. Us. One such example which is dear to my heart is the city of Keita.
Here is a city that crossed 11 municipalities together, created 1 mega municipality us. And has completely digitized the ERP system on HANA and customer engagement and commerce for one purpose, us. To provide the community with an amazing service and use budgets that actually improve the lives of people. And we're going to show you how this looks, Ali created the emergency management system, and you will see the Infinity model in action.
Us. In the emergency services space,
if something goes wrong, somebody dies.
Us. In the
past, fire, police and responders from 6 total agencies couldn't see how each other responded to the very same emergency.
And there was no connection.
No connection, us. Except for the fun. That's a chaos.
That result in chaos meant none of the individual 6 agencies could see the bigger picture of how a disaster was unfolding. Us. The SAP HANA Based System streamlines emergency info from 6 departments into one incident report and then immediately shares it.
Us. Us. So the
city's emergency response system is enabled by HANA customer engagement and commerce, connecting sensors to geospatial and us. And actually managing it absolutely in real time. And it's actually pretty amazing to sit in the control room and watching this live. Us. Customers like the city of Cape Town are realizing that thriving in a digital environment requires more than traditional business intelligence and analytics offerings.
It requires capabilities us. They require machine algorithms, predictive analytics, artificial intelligence, capabilities that allow customers to move seamlessly from data us. And turn these into insights. Further, we continue to connect these insights with SAP Cloud Platform us. Beyond the walls of enterprise, integrate them with partners and ecosystems, which are critical to these customers' success.
Us. We see the cycle playing out in a number of business cases within our customer base. I was asked the question this morning, is it only about us. No. That's the start of the journey.
It's expanding S4 into sources of data, Making the software intelligent, allowing decisions to be made at the point where they need to be made, this is a brand, brand new world. Us. And you can innovate in this world in any place in the world really fast. And so I'm going to roll another video. It's actually 42 seconds.
Us. We provide a core innovation solution for not only each customer issues, but also social issues. Us. IOT solution for transportation safety is the fastest.
Us. The Hitui Sensor Vest is the core element of the new SAP connected transportation safety solution. It measures data such as your heartbeat, us. GPS location and posture in real time.
In this solution, the driver
will have the heater reshoots and then the body information will be collect us. And process in the smartphone nearby. And then the certain information will be sent to the backend system.
Us. Using Pattern Recognition, the SAP HANA Cloud Platform is capable of predicting changes in the driver's behavior, us. Like increasing stress or fatigue, the fleet manager receives a dashboard alert and can then radio the drivers and alert them on a mobile device.
Us. We can catch the driver's unusual movements when he is driving and an abnormality occurs. We expect that this will help us make the vehicle stop safely.
Us. SAP Connected Transportation Safety provides benefits for all parties, a perfect monitoring tool,
us.
Us. So I was beginning my portion of the program today with these examples because I believe that for every customer that you will see on the stage, there are 1,000 more out there us. That we're relying on SAP to bring digital to life and just watching your faces, that's pretty cool to see how we can actually change Perception of people and actually create a really safe world with technology. So that's the power of digital. Us.
It also reflects the power of SAP's S4HANA and the HANA platform coupled with our machine learning capabilities, SAP's Boardroom of the Future, Our business objects analytics portfolio and many other technology tools that integrate completely into S4. Us. The Infinity model represents a never ending process of data collection, analysis and insight us. And action refinement, and I'll use the word action refinement because the difference is you can now react to actions if you have the intelligence and enough data us. So a process that extends to all facets of business where the customer is addressing the customer experience with hybrids us.
Managing the workforce with SuccessFactors and Fieldglass, Addressing Spend Management us. With Concur and Ariba and Advising an Internet of Strategy, an Internet of Things strategy. Us. It is a complete and comprehensive framework that allows customers limitless possibilities. And as the Head of Sales with only 15% us.
Of our customer base move to S4, I feel that the opportunities are limitless for SAP. Us. I share these stories with you because I truly believe you got to feel it, you got to it's got to bring to life and you got to actually imagine what a digital world could look like. Us. These are absolute real stories.
I've sat in these control rooms with people that run it and have seen the changes in their lives. Us. I've obviously been to Japan. I know the bus company. It's only 300 people.
It's doing amazing things. Can you imagine when we bring it to the world? Us. So not all my examples are videos, which I had control over, but I am delighted. I have known this lady for us.
A while now, when I first met her, I was astounded by the innovation that she is bringing to her company, us. Ms. Ittia Sherry Vascon, the CEO of NT Digital. NT, let me welcome NT to the us. So, us.
So, Edithya, thank you very much for traveling all the way from Thailand. It's yesterday, but it was yesterday. We met yesterday. You landed yesterday. You've had a fabulous time in New York City.
Us. It's been awesome. You are Head of Applications and Infrastructure, the CEO of the Inti Digital Business. Us. Just help us understand a little bit about how your business looks today.
Okay. Interesting to say that, say, on participant, us. We are the company in Thailand and we are regional's player. We are the 2nd largest us. So it means that we are fully commodity, right?
The question is, we are commodity, us. Can commodities company use the technology to differentiate yourself? The answer is yes, us. You should differentiate yourself. So that's why for our company, digital transformation is so important us.
Because at the end of the day, Ximen is Ximen, but if you use the technologies to touch the customers, you will understand the customer behavior. Us. You understand what they want. You can feed that information to R and D. And if you can touch the live My customers, us.
You're going to have a different channel that can able to give benefit back to your own channel, which is B2B. Us. So this kind of thing has give the opportunity to the company who so called commodity product. Us. Now on the list, I don't know have you aware or not, we talk about the customer, but how about the other business partner us.
You also contribute to your business. Can you use the technologies to help them to become better in service to you, to your customer, us. Our use of technology to help them to gain more revenue, more or less, the last one is so important, us. Generation. I know people talk about customer, but you may need to aware that the new generations come.
Us. So even in cement business, we're talking about the new generation? Yes.
This is interesting us. Because the business has been built from the old generation, and when they grow old, they need to pass on to the new generation. Us. And the need of the customer in the new generations are different from the past. So us.
If you run the business, have you prepared the model and have you prepared a service that match to your new generation customer
us. So what does the digital economy, digital transformation, digital digital, us. What does it mean to you and your business and what and where does SAP fit into that vision?
Interesting. We believe that digital is us. The core of the transformation for us, and if you want to differentiate, that's the only way. By the way, that Q SAP still has S4HANA. Us.
So we implement SAP S4HANA as our core for digitals us. Because if you want to connect anything, we can connect easily.
But you I mean, you implemented S4HANA us. Quite a while back, I mean, I think you were the 1st company in Southeast Asia almost, right? So why did us. Why don't you jump in so quickly?
That's interesting. Because the thing is, you need the core that can connect to all the things. Us. So at that moment, SAP launched S4HANA. And when we see it, we said, yes, this is the way forward because we need to connect with a lot of us.
Technology, so why don't we implement it? And at that moment, we want to adopt the new technologies and you also launch us. The simple finance version. So that's why we for us, the mindset is clear. We need to transform.
Us. Hello, for 9 months.
We implemented SAP Sohana with 36 SAP model connected us. With the 1 non SAP application within 9 months, greenfield, not upgrade, greenfield. Us. And that opportunity give us to rethink the whole process.
So when you look at business models, different business models change the whole thing?
Yes.
Us. So when you look at it,
I'm certain it was all a bit of roses, everything worked perfectly. How did it actually go?
It's interesting when the new technologies And then when you jump in as a pioneer and you said, yes, let's adopt it, right? A lot of challenge we have because the resources in the us. The country doesn't have the skill, but I need to thank you to SAP because once we ask for help, us. So even the global support, regional support, we jump into it. And then, yes, with the strong partner with SAP, we can able to go live us.
Everything not cut anything gross cold and we thought this is 9 months.
Us. It wasn't about implementing S4, right? I mean, that was just the starting point on the journey. Us. You truly believed in digital disruption.
You believed that there was a smart plant us. That you could connect sources of data to it. And this was the defining step. Why don't you just talk a little bit about us. The journey and putting the whole journey together.
Okay.
When I mentioned about the generation change, it's not only the customer, us. But when we're talking about the generation change in Thailand, by 2,030, we will become the aging society. Us. More than 30% of the population in Thailand will be elder citizens and the birth rate is reduced us. Question would be how could you as enterprise can able to operate with less human resources us.
And that run is a big deal right now. So the things that we are doing, we are preparing the company for future. Us. So if the enterprise need to run the business deal with less capacity of the people of the human resources, us. How could we increase the efficiency of the process?
And if we can do that by automations and by the smart machines, us. The cost reductions will happen and then you will gain a benefit on fighting in the market. So that's why this kind of the idea us. And also the future's problem come, we decided to implement the IoT because the big fan of Siemens us. Require a lot of resources to rent it.
So that's why right now we are under the program and the projects us. To implement the first smart plan in Thailand, applied IoT in there. So it will cover the pre state maintenance, us. Where we were going to share the spare part only if needed, so it will give the cost. And we also create the system us.
For our contractor management, where we know exactly where they are in the plant, we can control the safety, and we will make a transparency between the plant and the finance us. More or less, we will have a smart control room, etcetera. The thing is, us. The technologies is here. Mhmm.
It depend on the business, how to apply it to be most benefit to you. Us. And that's the way we do.
So what are some of the key innovations that you feel will help your business move into us. The next or the future.
It's quite aligned with what SAP predicts as well, the IoT for sure. Us. IoT for sure, because with IoT connectivity with everything you can do automations for the whole process, and the business model can be changed, us. But, because but will help you to increase the efficiency, for the short cloud solutions us. And mobile technology is still very important because that is the channel where you can touch base to your real customers.
Us. And those technologies can able to help you to enable the new business model.
Us. I'm going to interrupt you. I don't think they understood what you meant by the last mile customer. Because yesterday when you told me us. I'd have asked you 5 times.
Okay. That's fine. It really means a customer in the cement business. I mean, what does this mean?
Okay. Us. Normally, for the cement business, you will be enterprise who produce the cement. You send the cement to a distributor, us. And that is your customer.
The distributor will send the cement to retailer and retailer will send the cement to the person who consume it. Us. So there are so many steps that you haven't touched on. The question is, what if you can touch us. To your real last mile, who use your segment, what does it look like?
It will open the opportunity for you to understand what need of the real customer us. And also what kind of additional service that those customers would like to have. And at the end of the day, us. If you figure out that recipe of success, you can able to offer the values, some of the value, some of information, us. Some additional service back to your retailer and your distributor.
At the end of the day, you can able to create a very strong ecosystem. Us. And that's the way the business right now need to think about it.
So if you look at any of these McKinsey reports or any of these reports, They talk about digital disruption. They would probably say that the cement industry is on the slow side of digital disruption us. And that it's waiting, it's raining, no storm yet, it's not a hurricane, right? I mean, it feels like you are in a hurricane already and that you've actually us. You decided you're not going to deal with any storms, you're going to just handle the snow and just go for it.
So what advice would you give us. To companies that are going to start on this journey and they feel a little slow and conservative, what advice would you give them?
Us. You know what, Bonnie, I think you shall not wait until the strong hit you because you don't have the time to do anything. Us. So if you have the time, my suggestion is be the first. Be the first pioneer because the thing is, the time is flatter.
Us. Be brave to do something new. You know, feel fast, feel fast, learn fast, move fast. Us. Because once you get that learning, you get the knowledge, you get the recipe of success, you're more advised to already implement that one.
The competitor cannot able to catch you because you are the first one who will run, right? And I think this mindset us. Chao need to be in the coverage, no matter what size you are, but we need to keep moving us. And I think that one will ensure the safety for your corporate and also satisfaction to your customer where us. I believe everyone want to see the customer's mind.
Itzhia, thank you very much for joining us today. Thank you very much. Us. Thank you. That was great.
Thank you. I'm going to catch up on some time. I mean, what Ittje spoke about, I think, is us. It's really important in the digitization journey. We're talking about connecting supply chains, we're talking about consumers, the end to end supply chains, digitizing it, us.
Understanding data and how to make it relevant for the consumer. In a simplistic terms of the cement industry, the focus was on consumer, us. The supply chain and making it effective thing. So when I say we talk about S4 and we talk about the products, SAP Cloud Platform, us. We have to bring all of these together to create an amazing customer experience and I think you saw that with Centimeters City Cement.
So I want to thank you and look forward to the rest of the day.
Us. Thank you.
Thank you, Roger. Thank you. So we now have
a short coffee break, 10 minutes, and we'll continue at us at 2:55 p. M. Thank you.
Us. Us. Us. Us. Us.
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Us.
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Ladies and gentlemen, please find your way back to your seats. Our program is about to resume. Thank you.
Us. Us. Us. Us. Us.
Us. Us. Us. Us. Us.
Us.
Us. Ladies and gentlemen, we want to continue with the program. Us. Another customer deep dive. Obviously, the coffee has been so good in the anteroom.
It's us. It's my pleasure to introduce Jennifer Morgan, our President of North America here on stage. And Jennifer, you will introduce us. I'm too fast here. Silence.
My pleasure to introduce Jennifer Morgan, President of SAP North America on us. Welcome, Jennifer. We will introduce the customers. And before we start, I also want to introduce the LOB Executives us. We have in the room for additional Q and A later on, Alex Arzberger for Ariba Mike Ethling, SuccessFactors Darren Ruse, S4HANA Cloud us and customer of our hybrids.
And with that, I hand over to you, Jennifer.
Thank you
very much, Stephan. Good afternoon, everybody. Us. Again, my name is Jennifer Morgan. I have responsibility for leading our North American business.
Us. Again, my name is Jennifer Morgan. I have responsibility for leading our North American business. I'm really proud to represent the 25,000 employees we have us. And the United States unparalleled portfolio, it's really the people that make a great company, and Bill talked about that a little bit earlier.
So us. Stephane introduced my colleagues who are here and will be available for Q and A afterward. And I also want to just recognize and thank the Executive Board. We will have time for Q and A at the end of the program, so I look us. And we're going to get right into our panel.
What I love about the customers that you have on stage today, they're from different industries, us. They're from different regions and they're all innovating in different lines of business. So it's going to be a great conversation. But us. What's really interesting is despite these differences, they all have a lot in common and a commonality us.
Live conversation. But what's really interesting is despite these differences, they all have a lot in common. And the commonality lies in the focus us. A very blessed world. The topics that are front and center, growth and innovation, how to enter new markets, new product innovations.
Us. We talked a lot about M and A for growth. How do we get more? Globalization, risk, the C suite, us. The audit committees, the risk committees on the board want to understand how our company is managing through the regulation, the complexity, us.
The localization requirements in doing business across multiple countries in the world. Or how about the workforce? Us. Every C suite right now is focused on the war on talent. How are you going to win this war?
How are you managing your engagement of employees? Us. How are you reaching your talent pools? How are you looking at your succession of your C suite? And technology is a common element across all these areas, us.
Because not only is technology relevant to each of those other areas I just mentioned, technology is no longer just the enabler. Us. It's the driver. Awards in the C suite are looking to CIO, to the lines of business and to technology to drive new ways of doing business. Us.
And so we're excited because each one of these line of business owners and leaders and their functions have the ability to our customers us. To truly empower the enterprise. So now I'm going to introduce our customer panel today. We're going to have some fun. I've got Jim with me from Maui Jim.
I
us. I've got Georgina Jaret from HSBC.
I've got Richard Taylor, who is at the Birchman Group. And I've got Robert us. Jill is from Microsoft, so we're going to have a great discussion. So please join me in welcoming our customers and our panelists today. Us.
Okay. Jim, I'm going to start with you. So Maui Jim, I think everybody here has not only owned a pair of Maui Jims, but has probably us. They've been devastated when they've lost a pair of Magic Gems at the beach, right? And now Jim has just a really cool culture.
It's very innovative. Us. How do you continue to keep that I think you called it a digital Ohana, right, in the midst of all the changes happening in your industry?
Us. I mean, who else wants to talk about sunglasses,
February? Dork.
Us. I think that it's interesting when you think about Maoy Gymbore, business of sort of planes and glasses. We have descriptions
of glasses.
Us. But more than that, we're
in the business
of people.
And most of our customers
reinforce pairs of our
us.
And we really don't think just about the product.
We think
about the lifetime relationship that we end
up having
us
with each of those customers.
So what we're trying to figure out is how do we extend our great customer service. The company was built on this idea us. No matter what happened, we were going to
take care of you.
And 30 years ago, the way
that we would interact with
our customers was us. Really different. It would be a phone call, you might walk in to just a dealer, you might just end up mailing a
product us. Sort of sending it
off into the void, not really knowing what was going to happen
with it
or what the response or whatever. Us.
So what we see is sort of
a shortening of the interaction design and the true establishment of like the gold master. Us.
And when
we talk about our digital ohana,
it's not
just the end consumer, where's our glasses, it's also our retailers. Us. Because the brick and mortar industry has changed so radically. If you speak with anyone that's worked in that side of the business us. And sort of reported earnings last year, they are so concerned with what's happening with their digital business.
And it's going to be the brands us. They really understand how to support those retailers with technology to provide true visibility of customer and to support them in their deployments that are going to be successful. Us. Because we have to compete just like everyone else has to compete. The retailers compete against each other.
We compete against other brands. And we're going to make sure that we have the best technology that's us. Everyone is in that digital HANA to be successful.
So to do that though, right, you just you talked about some of the retailers, us. The B2B business you have, you have
a
growing B2C business. Yes. And all the while consumer tastes are
changing constantly.
Us. So that means you have to continue to innovate much quicker and bring product to market much quicker and get back to the customer much quicker. So talk to me about the rapid innovation cycles us.
Well,
it's really akin to what you'd see almost in the enterprise space, right? You had us. A lot of iron. It wasn't as nimble. And now we keep talking about cloud services, microservices, how we can spin things up pretty quickly.
Us. Well, we think about the same offerings to represent our products. So we have design processes that occur, us. How the styles are created, but then how do you get that messaging out to customers quickly? How do you make sure that they know what's us.
Coming down the pipeline to allow them to do their demand planning
and
to really understand that. So, much like the previous customers up, it was sort of greenfield for us. Us. So we ended up creating an ecosystem of native application for our 400 sales representatives, account executives that service 30,000 doors us. In the United States, we platform with SAP Hybris Commerce in 6 months in the United States and Canada.
Us. And then we have a global rollout that's tied to that. So when we think about deploying product, you can't take us. Months to get collateral and product information management details out to every partner that you have. Us.
It has to happen almost instantaneously to make sure that when that product is ready to hit, that it hits every channel in the most complete way and Everyone has visibility of where it actually exists within the supply system. And then also what's happening predictably, extremely important for us. It's not just sell in, it's sell through us and looking at that at an extremely granular level. My job used to be looking at big aggregate numbers and now the story us. It's very localized and it is hyper specific.
And it has to do with how we can actually capture that information us. And track it in the ecosystem that really becomes of great value because we have partners that are extremely us. And then we have others that are really at the beginning of their e commerce strategy. And so as a brand, we look at our service us. It's not just delivering great product.
It's not just picking up the phone or servicing that account. It's really providing them the tools and The insight that they're going to need to be successful. And I think any brand that's really looking holistically us. How they are going to grow is not just thinking about solving their problems, but they're going to solve their partners' problems. Us.
And it's about building that branching structure and that's where the future is for us.
So you talk about rapid innovation, but then what about rapid delivery? I know you're using high risk, you You've had great success. But now you're doing something pretty cool connecting that through a microservice to Uber Rush.
Yes.
Tell us
about that.
So we had an opportunity to work with Uber us to create a pilot service in Chicago where we have actually enabled a local dealer. So it's not we don't have any owned and operated us. They're all independent or retail chains that carry our product. And what we're able to do is to provide an inventory position us. That would then also allow a consumer to come to our brand website and if they would want delivery within an hour, us.
Within a specific geography, they would have the opportunity to buy that product and it hooks directly through our CAS installation. Us. There is a service call to Uber, driver comes to the door and picks it up. So why is that important? Well, it's important because we do a lot of brand advertising and there's a specific brand us.
We want to connect our customer to the local dealer because that is the first point of support us for that customer. But again, they don't have the technology, the infrastructure, the ability to do that. And we have to be able to provide us. A consistent service level and manage that as a brand. It's one thing to just say, we want to enable us.
Delivery within a specific time period. It's very different to think about like what is that delivery service going to look like us. When the delivery person arrives at the consumer, what happens when the person isn't there or there's a refusal of delivery, all the edge cases. And us. And that's what we think about with our partners in a service like this.
But the amazing thing about this is that we stood everything up and got it running in 3 months, us. Which for speed to market, given the complexities of all the integrations, that was amazing. And so us. When I see the big graph, the big graphic come up there, the things that I get excited about are us. You know what's happening with the platform that allows us an SMB like us to really do things.
And there's like one little section of that graphic that may have been lost. Us. Was the use of Swift as a development language, which is sort of a native iOS language, but it's being expanded for deployment. And the small things like that and the inclusion of Mongo is sort of like a data source. Again, it's a little bit nerdy, but us.
When you're looking at an SMB that may not be expanding into larger infrastructures, even though we do run HANA, we just switched over. Us. Those types of opportunities are extremely important for us because it allows us to do things at scale in a way that we us. Never would have and we can also build on all the things that clients like this group over here would be paying for at HSBC. Us.
I love it.
You've been a great partner and customer and we're excited to see what's next at Maui Chien
and
the pink sunglasses that we talked about.
Yes, those will be coming.
Okay. Us. So we're going to completely kind of pivot here, different part of the world, different industry, different line of business. Georgina, us. You are living in a complicated, regulated, very big world.
You have 45,000,000 customers, 250,000 employees, us.
Okay, Jen. Well, thank you very much for a start for asking me to come and talk to you. We are a relatively
new customer of SAP actually, even though we are one of the biggest banks in the world.
I would hate to us. Actually, even though we are one of the biggest banks in the world, I would hate to say which level we are at because it depends which way you look at us. Us. But certainly in terms of the number of employees we have, we have a lot. And as you say, of our large global reach, which is partly why us.
SAP is a great partner for us because you too are pretty much everywhere. We are in fact in probably more locations. Us. The environment is extremely complex. I'm sure everybody in here doesn't need me to tell you that.
We pretty much are transforming absolutely Everything we do because we have to and because the regulators are expecting us to do that and that is across the industry. It's not specific to HSBC. But obviously, the us. The broader the reach, the bigger the organization, the more you have to do. And actually quite fast and changing any organization of our size very quickly is us.
So partnering with the right firms is definitely the right answer. Yes, I mean, I think it's important to recognize that we are under compliance and regulatory us. Wrigg and correctly so across the workforce, but also across the industry and all the customers and clients and products that we transact.
Us. So Georgina, when we were talking, it was interesting because you're using success factors and around the learning component, you're leveraging that to meet some of us. Regulatory requirements and the engagement and training of your employees. I want to hear a little bit more about what you're doing there. We also said, us.
We're doing that because it's something we need to do, right? But at the same time, we're also innovating and transforming in other ways because it's the right thing to do for the business.
Us. Yes.
So talk to me a little bit about the regulatory nature of why you're doing this and a little bit more about why you're doing it for the good of the business and the workforce.
Us. So I think the interesting learning between the 2 organizations or the industry and SAP around learning is that for us learning is something that certainly under U. K. Regulation, we have to us. Put our staff through and they have to comply with doing those courses on time.
And if they don't, they get financially penalized for us. Failing to do their courses now. That obviously drives very interesting staff behavior because when you are a trader, that's quite a lot of money. Us. 100% of your variable pay is quite a lot of money.
So the learning platform isn't I suppose it's more akin to the pharmaceutical industry actually where us. It's mission critical that the staff are trained, but this is under the regulatory regime. If you look at the broader work we're doing with SuccessFactors across the HR suite, us. That's not driven by regulatory change per se. It's driven by the need for the organization to move its technology to a brand new, very innovative, forward thinking platform.
Us. And being a bank, we would never ever have HR technology at the core of our capabilities. It wouldn't be the core of what we do. So why would we try and do that in house? Us.
It's kind of one of the concepts, I suppose.
So I was actually amazed at the number. So you have actually completed more employee learning courses than any other SAP us. About 9,000 per day,
I know don't blame me for that. That seems slightly insane, I know. But, yes, we do huge numbers. And being somebody who sent us. These training courses on a regular basis, they do seem to come around rather quickly.
But it's because everything changes so quickly and because everything that we have to train the staff on is very, very complex us. And they have to understand it and they have to put it into practice at every moment of every day that they come to work. So it's mission critical and us. And it's something the regulators expect of us, hence the fact that we enforce it upon our staff.
And so some of the other transformation that you're doing in addition to kind of the learning aspect, talk
us. So we're live on learning, which is why you have those superb statistics. And it does make me question if we are the biggest user in the world that we might need to look at ourselves and maybe we've us. That feels yet more complicated. But anyway, we're also looking at the platform for the rest of the HR transformation.
Us. So we're in the process of that program right now. We're right in the middle of it. It's probably one of the most insane things I've ever taken on, but there we are. Us.
I'm aging by the day rather faster than I otherwise should be. But we are doing basically in 2 to 2.5 years of full move from an in house ERP HR us. We've spent 25 years over complicating to Mr. Erdling's SAP SuccessFactors product, which we are religiously trying to us. On a vanilla basis, which means that the bank has to reverse engineer itself onto the platform, which is easy to say and very difficult to do across 71 countries.
Us. We passionately believe that their way is the only way they can do something. So, I guess some of the weight for me of working with your company us. He is saying to them, listen, 5,000 clients on that platform cannot be wrong, and we cannot know better than every other organization in the world how to do this HR us. Which broadly is the same between one industry and the next.
So yes, I suppose that's what we're doing. And the rest of that transformation, you could argue, is not regulatory driven and therefore us. It's about simplifying, standardizing and globalizing our model.
Okay. So we talked about all this regulation, us. Size and scale, but yet you chose to go to the cloud. It can't like, is that I mean, how do you make that happen?
Well, so that's an interesting us. I mean, the regulatory issues we're going to the cloud is putting the personnel data in the cloud. That means we're giving it to SAP into their data centers. Us. Now that makes organizations like ours go into a spin of panic because obviously we're very, very happy to keep everything in the walls and own it all ourselves and make So there's an emotional move there.
There's also a sort of regulatory and compliance move where certain of the countries, and I forget the statistics around 20 or something. Have to have individual participation agreements with SAP. So we have to have legal agreements directly from the country us. So we're breaking some barriers here. The upside is about the speed of us.
Delivery, we could never do that that quickly in house. And also the innovation where we have to keep running with you. We can't stand still and go, We'll stick on this really awful old version because we can't move. We have to keep going. So it will be an interesting test.
We're not there yet. But we'll see.
Us. And you have a long history with SAP. So
not yet.
Not yet.
Not yet. We like that answer to you, Regina. You really could answer. Us. Talk to me about why you chose to partner with SAP.
How did that come about?
I mean, the process that we went through in typical HSBC us. I was very rigorous, so we go through a very active RFP process whenever we do something like this. I wasn't actually personally involved in that, us. I can't take any credit for the decision. However, we were very, very religious about looking at which of the products had the proper coverage.
We needed basically a full suite for an HR capability us. We're one of the few organizations in the world that has a global platform actually. So we already use, although we have customized it, us. I kept the correct word there, to within an inch of its life. But we do have a global platform everywhere in the world, which is quite unusual for an organization of our size.
So that makes it easier to move from one to us. Yes, we went through a very rigorous selection process to come out with electing safety. No, we're glad you said.
Thanks, Regina. Pleasure.
Us. Okay.
So I'm going to move over to you, Richard, the Beuchman Group. First, tell us a little bit about Beuchman Group.
Yes. Good afternoon, everybody. So us. Beutel is a fast growing international consultancy firm. So we operate out of the U.
K, Europe, us. Middle East, Southern Africa and South America. And in terms of our strategy as an organization, we grow through the acquisition of businesses and international expansion. Us. And that's part of our ongoing strategy.
I think from when we started, we very quickly moved into 5 continents. And us. That's what our international element is very important to us, yes.
So you're growing.
Yes.
And we're fortunate at SAP. Us. We really count on and feel very blessed to have a very vast partner ecosystem. So we love when our partners us. Not only use our technology, like what you're doing with S4HANA Cloud, but also bring that to our customers and bring that value to customers.
Us. Talk to us a little bit of how you're using S4 on a cloud.
Okay. So, whether it's internally or with our customers, we talk about us. Removing friction. So friction is the sum of all those things that makes doing business today a little harder and more expensive than it should be. Us.
Yes. And so our IT strategy is very much focused around removing friction. Yes. So there's 3 key elements to it from our perspective. First of all, us.
Scalability. So we need a platform that is robust, secure, easier to implement, easier to maintain, us. Scalable with a lower cost of ownership, Piyam. Secondly is from us. From a business operations perspective, we want to have a cloud first approach us.
So that all of our core operating processes are in a Software as a Service environment. And so what we've done is we've chosen to put S4HANA Cloud in the center of that us. With SuccessFactors from an HR and people perspective and Concur from an expenses perspective. Us. And the reason we did that is because we see that as being a truly integrated cloud solution, which is important from our perspective.
Us. Thirdly is we need to innovate from a products and services perspective. And so it's important for us that we keep that core solution as us. As planned, it is possible. At the end of the day, that's going to keep our cost of ownership down to a minimum.
But we
need the ability to be
flexible to us. To innovate around the edges. And so we're using the HANA Cloud platform from that perspective, integrating it into S4HANA Cloud. Us. And if you look at it from our customer perspective, if you stand back a little bit and say, what's happening with a lot of our customers.
Us. So whilst their business models are different and the challenges they're facing are quite different, actually, a lot of the us. There's a lot of similarity, yes? Organizations need a platform for growth, a scalable platform. They need us.
A core solution which is efficient and effective in delivering their underlying operating processes, and they need the flexibility to innovate.
Us. And as a professional services company, people are your greatest asset. So you also are using SuccessFactors, us. I believe, right?
That's right.
Very different size and scale than Georgina at HSBC.
Tell us a little
bit about how you're leveraging that in areas of focus us.
Yes. As you say, I mean, people we are a people business. And our people are also working anywhere in the world at any given point in time. So us. SuccessFactors is quite an important part of our solution.
And we're using it from a core HR perspective with Employee Central and also us from a talent suite perspective. The 2 sort of key elements to that for us is really around talent acquisition, so recruitment, onboarding us and building and maintaining talent pools. And secondly, it's really around engaging our teams, us. Especially when they're working in quite diverse environments in terms of different geographies, etcetera, in different projects environments. So we're this year moving to the continuous performance management us.
Excellent. Excellent. We're excited to see your growth and where you're headed. Thanks for being with us. Okay.
Let's move over to Robert at Microsoft. Us. So Microsoft, awesome company, awesome customer, great partner of SAP. We're doing a lot together. Us.
When you look at your business, Robert, right, the device business, the Surface business is growing in double digits. It's a huge part of your business. Us. And you're innovating in a lot of different areas. Just tell me a little bit about what's happening in this area of the company.
Yes. Well, Microsoft is us. Becoming much more purpose driven. And you mentioned the story about your kids playing Xbox. And our mission is to us.
Empower people and organizations to achieve more and maybe your kids are achieving more.
Yes. You've empowered my children to us. And way too much money
on it.
But seriously, I mean,
I'm looking out in the audience. I see Surface devices. I see Microsoft devices. 4 years ago, that business didn't exist at all. We us.
We created a new category of 2 in ones, which you now see everywhere. We've got hollow ends, surface hub, 85 inches us. Touch capacitive devices, my job as CTO for the supply chain is build a platform that allows us to connect wherever those devices are made to wherever customers are us. And to be flexible and elastic for up and down. And so, when I think about the complexity, so we serve 6 channels of us.
Our own direct channel, our e commerce business, we have 116 brick and mortar stores, we have big box retail, we have distributors, we have enterprise and We needed a platform that allowed us to be really flexible and agile as we us. Went out and did that. So, we really reimplemented SAP at Microsoft. When we first implemented SAP, it was really around our software perpetual licensing kind of business. And us.
When I started Microsoft, we were still punching disks. And so it's amazing where the company has come. And so, us. So, SAP has been a good partner because of the agility that we've been able to build around the platform and then obviously taking advantage of, I think the us. Great complementary nature of the technology that Microsoft has, whether it's Azure, our Power BI, our Cortana Intelligence Suite, and we wrap that around us.
So you mentioned we've done business together for I think we tabulated it was around 25 years or so. Us. But when you looked at how you were going to innovate on the supply chain, those new areas of the business, what were the traits you were looking for? What had to be different us.
Well, I was skeptical at first. When I was given the task of us. Really creating this platform for our future. We called it our digitized supply chain. So taking all of the data, connecting our customers back all the way to the point of manufacturer, us.
How do I create a platform that allows me to I don't know which us. So, our job is an innovation supply chain. So, Microsoft really isn't in a business of huge volume, pushing huge volume. It's about driving innovative product categories. Collins is a very good example.
It's something unique in augmented reality. We're putting a bunch of software like Windows Holographic to actually support us. And so where Windows is going as a platform means that the device is an entry point, basically a portal to those services. Us. And so Satya challenged us to say, we don't know what product we're going to build.
We don't know what volume it is, but give us a platform that's going to allow us us. To do that and keep driving innovation and not allow the operation, the supply chain, our supply base to constrain us. And so it was really important for us to connect that network of suppliers. We're using Ariba around the edge. I think we've got, us.
What is it, dollars 3,000,000,000 now flowing through Ariba? We've got $10,000,000,000 or $15,000,000,000 of direct spend. So we've got a lot more potentially to go and onboard that.
Us. And that's since when? That's since you were saying?
Since September. So we've onboarded I think 37 key suppliers. Us. And the challenge that we have in the supply chain is that we're not a typical supply chain like a Dell or an HP or us. Consumer Electronics, it is we're generally given really tight timelines, really tight dates.
We have to spin up the supply base. We have to go qualify these suppliers. Us. We have to build those supply chains into those 6 channels that I talked about. Very different products to Xbox is very different us.
Product and 85 inches Surface Hubs that you see on CNN, different customer base, different channels, completely different manufacturing process. Us.
And how has the innovation both the innovation and the pace been working with SAP as you implement this?
Well, yes, that was where he's going. So us. At first, the old reputation of SAP is an old, pretty slow, old line enterprise software company. Us. And being at Microsoft, we have a lot of software engineers.
And the first thing that people want to do is go build everything. And so what I have to do is determine what's really core to us us. In our operation and what where is their competitive advantage in selecting someone like SAP. Us. But the
key thing is they have
to move at the same speed we do. Otherwise, they're going to be a constraint for what we want to spin up. And so us. That was when I challenged SAP in Palo Alto about a year and a half ago to say, Dave, look, we're I need you guys to behave like a startup. Us.
And together, if we co innovate and we do some things, we can go deliver some really innovative things. Us. An example, our product team said aimed at our Xbox group actually. So, we want to build custom controllers. We want to have millions of different combinations, us.
Colors, buttons, people can customize these controllers. So we enabled used SAP, Core and Ariba to connect our supply base to allow real time commitment us. To say, hey, is that color available? Is that resin available? And we create a unit of 1.
So we create a build material and a product a us. Production order of 1 and then ship that all the way directly to the consumer. And so that has been a good success story and that's using us. Base functionality. So we built a service basically that allows us to onboard any number of products.
So now we have Surface looking at doing it with some of their us. Accessories. It just gives us a capability as a supply chain. So now we can become a competitive lever in a way, yeah.
Us. That is an awesome story. I know Bill and Satya are spending a lot of time together and we're doing a lot across the company. So thanks for sharing that story. Us.
Okay. I'm going to close this up before we move to Q and A, and I'm going to hit you all with a little bit of a surprise. I call this the lightning round, okay? Us. And it's just giving me 1 or 2 words.
And the question is, what about SAP and working with SAP us. Gives you confidence and trust in SAP as your partner for the future. Us.
I have to say it's innovation and agility, and I would echo what Robert was saying, this us. Preconception of it being sort of slow moving and that's not the impression that us. I've had in my experience of working with SAP and SAP High Risk. We're a small business and we need to move and react quickly and there's been a us. Commensurate and responsive behavior from the partners that we've had, and that's of critical importance to us.
Awesome. Thank you, John. Us. Sorry, Gina, how about you?
Jim Toddley still.
That's what happens when you go first.
You can use it in there.
Anyway, us. So, Seth, for us, it's all about pace and innovation really and partnering with a company that provides us a proper service.
Us. Relevant businesses thrive, yes. And I would say it's us. I strongly feel that SAP is now more relevant than it's ever been. And I think that's a really important part us.
Of partnering from our perspective, both in terms of the customer and implementation perspective. Excellent.
Thank you. Us.
I think for me it's 2 things. 1 is we have a relationship. So there's an amount of credibility and trust that's been built over the 25 years. Us. Secondly, I think SAP has a point of view.
Increasingly, I think there was a lot of themes up here. Increasingly, it's about taking the us. Our processes and running standardized them. So, there's not a lot of strategic differentiation and figuring out a unique procurement process. Us.
But you really want that stuff just to work. And increasingly, you're going to want that to be automated. And you're going to want to drive machine learning. You're going to want to get people out of the way. And us.
And so what we're doing is we're looking at where to strategically use SAP at the core with what they're really good at because we trust them
us. And
we're looking at where we can get our people to focus on more differentiating activities.
I love it. Thank you very much. Let's give a round of applause to this panel. Us. So we're going to set the mics up for some Q and A.
And while we get those ready, I want to turn to my colleague, Darren White Stearin. This morning, you had some discussion around everything we're doing with S4HANA and the class. I wanted to us. I'll turn it over to you to spend a couple of minutes giving an update about our plans
for 2017.
Some discussion around everything we're doing with S4HANA and the class. So I wanted to us.
Thanks, Chen. So this morning, we spoke quite a lot about the launch of S4HANA public cloud, which is our ERP solution position us. In the enterprise space, so for organizations with over 1500 employees. Our business by design product is aimed at lower segments under 1500 employees. Us.
And this new product is really about bringing next generation intelligent ERP to the marketplace. So we've worked really hard to bring to market new capabilities us. Around machine learning, around embedded analytics, around our new digital assistant, which is called SAP CoPilot us. Into the product to really provide transformational capability for organizations who are looking to innovate in 2017.
Us. Excellent, excellent. Thank you, Darren.
Thanks, Jay.
So I would like to invite the audience to not only ask questions to our panelists, but we also have us. Our line of business leaders here are Carsten Thoma, who leads SAP Hybris Mike Edlings, SAP SuccessFactors us. It's Stansberger, SAP Ariba. And as you just heard, Darren Lewis with SAP S4 in the cloud. So can you get a microphone over here?
Us. You want me
to stand up? I'm Walter Pritchard with Citi. I guess question, I'm not sure who to direct it to, but maybe Georgina, since I think we know some history of your company. You have a high profile board member from a competitor. I'm wondering, generally, us.
There's this idea that maybe the application suite is refragmenting to some degree that it was a very kind of monolithic, went with mostly one vendor and us. Consolidated for a number of years and now maybe cloud and microservices and so forth has enabled the refragmentation. I'm wondering if you could talk about us. If that's happening in your environment or if it's going back the other way, I'm just curious if you could comment there. That'd be great.
I mean, I'd hate to talk as if I us. The CIO of HSBC because I'm definitely not. So, however, the move to the cloud is definitely something that's happening with us. And my personal view and it's My personal view is that we're pretty agnostic as to who the provider is. It's all about the product.
It's all about the relationship and it's all about the Innovation and the offering. So yes, my view is it's moving. It's moving us. From a more limited set, and that's also shown by us taking stuff out of the organization and considering taking service from external providers.
Us. Anybody else like to comment on that, Ron?
I think it's ultimately about choice, right? So I think at the core, you've got us. The core process engine is really solid, especially if you look at where it's going with HANA, which us. Supply chain anyway is a huge optimization problem because at any given point in time, you've got variables changing, you have suppliers, you have fires, earthquakes, us. Snowstorms, all these things that are need to be balanced in real time.
And so the engine of being able to connect demand back to the points of Apply and then optimize, so against variables because you still need to maintain margin, you don't want to expedite, like all those things are really powerful. Us. But then also the ability, like for us anyway, you saw that SAP has a lot of their own analytics tools. But us. Microsoft, we have Power BI and a lot of our own Azure machine learning capabilities.
So, we're able to utilize our own capabilities us. There's still leverage, I think, the power that SAP has with the core. And as well as things like the Ariba network side, I think that we're underselling a little bit us. The power of this connected the Facebook of business, so to speak, because if I can get all my supply base us. Connected on this network and my downstream demand partners and be able to bring in the demand signal up to supply, us.
That creates a capability to be smarter, faster, essentially, because now I can say, hey, here's where this demand is coming in. Here's where I'm seeing supply disruption. How can I make a commitment? Us. And where we're at, we compete against Apple, Samsung, everyone else for the same supplier, same parts.
And oftentimes, we've got to be right there first us. And make a commitment, sometimes $1,000,000 buy right there. And so creating that us. Information flow, making it faster is really important for us. So I think it's not really about fragmentation, it's about choice.
But really us. Looking at where the core of SAP is for us anyway and how we're leveraging that.
Thank you. Another question? Us.
Sure. Richard, you obviously practice what us. In terms of deploying SAP software yourself, can you maybe compare and contrast your experience with the public cloud version of S4? Us. How long it took you to deploy it, the level of functionality, say, relative to the on premise suite.
And I would expect it's probably a little more limited functionality today, us. More suited to a professional services company like yours than the on premise alternative.
Okay. Yeah, sure. Us. So we purchased the Enterprise Management Edition, and we're implementing the Professional Services Industry Solution. Us.
So our initial scope is 3 legal entities. We started the 1st legal entity we started the project in October last year and we went live with the 1st us. Just before Christmas on 23rd December, Young. At the moment, we're focusing on the second and third and integrating with SuccessFactors. Us.
And then following the 17/02 release, we'll then implement Concur. So you're correct in the sense that we're using the Professional Services us. Industry Solution, that was one of the first industry solutions available in S4HANA Cloud. So that makes sense from that perspective. Us.
One of the core reasons
that we
want to go with software as a service us. As a principle is the continuous innovation cycles, yes? And so we are a bit of an early adopter from an Esplanade us. The innovation cycles are going to be significant, yes? And we can see from what's coming out this us.
A release in February and what's planned for May. They're a big jump forwards. There's quite a big difference between us. The previous sort of on premise private cloud sort of implementation approach versus what's happening with the S4HANA Cloud. First of all, there's us.
A big fit to standard as a core principle. Now from my perspective, that is very, very important because I don't want to mess around with that core solution. Us. I wanted to be a standard, as you're doing in HSBC, a standard as possible because that's actually how I keep that working efficiently and effectively and enabling us. SAP to worry about that problem and making sure the innovation for that product continues.
And our expectations us. Hi from that perspective as well, yes. But so you've got the fit to standard element, which means you don't need to go through us. A long winded sort of blueprinting exercise, yes? And from a configuration perspective, it's far a simpler configuration.
So it's us. What's SAP called guided configuration? So in actual fact, you see the project timescales, us. Budget, etcetera, for implementation massively reducing down. And we were discussing this in the earlier sessions this morning that us.
If you look at the past, the critical path was around technical and functional work. Now actually the critical path is around us. People and process change and the business adopting the technology.
We have time for one more question.
Us. Thank you. It's Adam Wood from Morgan Stanley. Just wanted to ask
a little bit about integration of the technologies. Us. One of the big debates has always been between standalone applications, best of breed and then the suite approach. Obviously, SAP has us. The core and it's bringing out these new applications that many of you are running.
For those of you are running the core suite and some of the add on applications, could you maybe tell us us. How important was integration to that decision for you to take both? And in terms of the quality of integration, where are we and where would you like it to go to?
Thank you.
Us. Well, because we were an early adopter of SAP, I think we implemented in 'ninety five, us. We've kind of come up and we have this on premise version and we have a lot of core financials that sit there. And so us. We have a fairly complicated environment as well because we wanted to run on a single instance of SAP and then run on SQL us.
So that we could show customers like, look, you can run huge enterprise workloads on a single instance on SQL. And it wasn't always that way, like we worked with SAP to get it us. To that point, so that was Bill Gates and Plattner early on made that commitment to get our products to work well. And so we have this complication. Us.
And the way I see it is really we can create a bridge. So for supply chain, I want to leverage S4HANA because that's for me where all the functionality is going. Us. I want to leverage Ariba as a network. And so, that's something that I've asked SAP to really step up us.
And build that bridge. In fact, Bill and I were just talking about that this morning, because I think that there's a lot of customers. I think Bill said we've got 70% of business transactions us. Going through SAP, but most of them are on prem, especially old buying companies and they have to be a really good reason for them to want to invest us. And the new thing.
And so I think that SAP is going to build a path for those customers through this integration, especially in their core financials. And then us. Over time, you'll see the functionality all moving to the cloud because it will just make sense. It will make financial sense. To do it, you don't need IT departments.
Us. You'll have very solid cloud infrastructure, lights out support. So for us, it's about this kind of phased us. So we're taking Ariba, which is in the cloud. We have IBP, which is in the cloud rain on HANA.
We've got these features around. And us. The big one for us is going to be, can we get our transactional engine there and will SAP then provide that bridge back into the on prem financials? Us. Because then I think then companies will say, wow, there's killer applications here from a business function.
And by the way, I'll have to invest and lift and shift us. All of that core infrastructure over time. So that's what I'm excited about is being able to bring it along. And we think that's probably us. 3 to 4 years, I think.
SAP said by 2025, they want to kind of move there from ECC into S4HANA. And so, us. We want to help
do that.
Thank you, Robert. Jim, Georgina, us. Richard, Robert, it's been an honor and a privilege to have you with us today. And for everybody in the audience, thank you so much for investing your time. I'm going to turn it back over now to
us. Us. Thank you, Jennifer. Thank you. Thank you.
Thanks very much. Thank you. Thank you. Us. Thank you.
I'll keep my introduction very short. A very important element of the day is, of course, the financial framework of SAP. And our us. Last presenter for the day is our CFO, Luka Mutisch, who will walk you through the financial model, including an update on increased transparency in our segment reporting as of Q1 2017. Luca, the floor is yours.
Thank you. Thank you, everybody. And special thanks from my side as well to the customer panel. Us. It's really incredible how many great insights and ideas you can get from customer examples.
I certainly took some with me. Us. Some of my Board colleagues will probably be able to guess which one I like most, but us. It's true. We often try to save the best for last and the best obviously is customers and finance.
What better us. Elements could we have for the end. But of course, when you go last, you have to somehow try to keep emotions high and keep us. The energy level high. So I thought about this a bit and of course it's also important that my Board colleagues us.
Keep the energy level high. So Bill, you won't like this, but you will have soon emotions as I want to really have a call out to all of my friends in Boston us. I will see you tomorrow for my roadshow there and congratulate them from the bottom of my heart on a really epic us. Now Bill is a Jets fan, so I have to apologize for this, but I think Why do I mention this? Because a, I believe Epic is indeed a fitting theme for what I have the privilege to cover today us.
And because there are similarities but also differences to what the Patriots pulled off last Sunday, us. What is great about SAP is that indeed I would say we are a tremendous example of a successful business model transformation. Us. In the first half of our 10 year plan that Bill laid out in 2010, I think we have done better than the Patriots. We definitely us.
I have beaten our initial expectations. We are a strong, very strong growing player in the Cloud. We Continue to have a resilient and solid core business with hiring on all cylinders, but I'm equally convinced that the best us. As in the Super Bowl final is actually yet to come in the second half and that we can accelerate from this already great performance going into 2020 us. And then there will be an overtime for us as well, because life for SAP will continue in 2021 and going forward.
And I believe we will also be a Poise to Win in the overtime. And I want to tell you why from a financial performance perspective, this is what you will see. Us. And I have 3 very simple themes for you this afternoon. And those themes are around growth, predictability and profitability.
Us. And in all of those you will see that I will use the word commitment a lot because this management team us. Is absolutely committed across all of those dimensions, growth, predictability and profitability to drive us. Truly stellar outcomes and long term sustainable value generation for you, our shareholders and investors. Us.
So let me get into this and start with the growth theme. SAP is unique in our industry us. And Bilt caused this the great trifecta that SAP has been able to pull off and that we command very strong growth in the cloud, but we command this growth without it us. Going at the expense of our core license business. And when you have listened to the presentations from Bernd and from Steve, us.
You will understand why because we have an extremely synergistic portfolio. We have complementary assets that really us. Help customers to drive end to end digital transformation as we have heard from the customer panel and the example, that Rob hosted in his session as well. Us. So, of course, the question then may be, will you be able to sustain or even accelerate that strong growth in the Cloud.
It was the engine of very strong and fast expansion of our business for the last few years. Actually for the last 4 years we have been growing at greater than 30% organically. Us. We have had a strong backlog growth as Bill has alluded to and the answer is absolutely yes. Why?
Because we have strong us that are operating already at scale where we continue to innovate around Concur, around Ariba, around SuccessFactors, but equally importantly, we don't stop us at harvesting that innovation that we have already at scale. We innovate in new areas. We have fast growth businesses. Us. Think about the CEC portfolio, think about hybrids in the Cloud, these are assets that grow at a much faster pace than our average us.
And it's already operating and starting to get into scale. This is a triple digit business actually for us in the Cloud already. Us. Think about the HANA Cloud Platform, sorry, the SAP Cloud Platform, which is the next of our cloud assets that will reach this triple digit million us. This year actually already, I'm convinced about that.
Think about analytics in the cloud, business objects cloud, us, which is a solution that I'm extremely happy to use inside SAP to power our digital boardroom, which has seen phenomenal uptake us in its 1st year of existence. And next to that, think about the HANA Enterprise Cloud, which is also an us. Extremely positive business which also grows faster than this. Because of all of this new innovation that we are having in the company, us. There is no doubt that we will continue on the growth trajectory that we've seen in the past few years in the cloud also going into the future.
Us. Actually, to call out a secret, even after 2020. But we equally have a very strong and resilient core business us. And we will continue to have this resilient core business also for the years to come. S4HANA is a truly a groundbreaking innovation in an area where many have thought it cannot be innovated anymore.
It allows you to completely, as we have heard from some of the examples, us to completely transform an enterprise and with its industry specific capabilities now being rounded up, it's poised for even further growth in the years to us. Yes, of course, in the core, there are areas that are transforming to the Cloud and we are actively pushing and driving this transformation because we believe we can win in this us. This is the areas around HR. This will be in the future also to a slowly increasing degree areas like analytics. But us.
Overall, we have become way more confident as opposed to the time where we devised our original midterm ambition us around S4HANA's ability to uphold the core and uphold licenses at a very high level. So we don't project any more high single digit us. Declines as many of our competitors would love to see, because they are actually declining in double digits. Us. We believe, and that is, I believe, a prudent assumption that until the end of the decade, we will see at maximum low to mid single digit declines in licenses.
Us. We believe that we have an opportunity to even better than that. Actually for a fact in the last 2 years us. We have been better doing better than our original expectations and we have been seeing growth, in on premise licenses even. Us.
If you pair this with the fact that our support business remains tremendously resilient, we see us. A very, very high renewal rate. Now for many years, despite the fact that we have the Cloud transformation, ongoing, us. You can see 2 things. A, of course, that the complementary nature of our portfolio is true and therefore, we don't see us.
A huge cannibalization effect in terms of support revenues. But you can see B as well the stickiness of our solutions and the customer satisfaction us. That's why we have extremely high renewal rates with a net renewal rate of roundabout 96% as we shared at the last Capital Markets Day last year and that is after migrations of customers from enterprise support to product support for large enterprise because they buy us. More licenses and have become eligible that is after migrations to the Cloud as part of our Cloud Extension Program and then weighted average maintenance rate of 20%. Us.
It's easy to see that even in a declining license scenario, support revenues and hence the combination of software and us. Revenues will continue to grow. And that's why as a strong commitment by this management team, we will see us. Until the end of the decade, high single digit cloud and software revenue growth for SAP as a Group. Us.
Now let me come to the next theme and to the next commitment. It's a commitment about the growing predictability of our business overall. Us. Of course, the strong and exponential growth in our Cloud business as well as the great resilience of our support business us. Inevitably has led already over the course of the past few years and will continue to lead to a growing share of predictable, highly us to the recurring revenue streams within SAP.
That's a combination of Cloud and Support revenues. We are already at more than 60% us. Revenue contribution of these 2 revenue sources until 2020, we will be at up to 3 quarters of our total revenue being based on these revenue sources. Us. What does that mean for us?
Yes, of course, it means that we will have less volatility in our revenue performance. Us. It will be more predictable from a top line perspective, but it equally means that for us from a planning perspective, from an investment perspective, us. We will have much better line of sight in order to make investment decisions because we will not face an us. High risk is in the past through more one time revenues or upfront revenues to not know exactly how we will be able To end up in the year, so this is for me from a CFO perspective of course an extremely valuable feature of our overarching business model transformation.
Us. And hence, the second commitment that I want to give on behalf of all of my colleagues here is that we will relentlessly push us for maximizing the predictable revenue ratio in the SAP Group. We will not sacrifice us. Neither the Cloud revenue growth nor the support revenue growth for maximizing short term upfront revenues. Us.
We believe in the power and we believe in the value generation that is connected with this shift towards more predictable revenues. Us. So we are all in, we are leaning into this and we are very, very confident that this move will of course continue as well in the overtime after 2020 us. And we'll only amplify as an effect. Now let me come to the 3rd important element and that is the point about profitability.
Us. So let me start with a clear statement. SAP has always been committed and very much focused us on driving its business model transformation while continuing to deliver profitability and profitable growth for the company. Us. That's why we have had no single year during our business model transformation in which operating profit would have declined.
We've actually expanded upon it. Us. And we are reaching now a point where we have reached scale in our Cloud business to an extent that we will see us. Especially as of next year, when our one time investments in the Cloud to make us even more efficient in this business us. That we have highlighted before have run their course to see exponential increases in the efficiency and the gross margin contribution us of our Cloud business.
We have already reached a point where Cloud, despite of a tremendous revenue mix shift that we are seeing, us. In 2016, we were at 14% revenue contribution of our Cloud business. In 2020, we will be at almost 30%. Us. But that this strong revenue mix shift effect does not have a reducing effect on cloud and software margins in total.
Us. And this effect of increasing cloud and software margins will only amplify itself once these investments have run their course as of 2018. Us. And you see our targets for 2020 here. We are shooting for a tremendous improvement of our gross margins across all of the business models that we are running in the Cloud.
Us. Our HANA Enterprise Cloud Business, which in 2014 when we started was heavily dilutive to cloud margins but also to company margins Has broken even in the second half of twenty sixteen at a gross margin level. Guess what? In 2017, us. It will already have a very, very decent gross margin contribution.
Next year, it will start to have a positive operating margin contribution for us. As we march to 2020, it will actually be quite accretive to operating profit. And our us. Software as a Service, Platform as a Service as well as Business Networks assets will climb up to 80% gross margins, which means us. At this point, there will be exponential absolute operating profit contributors.
Us. Of course, we are not there yet. As I've said, we are investing currently in a converged cloud infrastructure. We're investing in data center consolidations to be more efficient in our cloud operations. We We are migrating away from legacy databases to our HANA database platform for our scale assets that have been built us on 3rd party databases and this is in 2016 2017 resulting in dampening effects.
However, all of these investments are making us fit to see this exponential gross margin expansion that I've been highlighting. Us. And we will provide you with even further transparency as of this year in how we are doing in this respect. I'm happy to announce that we will, as of Q1 2017. Change the way how we present our segment reporting so that in our so called Application Technology and Services segment, us.
We will break out separately the revenue contribution, the expense contribution and hence the gross margin performance of both the IASS us as well as the Software as a Service Platform as a Service Business. So we are very confident that you will have all of the transparency us. To track whether we are following through with those commitments that I've shown to you on the last slide. But it's not only us. In fact, we will improve across all of our business models in terms of efficiency and hence the cloud gross margin will improve dramatically by 8 percentage us until 2020.
We actually see that we still have great potential left in our software and support business to further increase its efficiency as well. Us. In 2015, we gave a rough target that by 2020, we want to be at an around about 88% Software and Support us. Quite frankly, now 2 years later, we are already at 87.4%. So I believe this us.
It's becoming a more and more conservative target, and we should be able, if we are focused on this, to do much better, than this. Us. Why is that so? Because a) the relative weight of support revenues as a total of software and support gets bigger us. And B, our share of expenses that we have to pay to 3rd parties, for example, as royalties for our databases us.
It's getting smaller and smaller as the share of HANA based licenses that we sell gets bigger and bigger. Us. So in combination, while of course the mix between software and support and cloud revenues will dictate The ultimate cloud and software margin, if you have both elements so strongly increasing, us. Of course, it is very, very likely, if not certain, that the cloud and software margin will go up. Services was in 2016 us.
The only reason actually why the total company operating margin was not already seeing the trough and was not starting to increase again. Us. Let me be clear, our services business operationally is already very healthy again. We did a great transformation of that business in 2015. Us.
We see that billable utilization is at a very high level. We see that the underlying performance in terms of services bookings us. It's trending upwards. However, we consciously engaged in a small number of high profile co innovation projects us. Customers in Asia that have resulted in quite a number of investments that are booked in the services business that are dampening the margins still.
Us. However, these projects have now run their course. They are ending in 2017. And so we fully expect that we will see an upwards trend of our services margin again. Us.
We will certainly not achieve the traditional margins in the high 20s or even 30s for our service business anymore us. Because that business has transformed to the cloud as well nimbler, smaller, faster implementation projects. However, I am very confident that we will see the margin trending up above the 20% mark again. And this year, we should definitely see this mark us with the projects running out. So if you take a look at this and couple it with the fact that our cost ratios us.
We'll also improve. Our R and D ratio after a period of heavy investment is expected to us. Slightly trail the performance on the top line and hence the R and D ratio will come slightly down over the years to come until 2020. Us. The sales and marketing ratio is expected to grow in line with the growth of the business.
And G and A after a big decline in 2015 after our company transformation program where we have us. Slim down quite a lot of the overhead functions across the company. We remain stable at this lower level. Actually, I believe there is scope us to even further slightly reduce the G and A ratio. Then of course, the final question comes and I get this in every us.
Discussion with investors. Okay, when are we seeing operating margins trough then? And shouldn't there be scope for an increase in operating margins again? Us. And indeed, we believe this trough is coming now.
In 2016 and in 2017, us. We still are subject to the effect from revenue mix shifts and yes, we have still the substantial investments in our cloud infrastructure. You You see this also from our CapEx spend in 2016, we had round about a $1,000,000,000 in CapEx spend. I will show you towards the end us. That also in 2017, we expect further increases in CapEx to finalize these programs in time by the end of 2017.
Us. But then as of 2018 when the cloud has finally taken over our classical on premise license business, when all of these investments can be transformed and translate us. Thank you. Thank you. Thank you.
Thank you. Thank you. Thank you. Thank you. Thank you.
Thank you. Thank you. Thank you. Thank you. Thank you.
Thank you.
Thank you. Thank you. Thank you. Thank you. Thank you.
Thank you. Thank you. Thank you.
Thank you. Thank you. Thank you. Efficiency in the rest of the business in software and support and especially also in services, you should see margins trending up again. Us.
And as you've seen, we have recently updated our guidance, not only for 2017, but also our midterm outlook us going into 2020. And while we are pretty unique in our industry giving such an outlook 4 years out, so it should give you us. A great sign of our confidence as a management team. And as we have upgraded this ambition even, us. We have been facing some questions.
Where do I see the leverage in these targets? Well, let me be clear here as well. Us. When we set this mid term ambition, we want to be absolutely clear and certain and sure that we will hit this guidance across all of the different metrics. Us.
We believe in the mix between achieving these targets one way or the other being skewed more to the one or to the other of the targets or even outperforming 1 or the other of these us. There is definitely scope to absolutely see a quite steady and positive increase of the operating margin as well. Us. So finally, one more thing and one more commitment to all of you. Let's talk about capital allocation us across the Group because this is something that is also top of mind in a situation where you have seen also Bill stating very clearly that we believe we have the most us.
Our comprehensive portfolio in our industry that we have all of the core assets that we need to continue along this impressive growth trend and that we us. We see a need of course to augment our capabilities in some areas through tuck in acquisitions. It is highly likely that they will not be of material nature. Us. And that's why, of course, you're getting the question.
You have such a positive and strong cash generation profile in your business. Indeed, us. We have seen a very strong CAGR of our operating cash flow development, especially in 2016 where we think we have been growing operating cash flow us by 27%. Admittedly, 2014 and 2015 were also affected by one time effects. Us.
But you see that despite of the fact that we invested heavily in CapEx in order to increase our cloud capabilities and become more efficient as of 2018, us. Despite the fact that we paid a very strong and raising dividend, we were able to substantially at the same time downpay and have now a very healthy net liquidity that has already reached 3.2% net debt us. And we are continuing to pay down debt as it becomes true. So what does that mean? It means of course that we have scope and we have optionality us in terms of the usage of cash going forward.
We believe that our operating cash flow performance will continue to follow the positive development us. So if you make the math and take a look at what we roughly want to us. Grow on the top line. I think it's reasonable to assume that we will end up in 2017 with an operating cash flow us. Of round about €5,000,000,000 as an example.
Let's talk about the priorities in the usage of capital then. Us. And those are the same ones that we've always had as a key priority. A, we of course want to continue to invest in our business and in us. These are the cloud investments on the CapEx side for example.
We believe us. We will continue to see increases in CapEx investment across the Group in 2017. The growth rates will already be Lower than what we have seen in 2016. So we will start to trend down. And as of 2018, this will us.
More radically flatten out, but in 2017, we still have an increase in CapEx, probably somewhere less than 1,300,000,000 us. And we want to continue to pay a strong and growing dividend. How much exactly that dividend will be, will be official once the Supervisory Board of SAP has made the corresponding decisions 2 weeks from now in its meeting. I think it's fair to say that it will be higher than the one that we have seen us in 2016. And then we have €1,400,000,000 in debt repayments that are coming up, €1,000,000,000 in euro bonds and roundabout €400,000,000 us in USPPs that will be becoming eligible for repayment in the second half year, us.
Which means we have optionality of roundabout €1,000,000,000 to either do tuck in acquisitions if we want to pursue any smaller opportunities. Us. But if we don't pursue them to a full extent of the buffer that we have left, then of course we would have scope for us. Additional returns to shareholders and in that case, we will consider in the second half year a the corresponding share buyback. So we are committed and that's the last commitment with which I want to end to absolutely appropriately us.
Have our shareholders been participating in the success of the company through a strong dividend, but also if we generate excess cash, which It admittedly was not the case in the last 10 years due to the acquisition activities that we had, which nevertheless have now run their course. We then also engaged us in share buyback as we have done it in the years in 2007 and before when we had a situation in which we generated excess cash. Us. So let me close before we go to Q and A and I would like to invite all of my colleagues on the stage for this. But just leaving you with the following thoughts us.
That you should take away from this Capital Markets Day. A, I think it is clear that SAP is winning in our industry. Us. We are a leader and we have extended this lead actually in many areas. If you think about S4HANA and the digital core, there can be no doubt us.
That SAP is taking substantial market share. If you think about business networks, we are the clear market leader in all of the categories that we are covering there. Us. SuccessFactors is a winner powering the biggest and most complex organizations of the world. We have great new assets around S4HANA Cloud, around our You see portfolio when you think about what Maui Jim is able to do with the Hybris solution portfolio us.
And we have never been in a more relevant position to serve our customers from a strategic perspective end to end than we are today. Us. This was only possible because we were committed towards investing, to investing both in innovation from an organic perspective, but also sometimes making bold moves in making acquisitions in the right assets, in premium assets, us. Not in a me too asset and paying sometimes, yes, also a premium for that, but it was fundamentally the right and the only way for SAP us to retain and extend its relevance and ensure our long term success. But now we are there and we are absolutely firing on all cylinders.
Us. And as we continue our acceleration to the cloud, we will, as a matter of fact, and we are entirely committed to that, us. Increase not only the predictability of our top line, but we will also improve margins, profitability and cash flow. Us. And then we are absolutely able to appropriately, a, return value to our shareholders, but b, us.
We also have the options in our hands to do out of our strong operating cash flow generation the right investments us to safeguard SAP's success not only for the second half, but also for the overtime. Thank you very much. And now we'll do a Q and A. Thank you.
Us. Us.
Yes, please. I'd like to ask Bill Brown, Robin Steed to join Luca Heung's stage for the final our Q and A and I'm not sure at this point in time whether there are still people awake in Europe, but we do take questions by e mail. Us. Please send them to investor. Sap.com.
Thank you, Bill.
Thank you. You're doing a great job. Thank you. Should we do a safe harbor together?
No, no, no. I think us. We start here in Grumor, New York, and I see one question here from Charlie Brennan, Credit Suisse.
Us. Yes, it's Charlie Brennan here from Credit Suisse. Just two quick ones actually. You've shown us the diagram of the wagon wheel with us. SAP HANA at the core and the applications around the edge.
Can you just tell us how many of those cloud applications like Concur and SuccessFactors Currently running on HANA. And of the ones that are not on HANA, what's the time line to deliver that? Us. And then secondly, just a customer question. We've heard about some big successes for success factors at us.
Companies like HSBC, but a lot of investors are asking me about Walmart. Was there any specifics in that deal in terms of functionality us. The favorite your competitor in that situation.
Maybe I could start off with the Walmart one and then you guys can talk about the cloud and the migration for HANA.
Us. 1st of all, on
the Walmart 1, absolutely a relationship plan failure. Okay. Us. The team won on the solution. The team won on the value from the pricing to the value of the solution.
Us. Walmart conducted an M and A and the jet.com relationship plan was not adequately us. Thought through in the relationship plan from SAP. And that happens when you don't cover all your bases in the sales cycle. Us.
But the important thing that I would like to reinforce with our dear investors is we won on functionality, we won on the business value, us. We fumbled the ball on the relationship plan.
That's it.
No more complex than that. And therefore, you should not believe in any
us. The way that that's a leading indicator of success
factors versus the alternative in the marketplace. Us.
Do you want me to continue on SuccessFactors? The entire SuccessFactors portfolio runs on HANA today. Us. However, we have 30,000 database schemas in our cloud data centers across the globe, which we have to migrate. Us.
Now we have every quarter a plan, how many of these do we migrate. And of course, the new ones which are coming in, they will automatically us. How many customers? How many customers? We have today migrated from the installed base, roughly us.
We will have end of the quarter 200. And there is a clear message. Priority is the first is first us. We serve the customers according to their needs and we have no pressure in terms of migrating existing running solutions
us. Sure. Us. Concur will be off of whatever portion of Oracle that is being used by the end of us. I think it's 18.
And having said that, just to be clear, it is literally a less than 2% of the revenue of Concur us. Actually sits on top of an Oracle database. It was an acquired asset even by Concur a number of years ago. And Concur is in the process of moving us. Obviously, to the HANA database overall.
Ariba is about halfway through that today. The network side is on
HANA and the application side will be there roughly
by the end of 'eighteen.
And maybe just to finalize this, us. These are the acquired entities. SAP, as Bernd has shown, has plenty of own developed cloud applications. Us. They all run on HANA, obviously.
We have not built them on a 3rd party database. So if you think about business by design, if you think about us. The CRM portfolio and the cloud, this is all built on HANA. So the only assets that we are currently migrating are the ones us from the acquired entities and that's areas like SuccessFactors or Ariba.
One thing that may be a point of interest in looking at the world through the us. The eyes of the CEO of the companies that we serve is the whole company called SAP runs in a digital boardroom.
Us. So with S4HANA
and with all of our solutions, we pull through us. All the important in memory real time data from these businesses and how we look at the business in our own boardroom and how we manage our supervisory board us. As well as our Executive Board. I have not seen too many companies that have the kind of technology SAP has and actually run their entire company in a digital boardroom. Us.
And anytime you want to come visit us and see it, we'd love to show it to you. It's pretty breathtaking.
Thank you. I see Next question here from Phil Winslow, Wells Fargo and then we take a question here in the first row.
Us. Thank you for Windsor Wells Fargo and Charlie's little colleague. Just a question for Bill and Steve here. Us. Bill, you talked about north of 70% of business transactions hitting an SAP system.
And then obviously, we talked about machine learning. And the old adage is us. We have more data and a simpler algorithm is actually better analytics. And so obviously, you've got a lot of data. How did both of you all think about monetizing this, us.
Call from the core applications, also the business network. Is this making the applications stickier and providing us. Providing incentive to go to S4HANA, is this sort of an additive sale? How do you think about that? And then just one quick follow-up for the rest of the team.
Yes, sure.
Us. Okay. You want to start, Steve?
I'll start. So basically, where we think about it is this SAP Cloud Platform us. And think about that HANA in memory database. When I talk to the CEO of a company, we talk about having us. The transactional data in your business in real time.
And we talk about being able to analyze the data in real time us. And actually predicting what's likely to happen next based on all the algorithms of facts. Now you're running a fact based real time us. That's powerful to the customer because they don't do that today us. Surprises as dark data and it never gets looked at.
So that in and of itself is breakthrough. The other thing about S4HANA, when you think about the power of that data, us. Today, our dear customers were up here talking about business model innovation, rethinking things on the fly. How do I do IoT? How us.
How do I take advantage of AI and ML? We didn't get into a whole lot of detail on blockchain, but removing middle people from a business process, us. Health Care, Financial Services, Retail, all kinds of industries are really focusing in on that now. Having that data us. In that system is unbelievable.
And then the last thing, Phil, that I've really come to appreciate is the most powerful brands in the world us. Really care about getting at the data that's in those SAP systems. So when we think about the ecosystem effect, us. You think about the early days of ERP, it was having systems integrators to implement ERP. We don't think about that anymore us.
Because that's not relevant now that the cloud has taken over. It's like how do you digitize services to educate the consumer on what's possible us. With a modern system like S4HANA, all the other labor equation kinds of things is going to go away. Us. I think our customers spoke about that today.
But the biggest brands in the world want to partner with us us. Because they want access to that data and they want to have partnership on that platform where they can use those open APIs, us. Build new innovative applications or use their technology to help the customer with the data that's in those systems. So us. I think we became much more strategically relevant in the ecosystem.
And I think to these customers who want to run a real time business us. And have a single view of the customer from the supply chain all the way through to the channels and social and conduct commerce. I don't know how you do it without having your hands us. And that's the power of that data and in memory on a base technology.
Us. Phil, I'll just add maybe 2 things to that. 1st and foremost, I think the value of the application goes up. If data is used to actually drive a better experience us. The application or for that matter, the application taking action on behalf of the company, that's a higher value application.
Us. And so I think that's priority number 1. I think the second opportunity is really that this when you think about us. Systems like ours, as you've implied, all this data can be collected. I think within the proper permissions, making I'm sure that there's a total transparency around how that information is used and with the permission of the customer.
I think there's an incredible opportunity to then use information us. On a real time basis, if you select to also share your information, so that example I shared earlier where around the field us. Example, you can find just as easily to concur, just as easily to a rebar or anything else. So if I want to know, hey, look, us. What is the cost of these of a giant tire for Rio Tinto on their us.
Tractors that are operating out in remote areas and what is the availability of that of those replacement parts. Us. There's tremendous value that I would say that we can deliver as a service that the customer can choose to participate in us. All
right. And then just a follow-up on the cloud side. So I guess it would be SaaS plus us. Data as a Service, I guess now too, the combination. And so but on the cloud front, Luca, you talked about a doubling of the us.
Effectively a little bit more from 7% to 15% of the private cloud. And so
a question for the rest
of the team here, when you think about that, obviously, the public cloud side, us. Obviously growing quickly as well, but how do you think from a customer perspective, how you all think about what percentage of us. Your customer base choosing private and why and which goes forward the public additions. Thanks.
Yes. So first, I would also us. Just your other question as well. We're going to monetize Leonardo and Clio on top of S4, so it's a natural pull to actually continue to monetize a bigger portion us. That whole platform that we spoke about early on.
We said 50% of the customer base will continue to move in the on premise world. Us. The reality is what we see is now that some of the larger customers actually want both. So we actually start to see them actually asking for us for public cloud as a basis us. For some time in the future when they're ready to actually move the other S4 piece onto that technology as well.
Us. So it will take some time, but it's a combination. It's a switch out at some point in time in
the future.
Us. Good. So the next question comes here from the first row, Keith Bachman from BMO Capital.
Us. Hi, thank you. I wanted to ask Luca your question. You mentioned that and Bill mentioned 15% of us. Your customers have converted to the HANA platform and you've also grown license revenue over the last couple of years.
So your comment was us. Over to 2020, you expect license to decline mid single digits, call it, which is better than your previous prediction. But if you have 85% of your base you're still going after, us. I'm not clear on why license can actually replicate the performance you've had previously. And as part of that question, I wanted to ask a twist.
Perhaps Bill, you want to jump in here. But us. As you think about HANA specifically, how do you think about on prem versus in the cloud? Thank you. Us.
Yes, it's a good question. And of course, when you look out 4 years into the future, You have risks and opportunities and you want to carefully weigh them to hopefully have a really safe basis to arrive at your prediction At a minimum and if possible do a little bit better. I think that's also how you should look at this low to mid single digit decline assumption that we have implied in our guidance leading into 2020. But at a broader perspective, I think we need to understand a few things here. Us.
We believe over the course of the next few years, we will have a great future with S4HANA public cloud, which will be a SaaS product, us. And so at this lower level of the market, we believe that there will be a shift Going on into subscription, which is good for us because it drives higher total customer lifetime value for SAP. Us. S4 will continue to drive growth and will be a licensed growth contributor us throughout this time frame, no doubt about this. As you said, we have 85% of our customers still out to be converted and we believe that a very good share of those will be converted in us in the period until 2020.
Despite that fact, of course, what you will continue to see is continued migration of the us. Edge LOB solutions to the cloud. We still have an on premise business in HR. We still have an on premise business in procurement and these spaces us. We'll move and we'll be actively migrated to the cloud over time.
So that process is not entirely finished. And B, us. There are new areas where we believe that we can add a lot of value to our customers, but also drive value for SAP by us. Starting migrations to the cloud in spaces where they have not happened yet. And one of those areas where we see a great opportunity us.
Analytics, for example, with Business Objects Cloud, we have a really cool solution that combines planning as well as analytics us. Functionality, just seen explosive growth in the 1st year of us having established it, which us. We believe will be very soon a sizable business for us. And so there are additional incremental effects of migrations to the Cloud that go against us. Now to what extent this will level out against each other?
To what extent there might be still incremental on top growth of license us or to what extent our current assumption of low to mid single digit declines will come
through. That's to a
certain extent unknown. The only thing I can tell you is us. We feel very safe with the current implied assumptions that we have in case.
One question here in the back, Kirk Materne from us at Evercore ISV.
Thanks very much. I was
wondering if you all could talk
a little bit more in detail about just your platform as a service strategy, us. Specifically, as you think about trying to bring more ISVs onto the platform to build out services like IoT that might have more specific us. Use cases in certain vertical markets. If you could just talk about that a little bit and maybe how that interplays also with your relationships with some of the infrastructures or service companies. Us.
Just trying to get a little bit more color on platform to service and how we should think about you over the next year
or 2 in that area. Thanks. Us.
First of all, thanks for
the question because this is one of the big opportunities us. Looking at our 2020 ambition, where massive growth is possible. So far, we have focused us on building line of business specific cloud applications. Now we move with ERP to the cloud. But us.
If you have listened to me, there is a huge opportunity to digitize core value processes us with any of our customers across 25 industries. And while this was done in the on prem world us with massive implementation partners, either adding capabilities to our system us. Or using just our development workbench to edit, this will now the place to be in the SAP Cloud Platform. Us. Rob and I are driving strategic partnership within Accenture, within Capgemini, but with as well a series of us.
Smaller partners
and they are all at the moment on boarding into that platform and I shared with you that only in the last 6 months, us. We have added more than 200,000 software engineers outside of SAP who are using now the SAP Cloud Platform us to build complementary new applications, which are enhancing our portfolio. Us. So there is a massive opportunity for us. We predict triple digit growth.
We have seen it us over the course of 2016, and there is no indication that this will stop. Rob, you want to add something?
Well, let's us. You should give some comments about YaaS because I think it's a very important part of that strategy and also the open portability of us.
Maybe I can just add a little bit to that. So I think that us. SAP Cloud Platform, the opportunity around it is fundamentally driven by Sfour, but it's also driven by all the business network assets and obviously success factors us. And hi, Bruce, allowing any of our partners or customers that we drive a set of extension or integration around SAP Cloud Platform. But I do think it's also it's critical for us and it's really driven by the customer that us.
Regardless of our cloud platform that we deliver, regardless of the fact that we have HANA Enterprise Cloud, that we want to make sure these services are available on any public cloud us. Really, it's a customer's choice. And so we take the view that we are multi cloud in our approach. We can sit just as comfortably on top of Azure or AWS us. Google Cloud Platform or Ali Cloud across all of our products and inclusive of SAP Cloud Platform.
Fair. Us. And maybe
an additional comment Rob just made. I mean, Carsten was the front runner with the high risk portfolio, YAS with high risk as a service. Us for us internally to test to pilot whether that microservice approach is us. An approach that is resonating well with the market. And we have been overwhelmed with the positive feedback us from the customers, from partners, but as well from analysts, and we will leapfrog with that approach.
Us. Some other known companies in the cloud who might who think today that they are us. The dominant player, I would rather phrase they have been the dominant player with their strategy and approach in the past. Us. They will not be the dominant player going forward, and we will see that we outpace them in terms of growth.
And then it's a question of time us.
Next question goes here to Alex Taut from Deutsche Bank, and then I think we have
us. You mentioned with Clear the machine learning package the solutions that you've now got. How are you pricing those? Is that encouraging you towards some innovative pricing models perhaps around us. The human input that you're replacing, is there any way of monetizing that?
Just commentary on how you're pricing those solutions. Us. And then Luca, you sounded very confident on the margin side of things. Are there any circumstances in which you could in which we would not see Margin expansion. And are you, in fact, being perhaps a little bit cautious because if we look at the way the gross margins are trending us.
In the different components and the commentary around leverage on the indirect costs, it sounded like the midpoint of the guidance us. To 2020, which is, I think, about 31%. It's not a huge amount of margin expansion relative to where we think we'll be in 2017. So is it even potentially conservative?
Us. Should I have the margin question first? Yes. Yes. So.
Okay. Then us. You know what could happen to not see the margin expansion in that way us. It would actually be a very nice scenario to have if you would have even more exponential short term growth in the cloud. Us.
And growth in the cloud with them in the margin expansion. And that would be a very, very nice problem to have and I would love to have it. Us. However, I think under reasonable planning assumptions, I'm indeed very confident that we will get there. Us.
On the planning and the question whether it's conservative, I think it's again, it's all a question of how the different components fit together. Us. We are now at the point and that's something that was, I would say, for the last 2 years, the last bearish argument that was left us. I think the market has understood that we grow faster than competition, that the growth in the cloud is not coming at the expense of the core. I think that point is ticked.
Us. The only point that was available was, okay, the mix shift is dragging the margin down. We are already at a point where at the gross margin level actually the mix shift in the cloud business is not hurting cloud and software margins in combination anymore. Us. Because yes, there is a mix shift effect, but our core business is also expanding its profitability.
Us. But I think there are a number of unknowns. If, for example, the ratio between the different cloud business models that we had us. We come in differently than how we are planning it right now. All of them will be contributing to absolute operating income.
That's the good news. Us. And I know about the early concerns about HANA Enterprise Cloud. We have now very clear line of sight that this will be a very nice contributing business us to SAP. However, the distribution between those, of course, could have a bearing on the degree of margin expansion And then also the ratio of the other revenue sources next to it.
That's really why it's difficult if we look 4 years out
us to come up
with this with, let's say, tremendous precision. We can come up with it with sufficient precision to tell you us. That in 2020, we will not talk about a margin trough anymore. And we can also be sufficiently clear us about the fact that our businesses will all remain strong enough growth businesses us. We were able to upgrade our total revenue ambition at the same time.
That's the level of confidence that we get to. But you are right, there are scenarios possible us. And you can think about scenarios in which the overarching progression from a margin perspective would be stronger us. Then what you can imply and calculate. But if it's not the case, then it would be because of a different revenue mix us.
That would mean that some very healthy parts of our business are growing even faster than we currently project and that would be a nice problem. Us.
And then your question on
how do we monetize care, I think we have to distinguish between different use cases. Us. We will incorporate machine learning, artificial intelligence into our existing applications. Us. The monetization comes with the fact that we will have then the superior solution in the market and we will win market share.
Us. There is another use case where we say because of machine learning, artificial intelligence, we are able now to bring new innovations us. There we as well will not monetize the individual technical component. We will rather monetize the new applications us on our cloud platform. And then there is the 3rd aspect, which makes our SAP cloud platform us at the center of gravity where we have, of course, machine learning services, where we have IoT connectivity services, us.
Where we have analytics services, and there we have a platform usage monetization model. Us. So it's based on consumption and we will make it transparent how the us. The partner or the customer is using our platform, but then it will be a natural ingredient of a technical service available on our platform us. And not a value in itself, which is stand alone as the us.
Huge comprehensiveness of the platform makes the big difference. It's not the individual service. You might go anywhere to find us. There are bits and pieces of these services, but you will find nowhere a service environment where you have us. Application services across the entire portfolio, Bill illustrated, where you have technology services across our entire technology portfolio.
Us. And then where you have the new growth drivers with IoT, with machine learning as well on that platform available for consumption. And then us. As Steve said, we will make that platform available in our own data centers, but as well on public cloud infrastructure as a service providers.
Us. Okay. Thank you. The next question goes to Adam Wood from Morgan Stanley.
Us. Thank you. Maybe just a follow-up, first of all, on that artificial intelligence question. Us. And really just thinking about the delivery.
SAP's customer data sits both on premise with the customers, but also in cloud environments. Us. And you're going to have competitors in that space, Salesforce dotcom, Azure and so on, where all of the data sits in the cloud. When you think about how you deliver those services, us. Is there any advantage to all of that data being pulled in one area for those companies so that customers can start to build applications on that cloud environment in a pure sense?
Us. What does the advantage you have on the application side give you a benefit there? So really, how do you think about the competition on AI and how that gets delivered us. With you having that mix of where the data sits versus others maybe having the data purely in the cloud. And then if I could, just on the SMB space, you talked us.
Quite a bit about the SMB opportunity. On an ERP side, you've pushed products, kind of pulled back from them. If I'm an SMB customer today, us. What product do you sell me and how do you sell it to me? Thank you.
Gerd, do you want to start with the first piece of this?
Us. I didn't get completely the real question, I have to admit.
The data
and the application us. With things like machine learning, right? This is where you were going? Us. None.
No.
No. Yes. I think, first of all, I think when you look at artificial intelligence and the way we think about it, And the way we think about it, the more data you have, the smarter you're going to get, more pattern recognition you're going to get. So we have to process data. Us.
I mean, if you look at where we're going from analytics point of view is to try to process as much data at source, rather than trying to bring everything in, right? Us. So in our environment, our data is actually quite a really a small piece of what an AI is going to be. It's our ability to use IoT platform, go out and then actually create
these algorithms, store these algorithms
and actually us. Go out and then actually create these algorithms, store these algorithms and actually process the data at source. And so that's a lot of where we headed right now.
Us. And just to complement, it is rather an advantage for us, not a disadvantage. As Luca was illustrating about our business object cloud solution. That is a solution where the code runs in the cloud, but that solution us. Is able to connect to any data source.
Of course, it can be our own data center with our cloud platform, us. But it can be as well any data source, any service API that sits somewhere. And we have seen us. Already customers who have been adopting Business Objects Cloud that they prefer that the data stays us. In their data center, while they have no problem of consuming a cloud product and what is happening is us.
At one time, we take your mobile device, us. The data is extracted from the customer's data center, partially maybe as well from cloud, partially as well from public cloud us. Think of maps, think of Nielsen data and therefore I do not consider this as a disadvantage. Us. I rather consider this as an advantage that we can build a trusted channel to our on premise customer data centers while this does not have to be the case, us.
But in many cases, it's reality today.
Let me just add a couple of things there. First of all, SAP applications probably have more enterprise data than any other an enterprise company in the world. And if you look at what's happening in technology, the whole model is shifting. You're not moving data anymore, you're moving applications. Us.
So what will happen is the applications themselves will move to where the data is, get what you need to get, deliver the result, and then the application itself will go away. Us. So there's a massive shift in the technology model. And fundamentally, the customer owns this information. And so there's no disadvantage us.
To SAP or anybody else around where the data is, the advantage is what company moves fast to deliver applications and services that can us. Understand the data, get a result, deliver value to the customer. That's the answer to that question. Now, let's move to BYD. Us.
Look, I this is my area of responsibility and I fully accept the fact that I think we've been less than clear on our strategy in the SMB space. Us. I want to be very clear about this. We deliver a great ERP solution for the SMB space, and it's called Business by Design. It's a product area that's run by us.
18 year Concur executive named Barry Paget, who understands that segment of the market exceptionally well. Us. We've actually done a fair bit of work around that technology stack to actually open it up, allow more innovation to be driven by our partners on top of that, us. As well as frankly integrating into Concur, Ariba, Fieldglass, SuccessFactors, every one of our public cloud products. In fact, you're going to see Carsten's, YaaS technology stack us.
Actually being used to deliver e commerce within that suite of services. What's been missing, in my view, has been how do you take us. That type of product and deliver it through a very effective channel into the SMB space. And that's one of the things that Franky concur brought to the table. Now, Rob's obviously His team has done a great job in delivering into the SMB space.
We're just adding value on top of that. And so we think that there's a tremendous future for BYD. Us. More importantly, BYD and Sfour public cloud are very complementary. So how a customer migrates across those products is up to them us.
And how they use it in any combination of mix is up to the customer.
I think one of the best kept secrets that hopefully you got today us. SAP is a platform company now. And the data arsenal that we have us. It's not limited to an ERP system. It's actually all these clouds and network systems.
And us. Doesn't matter what part
us.
Us either a phone data center, somebody else's private cloud or public multi tenant cloud us. Cloud platform can get at anything and give you instant visibility us. And predictability on what your next move should be as an executive making important us. This guy right here, Carsten Toma, I met him when we first bought Iris. Us.
I knew he had the vision to stay a step right past SFA and SFA related platforms us. With a single view of the customer from the data all the way through to the channel and the commerce associated with it. Okay. Us. When we picked up SuccessFactors, we
us. Us. Us.
Us. And I think Georgina underscored it today that that could be the global us. Platform for the largest companies in the world like Gartner says, if you have more than 5,000 employees and you're not running SuccessFactors, like you didn't read the memo. Us. And Alex Hatzberger has completely reinvented
us. Us. Us.
Us. We don't get caught up in small competitors who took a run at us with a better UI because we just build a better one. Us. So I think it's not any one thing that makes SAP highly unique. It's the combination us.
Of all of these things in a formation around customer driven value. Us. And I will tell you the most important conversation I'm having with customers is showing them the slide you saw today, which is S. Wahano.
Us. Us. Us. Us. Us.
Us.
Us. The cloud and network assets and the platform and the extensibility of an open platform us. And how to leverage that data in new business models. That's the big thing. Steve's got a data as a service business.
Us. He's working with Helen Arnold, who runs data as a service for him. If you take a company who today might be in the shirts and shoes business, us. What they're really concerned with is the data on the device and connecting the wearables and the embeddables, us. So they get all the data on what the athlete is or isn't doing.
Us. Us. Us. Us. Us.
Us. Us.
Us. Is that important? Because they can take that data and provision that as a service us. To the people that want to sell into their consumer base, which could be a community of a couple of 100,000,000 people. Us.
That might be actually more valuable than the shirt and the shoe you make. So you're seeing all these new business models evolve only because us. You have a real time in memory database and you have complete visibility with the supply and the demand chain and
us. Us.
Us all the channels. I want to thank my good friend Jim back there with us. On Maui Jim product, I think to myself, my goodness, the frustration when you have a great culture like that, you make a beautiful us. And you're limited by the channel and what the retailer does and doesn't tell your consumer who's dying to have the best of your product. Well, how are you going to
deal with that? Us.
You've got to go direct and you're going to create an unbelievable online
us. Us. Us.
Us and experience. Us. And that way they know if they go into the store and they don't get what they want, they can go back to your purpose online and find something that they really want that fits them. Us. And that's what's happening in all these companies.
And the wild part about this story is, I could just change the industry us. Thought leadership or the domain around the industry and plug and play the story I just told you in 25 industries all over the world and it resonates. Us. It's just like it's almost a little too easy. Okay.
It really is.
Us. Thank
you. I think given the fact we have to move over to the social hour conference pretty soon. Us. Time for 2 more questions. I see here one for Michael Briess and then Walter Pritchard.
Michael Briess, UBS first.
Us. Thank you, Stephan. Michael Briess at UBS. Luca, you've given a very clear picture on the P and L out to 2020 and you've obviously talked about us. Cash flow through the balance of the year, can you maybe say something about how you would expect to allocate cash in the later years assuming there was no large acquisitions?
Should we be expecting that that Ash will come back in the form of buybacks. And then one for either Bill or Rob, I guess. There's an IoT strategy here clearly. Us. One of the feedbacks we get from customers is that around your indirect access fees that that makes it quite hard for them to develop some IoT offerings us with you.
Can you maybe say if you're going to do anything on the pricing model there?
It's probably the easy one. On the pricing model, we're already actually starting to launch consumption based pricing. Us. So obviously we took that into account when we launched IoT that we had to open up the SAP Cloud Platform. So us.
It's easy accessible not only to our customers, our partners, consumption based pricing will be offered in that space. And so it will us. Clearly be based on value driven. And that's how we launched Leonardo.
Us.
Yes. And okay, on the capital allocation, I would say in the absence of large acquisitions, us. That picture will probably look very similar in years to come, just that the numbers are getting a little bit bigger obviously, us. Because our cash flow will increase, our dividend payment will increase, our debt repayment will decline because This year is actually the last year where we have debt prepayment coming up that is substantially above SEK1 1,000,000,000. Next us.
It's €1,200,000,000 and then all of the remaining years are below €1,000,000,000 So that means this us. Optional column, so to say, of what is left for either tuck ins or The returns to shareholders will tend to get higher over time. What we will not do is to engage in debt finance share buybacks. Us. This is a policy matter.
We're not a financial services institution. We're in the business of driving innovation on behalf of our customers and driving value from that. Us. But that's kind of the way how to think about the following years, so to say 2018 and going forward. Us.
And in terms of the 3rd element of a P and L, the balance sheet, I think the one item that us. We'll be very likely the case there is that goodwill will not substantially further increase as a part of our balance sheet.
Us. Okay. Thank you. And the last question goes to Walter.
Hi, thanks. So I guess either question for Bernd or for us. Rob, on 15% of the base now on S4,
can you talk
to us about what sort of patterns have emerged around us. Incremental spending from those customers sort of do they distinguish themselves between customers who haven't upgraded? Any numbers you could put around that would be great. And us. Is there sort of a kind of template in terms of what types of products they add on in addition to their core Upgrade as they go through that process.
Yes. I mean, it clearly depends on the size of customer.
And I'm thinking more of the installed base, not the half us.
Yes. So if you look at the installed base, I mean, what we see in us. The larger customers, once they've decided to move to S4, they're pretty much locking on all the cloud products as well on the line of business, whether it's Arriba, SuccessFactors, Hybris, us. They actually sign up for the full portfolio and what they drive us to do is to make certain that we deliver the integration in a us. Very flexible way.
So that we've seen and then you can just look at the results from 2016. We've seen tremendous uptake across the board us. In both, on premise for S4 and then clearly all the cloud products. The move in S4 has actually moved much further us. From the 16/11 version of S4, which was the logistics version.
So originally
us.
Us. We were just seeing a lot of finance with digital boardroom, and now you're starting to see significant uptake in logistics as well. Us. And that's why you start to see companies like Microsoft do the integrated budgeting and planning. So supply chain has become really important as well and has become another us.
Significant revenue stream in the cloud for us. And I just lastly us. On Bill's comments and Luca's comments because I know we mix HANA and S4 up a little bit. So with HANA, we had 16,000 plus customers. Us.
With S4, we had 5,400 plus customers and Q4 was 1200 plus us. Thanks. So we see a significant opportunity coming in 2017 in that space as well. And then as we add on Clio and Leonardo, us. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] That's truly when we start driving the whole digital experience into what we showed you from the customer base today
us. Walter, maybe just to add one additional data point. While us. Before S4, we have seen just small incremental numbers in net new names. Since we launched now S4, we have seen, depending on the quarter, close us.
40% net new names. This is what makes us so optimistic. So it's not just a conversion of our installed base us. It's the first time, I think, since more than a decade that we have significant growth with net
new names in our core business. Us. And finally, these are predominantly companies of the size that we are targeting with Sfour public cloud, but not only. Us. And that's the really interesting thing that we see net new name replacements of major legacy competitor customers.
And you do not do this easily. You only do this if there is a huge transformation us. The opportunity to do things completely differently. So companies that are entrenched, that are in a competitive environment that want to really change and drastically us. They switched over and we had these examples last quarter actually in a very exemplary fashion us.
Thank you very much.
Us. Thank you
very much. This concludes the official part of the Capital Markets Day 2017. We hope that some of you can join us for the cocktails here in New York City, and our next Investor Relations event will be at CBIIT in Hanover, Germany in mid March. Thank you, everybody. Thank you.