So good
morning and welcome everyone to our Capital Markets Day 2016. It's actually very hard to get on stage here especially for a German guy like me after such an inspiring video. First of all, thank you very much to all of you for joining us here in New York. Again, a very strong attendance, more than 120 Financial analysts and institutional investors here in the room in New York. Also a warm welcome to everyone who is following this event over the web.
It's our 3rd Capital Markets Day. I still remember 2 years ago, we started here at the Ritz then last year, combined with the S4HANA launch and the New York Stock Exchange in this year back in familiar territory. So my name is Stefan Gruber, Head of Investor Relations of SVP. I'd like to walk you through the agenda for today. You see the theme is Leading customers digital transformation and this is like the red thread for the entire day.
You can see the agenda here. Our CEO, Will McDermott, will kick it off with an update on SAP's strategy and vision, our growth potential around S4HANA and the future of the industry. Then we have the financial side of the house. This will be covered by our CFO, Luka Mutic. As you know, SAP is unique in combining a fast growing cloud business and a growing core.
And Luca will talk about the financial impact of that. Let me move to the innovation side. Bernd Leukert, Executive Board Member of SAP, Charge of Products and Innovation, will talk about the path into the digital economy and how we help customers in their strategy to digitize their businesses. And as part of Brand's session, we also have a live product demo here on stage. It will be the SAP Boardroom of the Future, the Boardroom Medefined.
So you can see how we manage the company using real time data. There will be a short break afterwards. And then we move to the customer perspective. This session will be hosted by Rob Enslin, Executive Board Member in Charge of Global Customer Operations. And we know from all your feedback over the last years, you find these sessions with the customers extremely valuable.
So this year, we have a combination of a long time SAP customer, HPE, Hewlett Packard Enterprise, is represented by John Hinshaw, Executive Vice President. And on the other side, a brand new customer of SAP, Jan Saar from Swiss Property, actually joining us from Tallinn, Estonia. So we're very pleased to have such an interesting combination. And before we go into the final Q and A for the day, There will be, of course, the session on Business Networks. And Steve Singh, Head of the Business Networks at SAP will talk about Ariba, Concurrent Field Class and as a unique differentiator for SAP in the marketplace.
I also want to welcome A couple of other members of the SAP senior management team here in the room in New York. Jennifer Morgan, President of SAP North America. We have Maggie Jan Jones, our Chief Marketing Officer Quentin Clark, our Chief Business Officer Alan Schenkman, the CFO of SAP North America. They will be around later on the breaks and for lunch for further discussions. Now to the housekeeping items, the favorite part.
This event is being webcast on the SAP Investor Relations website. So please use the roaming microphones later on for the Q and A session. You can also send us questions by e mail to the usual e mail address, investorsec.com. And before I hand over to Bill, my Safe Harbor statement. Please note that except for certain information, matters discussed during today's conference may contain forward looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from our expectations.
The factors that could affect the company's future financial results I discussed more fully in the company's most recent filings with the Securities and Exchange Commission.
Now it's
my pleasure to ask Bill McDermott to come to the podium. And Bill will be joined by Nick Sitson, our Senior Vice President in the Global Corporate Affairs team. So Bill and Nick, the floor is yours. Thank you.
Thanks, Stefan.
Hi, Lukas.
Thank you very much. I
don't know about you, but I've heard a lot of people give that safe harbor statement. I think Stefan Gruber does it better than anyone else in the world.
What are you thinking?
Stefan, thank you. Well done. I feel safe being in this harbor now.
Are you done? Yes. Okay. So thanks for your willingness to mix it up this morning. We thought we'd experiment with this format, maybe get a little bit more unplugged.
Sure. A lot of executives don't necessarily enjoy the kind of scrutiny they get from their investor audience. You seem to like it. I thought maybe in the in your welcoming remarks, you might shed some light on why.
Well, we have to deliver every 90 days for you, but we also have to have a vision where you participate in the strategy of the company. So you'll See us on an annual guidance, you'll see us on a midterm and you'll see us on a 5 year strategy. What we're trying to do is give you total transparency with our management team, our vision and strategy for the company and how we're executing. And hopefully, you find this to be very positive and trust building because in the end that is the ultimate human currency. Do we have trust with you?
Do you understand what we're doing? And are
we on the same page. Perfect. So every presentation you make, every conversation you're in, it seems like you always want to look back before we look forward. So if I take you back just for the benefit of some perspective here, 2010 coming out of the financial crisis, nobody thinks SAP has got a chance to be a growth company. And then if you look at this particular graphic, that story really speaks for itself.
So how How do you connect the 2 situations from where we were in 2010 to
where we've come? Well, first, As you'll recall, that was a time where we established a new vision for the company to help the world run better and improve people's lives. World run better is what SAP does in 25 distinctly different industries in nearly 190 countries around the world. So
We're on
that. But improving people's lives was about changing the context of the company. At that time, we weren't a database company. At that time, HANA was young. We were just making our moves toward the Cloud and the Business Network.
And we were in the process of kind of doubling the market, the addressable market and kind of reinventing the purpose of SAP. We said that we would double the revenues Of the company, we would get over $20,000,000,000 and we did. We said that we would drastically improve the operating profit and we said that we would have explosive growth in the Cloud. We kept our promise on every dimension. In fact, I remember the strategy documents said $20,300,000,000 in revenue.
We did $20,800,000,000 in revenue. We did $20,800,000 We said that we would be well over 75,000,000 users in the Cloud. We're over 95,000,000 users in the Cloud. And we kept our promise on the operating profit. So The company is strong and it's keeping its promises.
So we put it in context and I want to talk just a little bit about the competitive environment. You said yesterday on Bloomberg that locker room talk wasn't the way to go. I certainly don't want to get you down in that area. So I think if you take a look at this Kind of an image. And you take a look at obviously some competitors of SAP, but also some great friends of SAP.
How do you juxtapose Our position as a growth company against what the rest of the market is doing.
Well, when you have a once in a generation invention And think about SAP's history, when we went from mainframe to client server going from R2 to R3, You now have gone from R3 to S4HANA. You see that the software license and support sales of the company Is in double digit growth right now. The reason I point that out is because nobody else is growing and they are all negative. Yet they keep talking about SAP as if SAP isn't growing. And I think the best way to tell the story is just with the mathematics.
Facts don't lie. And when you think about Cloud Subscription and Support, there's a really important Point to make here, it's not just the triple digit growth because that does have some M and A effect from Concur. But even if you back that out and you go pure organic, We're growing faster than Oracle. We're growing faster than Salesforce. In many ways, we're growing faster than even a narrowly focused company like Workday, which is obviously in a lot of trouble.
So I think it's important to mention that SAP, whether it's the core and we're essentially selling that software Or it's the cloud and we're renting that software. On both dimensions, SAP is a growth company, is highly successful and is gaining market share against narrowly focused software companies and large companies alike.
So let me dig down a little bit on 2 pieces of that real quick. So one piece, if you go through some of the earnings transcripts from other companies, there's this discussion about the bad businesses And the good businesses, which are growing really fast.
Yes. So number 1, we don't have any bad businesses. So when you think about the SAP portfolio, We're not in the hardware business. We knew that was a loser. And just talking about vertically integrated technology stacks is complicated in and of itself.
We talk about obliterating hardware spend at a factor 10x. So we didn't go down any bad paths here. And everything we went into is outpacing the growth expectations if we bought it. And certainly, the things that we built like HANA And like S4HANA are just going like a hockey stick. So SAP is in great businesses.
And I think that's a really important dimension of our strategy.
The only other one I'd bring up is the open ecosystem approach because clearly that's been a big driver here.
Yes. So some companies, You can see them and how they're doing, are focused on wallet share and capturing all the spend in an enterprise. That's how they train their sales departments. We're focused on executing in 25 distinctly different industries in 188 countries in the world and making sure we have a healthy, vibrant, open So if we can run hardware from a company in China that's saving the customer 10x on the hardware spend, we should do that. And similarly, that open ecosystem, if they can take advantage of HANA and S4HANA, the cloud and the network assets of SAP and strengthen their point of view with their customers, they should do that.
So this idea of open ecosystem, healthy ecosystem and choice is a
key part of our strategy. So before we shift gears to the sort of the present and the future, I want to talk about the brand a little bit Because this is something I know you've put a personal priority focus on, the idea of taking what had been known as a fairly sleepy brand. Yes. And now you look at one of the newer ads with the Under Armour brand next to it, this has been a big part of your story.
It's amazing. I just had dinner last night with Adam Silver, the commission of the NBA, it could have been Roger Goodell, it could have been Gary Bettman, it could have been soccer, it could have been women's tennis. If you think about the sports world in any Country around the world, SAP has never been more relevant with leagues and teams because ultimately we saw That the consumer and the mobile was going to rule the world, in fact, change the shape of the enterprise. So, we had to look at everything through the eyes of the mobile device, The consumer, the breathtakingly quick experience they expect on their mobile, the beauty of the experience on the user side. And now you see this coming through in the brand.
And this example, of course, is Under Armour. One of the reasons I think Under Armour is a noteworthy story is we've been their Partner since they were a pre IPO company, less than US200 $1,000,000 in revenue. Today they're blue through US4 $1,000,000,000 They got a market cap near US20 billion dollars And they're the fastest growing player in their global marketplace. And they're expanding into new business models and new industries. So what we mean And what the brand means to the world has fundamentally changed.
And you said you've always had a belief that our brand Could be in service to the customer's brand as well. Do you think now with RunSimple that we've achieved that again?
I think the idea of RunSimple and radical simplification of the system, HANA for 1 and S4HANA for another. And then integration into the cloud and the network assets, we'll talk about in a little bit. It's fundamentally breathtakingly interesting because we radically simplified the technology stack at such a level that some people find it hard to believe. So simple is a revolution at SAP. The other revolution is running live because companies think about master data, They think about transactional data.
They think about aggregates of transactional data. With HANA, you don't have to think about any of that. So everything becomes breathtakingly simple. It also becomes breathtakingly fast. And that immediate access To that data and creating digital boardrooms for CEOs enables companies to run live and run simple.
And that's where we're taking the brand to the company. So let's shift gears.
Let's talk about the software. And I want to show you an image. And I wonder, do you remember there's one meeting I'm thinking In particular, I remember you had it. You came out of it and you said companies are looking for completeness of vision and only SAP can deliver it. Is that the nexus of why we're thinking about SAP now in a visual like this?
Yes. I think the reality of this is every house is built on a great foundation. The SAP HANA platform It's absolutely the foundation of SAP. Let there be no doubt, we are in the database business. We are the fastest growing database in the world.
And we know that fundamentally, the HANA platform will in fact change the world. And others haven't made this adjustment yet to a full column store database. They will have to. If you look at the DigitalCore to natively integrate The SAP application suite in TAHANA, this is a brand new world. This is a brand new architecture.
This is a whole new ballgame. I don't know if people have completely understood what we've done. So this has changed everything. So So if you think about HANA, S4HANA, connecting to the cloud for human capital management or customer We're extending that to the business network. We're in businesses now that no other company in the world is in.
And that's fundamentally the digital story. I thought this idea of a live system strategy might be worth mentioning to you. Think about what I said earlier, no pre aggregation transactional data whatsoever. Think about higher transactional performance at a 25x level, anything any other Company can do in the marketplace today. Think about, dramatic simplification of everything.
One customer in the Pharmaceutical industry was using 54 terabytes hardware system. When they went to HANA and S4HANA, they're now running on 3.5 terabytes of data. This is a 12.5x improvement. I met with a customer in New York City yesterday that had a proposal from a company for $25,000,000 in hardware. When he looked On HANA and S4HANA, it was less than 2.5%.
So fundamentally, change in the world for speed, Throughput, radical simplification and of course things like backup and so on. Bernd Weikert will go into great detail on this today. I have a question to ask Would you be interested in a no PowerPoint approach on the thought leadership side for HANA And as for HANA, if I simply forwarded you back of the envelope internal data that just said, here's what it is, And just lay it out there in the facts. There's a thing that's really frustrating. In 30 minutes, you can't do a complete tutorial on this.
But if you want, if you show me your hands, I will do a forward of an internal document that's totally fact based, scientific and mathematic on the power of HANA and S4HANA and how it fundamentally is changing the world we live and work in. Would you have an interest by a show of hands? That is unanimous. I will send this to you. I just asked you not to forward it, But you're going to get it today.
Hey, Stefan, you might want to get the lawyers to get a part for that. So Let's go back to this graphic for a second. So you have the HANA platform, you have S4HANA in the core, right? Do you think that the market, to your point, really understands the business value yet? Or is this still the early stages of what is ultimately a transformational cycle?
I think Because
of the folks in the room and the customers you'll hear from later, you're now getting it. The message is starting to come across. The lack or lack of sincerity on the part of other people creating headlines and FUD Isn't working as well anymore because they're not growing and we are. So something's happening. But when you listen to the customer stories, You'll understand how they're rethinking their business and fundamentally leveraging that for, for example, the Internet of Things.
The Internet of Things is fundamentally changing everything. Whether you're in Beijing, China and you're President of China and you On One Belt and One Road and smart healthcare, smart manufacturing, smart cities, connecting every device, the Internet of Things needs and in memory column store database to actually execute the plan. The new world needs the demand chain And the supply chain to be connected, so you have one version of innovation in the way you build your products, The way you acquire your products, the way you provision your products, the way you deal with your customers and ultimately the way you can conduct e commerce and know what the consumer is doing on the Internet. So we get that with HANA and S4HANA. And that's why the Internet of Things is a major part of our strategy.
On workforce management, Who would want a proprietary database and a narrowly focused point solution when you could get SuccessFactors connected to Fieldglass in a business network. And it's all integrated back and you have full HR capabilities in the cloud. Why would you want to do anything else? Once you explain that, nobody does. On the idea of the customer experience, That's why Workday is now at a lower price than when they went public 4 years ago, and it's only going to get worse.
On the Salesforce side, Sales force automation, connecting to marketing campaigns, it's not that it's a bad idea. It's just that it's the wrong conversation. Now the CEO wants to talk to the consumer in every channel. They want to have historical Empirical evidence of what's going on and what their behaviors and likes are. So when they connect with them, they have a mass customized Segment of 1 conversation and they can conduct an e commerce transaction.
If that consumer happens to come in direct to consumer, great. If They come in through a wholesaler or a retailer. You still have to know them and you still have to make sure you can upsell and cross sell them. So the problem that we need to solve in this market It's now different. It doesn't make one company bad and one company good.
It just means we're solving a new problem for a new century. And as it relates to the business network, let's really take a look at this for a second. In a global economy with fragmented supply chains and thousands of trading partners that every company in the world has, Wouldn't it be nice to buy things at a lower price? Wouldn't it be nice to take advantage of unbelievable talent that you could never get unless you could access it in a free, efficient network for people. And Why in the world when you have 6% to 8% of your balance sheet tied up in travel and expense, wouldn't you want ground, air, hotel, Food, entertainment to give your people the best experience at the lowest possible price and have everything updated completely seamlessly in your system of innovation HANA and S4HANA.
Why wouldn't you? So it's all common sense. And that's why people like Our story, it's simple. And that's why today I think is a watershed event with all of you. So we get a chance to Let you know what's going on in the market and why SAP is going to run away with this thing.
So quickly on Business Networks as a follow-up. So you have Ariba, Fieldglass and Concur are 3 best in class businesses. There was some Hay Maid. I don't know if you remember this. You seem to have a very short memory.
About that Concur acquisition, Yes. Some people challenge you on that.
Well, I think we had one company that asked the question, why didn't SAP buy Dairy Barn? And it was so out of left field, I actually thought about it. And then I had to study that industry because we weren't in it. We're in the software business. And I realized why we didn't do it because they're not growing.
And Concur was the 2nd largest software as a service company In the world with a USD 700,000,000 run rate at that time and the best margin profile of any cloud company in the world. And we had a chance to bring them in and then take a great leader like Steve Singh and put him in charge of all of our business network businesses, not just Concur, but Ariba and Fieldglass as well and allow him to build the machine. And what's interesting about his machine is he has a lot of small, medium sized customers in his portfolio. So just wait to see what he can do with SMN selling into the network and drive a whole new vector of growth for the company. So I love the stories when companies that are small say to me, I use your business network as a front end CRM system to sell into the Fortune 2000.
So you see, it's not just the network Sending the enterprise, it's also the network of the network that's now rationalizing and thinking Through the possibilities of brand new business models on the fly that are possible because you can connect HANA, S4HANA, the cloud and the network and extend it to an interenterprise computing paradigm that doesn't exist with any other company in the information technology industry except SAP. Well said.
Let me ask you some operational questions. First, the leadership team of the company, I think the investors are rightfully interested in that. How do you feel about the Board of SAP?
I have never seen the Board of SAP in better shape than it is right now. I remember, I've been around here for 14 years. So I've seen different boards come and go. Every position on the board, and you're going to get to see the colleagues today, we trust each other, We vigorously debate and we come out with the best idea because the best idea always has to win. And we're building this thing on total trust and respect.
And I feel that the people in our company see that, they feel that, you see that, you feel that, And it's absolutely showing up in the results. So I feel great about this team. And you just made a trip around the world for the Kick
off meetings, I see Jen Morgan is here. The regional leadership of the company, you feel particularly strong?
We have never had A better go to market and channel strategy than we have right now, And it's led by the absolute premier executives in the industry. And I will tell you this, it never ceases to amaze me How companies and how the analyst community in some cases look right past the importance of to go to market and to go to market leaders of a company. This is the strongest leadership team, the strongest go to market in the enterprise application software industry. So when you come in to SAP territory or SAP accounts, You're entering into a house of pain. And when we decide to assert our will on a market opportunity, when you have this Kind of innovation, we're pretty good at it.
So combine all those forces, I think we're going to make it very difficult on narrowly focused Point Solutions. And I think architecturally, because our new architecture is so superior, we'll do extraordinarily well against the big players. And we have leaders that love their job, they're loyal to the company and they're executing beautifully. And yes, Jen Morgan is a perfect example. I could say Adaire Fox Martin, I could say Frank Cohen.
I just think this whole team under Rob Enslin is best in class.
So let's talk a little bit about the business model, because I think if you read the analyst reports, there's still heavy interest in rationalizing the top and the bottom line story of SAP. So as you look at a graphic like this, whether it's the share of predictable revenue or the margins, how do you explain where you think the company is today?
Yes. Well, first of all, We're going to give you a company here that by 2020 has like 75% recurring revenues. So when the New Year starts, 3 quarters of the revenue is already in the bank. And each year, we're steadily improving this. And if you think about how far we've come, you have now highly predictable, highly recurring revenues for SAP and a very secure investment.
Let's extend it one more way. In our cloud portfolio, we have different cloud assets. If you look at our business network cloud assets For our line of business cloud assets, we have phenomenal margins and Luca will show you how they're going to continue to improve. In the private cloud, we have made a lot of investments and we had and still do Slightly now negative margins building that out. But that's only going to continue to get better.
So we will manage a portfolio of Cloud assets, the line of business and the business network has an 80% gross margin profile. If you look at the private cloud, it's got a 40% gross margin profile, but it helps us upsell, cross sell and do a lot of strategic things for the customer. So we want you to believe in the fact that we will brutally and aggressively manage the margins in the company. But we also have to be a growth company and capture the market share in the cloud while we can because you'll see later in clear mathematical terms how when you have good scale, very nice renewal rates, You also get huge operating income and margin leverage on a lower cost of sale, High renewal rate and improved margins going forward. So we're managing a portfolio.
We know Exactly what we're doing on the margin and we know exactly what we're doing on the operating income.
So we talked about where the company has Tom, we've talked about the business value to the customer in the present. Let's spend the remaining few minutes on the future. Sure. So if you think about some of the topics here, the idea of context rich data driven apps, The idea of wearables, the idea of machine learning. The topic where I have seen you most energized to talk about the future is healthcare.
Now, I think part of that's personal motivation, but part of it is a genuine belief that we can change the system. You're with Vice President Biden in Davos talking about fighting cancer. Why is this a topic for the future of SAP?
Well, in general, context aware, data driven, Machine learning oriented applications are absolutely the future of the enterprise. And in no industry Is this more relevant than health care? Today, if you look at the health care industry and you can talk to anybody, there isn't a single person that thinks it works. The electronic medical record system is a disaster. It was designed to create a billing event and a compliance event.
Most of the information that moves from first responders, nurses, doctors and surgeons between each other is voice and text. In other words, unstructured data. And we're going to have to have a database That is a column store in memory database to manage not just the structured stuff, but also the unstructured stuff. Moving beyond that, people like Vice President of the United States, Joe Biden, are now taking moonshots at cancer. Well, we've been working on cancer for a while with NCT in Heidelberg, ASCO in the United States with the CancerLinQ application and great universities Like the Stanford University School of Medicine on things like genome sequencing and focusing on The human genome and the data associated with that and aligning that with the best in class research from all over the world.
So an individual patient, perhaps even one that doesn't have the financial means of the folks in this room today, Can actually get the direct feedback associated with their issue and get it immediately at the lowest possible cost, So the system starts to work for them. At the heart of this whole transformation in this Healthcare industry will be data. It will be the knowledge, the exchange and the free flow of data. We see a world where a Social Security card could be connected to a file in a highly secure cloud. This would fundamentally change the healthcare experience for the patient.
It would also change the relationship with pharma companies and how they come up with the next great cure. It would also change the relationship with insurance companies. Because today, as you renew your insurance policy, not only did you get tortured in the medical system, but then when you renew Your insurance policy, they want you to fill out forms for every doctor you've seen in the last X number of years, every prescription that you've taken. And if you don't remember it and get it right, they'll challenge your claim when you file 1 someday. This is bizarre.
And we have to change it. So SAP, SAP HANA, S4HANA will be at the epicenter of completely revolutionizing and rethinking the health care industry. And we think it's very in keeping with helping the world run better and improve people's lives. And also, it can drive huge results. So we'll put one of our Executive Board members on this.
They'll run
it as an end to
end industry globally, and we're going to 3, globally, and we're going to go and take charge of the situation.
So I'll just be honest, I hate interviewing because I always feel like you're going to come out of the chair and attack me. I think maybe for the last question, I'm just going to get out of the way. I think the investor community deserves to hear from you directly. So as you think about where SAP has been, where we are and where we're going, Maybe some summary statements from you there. And then also, you've been in New York now for a few days.
I know you've had a dozen or so customer meetings. Is there anything you can share at a very granular level About maybe something that's happened in the past few days that could give everybody here a sense of where the company is. So I'll leave you to answer that and I'll get out of your way.
I'd be happy to.
Nick, thank you very much. Thank you. Nick Zitzen, everybody. One of the things we're doing is bringing in young, brilliant people into the company that fundamentally can make us more relevant, more youthful and more passionate about the future than ever before. And you see that in our hiring practices.
And If you look at our customers and our user group data all the way through to our employees and how happy they are and inspired they are to work here and what's happening For our shareholders, I think you're seeing the progress of SAP. We're just getting started. We are only Warming up, there's such a bright future. In these customer meetings that Nick talks about, and I'll give you one story and I will just focus on that. I go in and I meet a guy who's running a $5,000,000,000 company, a beautiful retail brand.
And he basically says, I got to rethink everything. He's on an old system ERP. He's got point solutions everywhere. His IT department keeps buying the next great widget with the next generation functionality and he's got a mess. It basically tells me I got to get simple.
I explained the HANA ColumnStore database story, S4HANA as the new architecture for the 21st century. I tell him we'll get him on the line of business cloud so he's up and running quickly at a low cost. And I explain the network and how it all integrates back into the core. I basically take His strategy in my pre call plan and I write the strategy out On our technical architecture as if I was him. That's what I do.
At the end of the meeting, the guy basically says, Can you guys really do this? Because I keep telling my people, we're having the wrong conversation. They're talking about what they can do on top of our old data to extract information. They keep talking about who's got the best of this or that and none of it integrates. I can't get any information and I don't see any visibility.
But here's the worst part, Bill. I got to go to my Board of Directors and tell them I'm going to figure out a way to grow this company in double digits In an industry that's growing by 2% per year, so the only way I can do it is through M and A. So I got to be able to buy companies, Snap them into my core architecture and run them like a new line of business. So when I add up the money, it says double digit, not 1, 2 or negative. So we're solving a different problem, ladies and gentlemen.
We are fundamentally rethinking how these customers can run live, how they can run simple And ultimately, how they can grow and deliver unique advantages to their stakeholders and their shareholders. So SAP is in that conversation, in the corner office, reshaping the way enterprises are going to look in the 21st century. That is why I kindly ask you to take a look at the e mail I send you later, To listen to my colleagues today on the unique architecture and the unique advantages that we have, so you can soundly Sort through the choices that you have and think about SAP's higher purpose in the world. And we are going to help the world run better and improve people's lives, 1 quarter at a time, 1 year at a time, but with a bold and ambitious plan for the future. And I hope that you see that today in my dear colleagues as they speak with you.
I thank you for your time and attention. I appreciate the interest that you've demonstrated in SAP. And I can guarantee you that the best is yet to come. Thank you very, very much. Stefan,
Over to you, Bill. Thank you. Thank you. Thank you. Thank you.
That was a very inspiring outline of our market position and the growth potential. And Bill already alluded in his talk with Nick Zitsen. Of course, we also focus on improving the effectiveness and efficiency in the company. And that's a good segue into the next presentation. It's my pleasure to introduce our CFO, Luca Motich, to the podium, and he'll walk you through the financial side of the house.
Luca, the floor is yours.
Thank you. Thank you very much, Stefan. And why is that I don't get to sit on these nice armchairs? That's unfair, I have to say. But I need to do another call out to Stephane and his team.
I'm not sure how they are doing this. But miraculously, they are always selecting a week for This Capital Markets Day in New York that is either before or after the snowstorm. So that's true precision planning, I would say. And precision planning Actually, it's a nice segue also to the topic of my presentation. I'm not sure whether you will recall it, but many of you will have been at the New York Stock Exchange last Dear Ryan announced that SAP would become the founding member of a segment of 1 in our industry, that's the so called RSSG or rock Solid super growth segment in our industry.
And indeed, when you take a look at what we have achieved not only in 2015, but also When you take a look at the confidence that we have portrayed to you both in our outlook for 2016 as well as in our increased midterm ambition for 2017, I'm very pleased to report out that we have executed with precision against that commitment that I've been given. We outperformed our guidance for 2015 on virtually every conceivable dimension. We beat our operating profit guidance. We substantially beat our cloud and software revenue guidance. We have given out on top of these already very strong numbers, a very ambitious guidance for 2016.
And we have increased our top line guidance for 2017 by staying true at the same time to our commitment to expand operating profit at the same time. This is unique in our industry. Bill has said it. We combine a strong growing cloud business with a very stably growing core business. And at the same time, We become more efficient in the enterprise at the same time.
But it's not only that SAP is becoming a substantially larger enterprise. We are becoming more predictable, less vulnerable to external volatilities and frictions at the same time. This is the beauty of our business model transformation. We have seen a great progression in the relative share of our cloud revenues As a percentage of total revenues already, but we are only getting started by 2020. Bill has said it, we want to be at around about 30 Send total revenue contribution from the cloud and more importantly even to a combined with the strong resilient continuously growing support revenue stream that we command, We will have up to 3 quarters of our total revenues by 2020 in very predictable revenue streams with a very high stickiness, creating not only predictability for our shareholders in our company performance, but also planning predictability for SAP to plan our investments and make sure that we hit our operating income numbers at the same time.
So I would say our performance and our progress in 2015 It has been stunning for many market observers. It has been very positive. And at the same time, of course, it has been spurring some very important questions. And I'm here To give you an answer from the SAP CFO and SAP Board perspective on those important questions. So here's the first one.
SAP is outperforming the market substantially. At the same time, we are defying a great amount of uncertainty that exists in the Actually in Q4, one of our best performing industries was Energy and Natural Resources, where we have the whole oil price topic around. So The first important question will be, how are you doing this SAP? What differentiates yourself? Bill has given a strong answer on that, But I want to give you my CFO version of that answer as well based on the same picture here.
In our industry, and it's very important to observe and I've been in Industry now for 20 years, there is only one recipe for sustainable long term growth in both the top line as well as the bottom line. And that is to vigorously invest in innovation, in the right innovation. This is not a business where we can cut expenses in order to milk the business. We need to grow it and we need to expand into new horizons. And SAP over the past 5 years has done exactly that.
We decisively invested both organically in the build out of our Great HANA platform. We acquired a number of really market leading assets. And we combine them in a very consistent framework that helps our customers now to transform their businesses across 25 distinctly different industries, which all have one thing in common. Digitization is everywhere. It's happening.
It's disrupting businesses if they don't choose to disrupt themselves and disrupt the rest of the market by innovating. And our solution portfolio is exactly and squarely in line with this strategic imperative. We have the digital core that can really completely revolutionize core business processes for greater simplification, for greater agility, for greater flexibility. But it's getting even stronger through the strong value proposition that we have to really be able to integrate seamlessly and very in a simple fashion All of the constituents of an enterprise, be it the workforce through SuccessFactors and Fieldglass, be it the suppliers through our business networks, be it the customers through engagement and commerce solutions, be it the Internet of Things and Big Data scenarios through the HANA Cloud Platform and our IoT scenarios. This is a unique picture and it drives stickiness, it drives growth and it drives cross fertilization.
And you are seeing this not only In my statements, you're seeing this in the number, which is much more important. Our order entry in the company Of Cloud and Software combined has been growing 18%, so stronger than the progression of the revenues in 2015. We see that the average deal size has increased, not only the volume and amount of deals. That's simply because of the fact that Our solutions are mutually reinvigorating growth because they are highly synergistic. Now Let's come to another set of very important questions.
You have seen in 2015 that we were growing our core license and Support revenues very strongly, actually in a combined fashion by 13%. This was not expected by many in the market. And so the question arises, Is this growth going to continue? Do we see a long term oriented reinvigoration of core licenses? Do we see a long term stability and stickiness in our support revenues?
Let me give you my personal answer on both of these questions. Let's first come to the license business. And there it has been obvious that S4HANA has been a great source of strength End of growth in the core license business. We signed up more than 2,700 customers in 2015 alone. We are absolutely confident.
No, We know that this will continue in 2016. S4HANA is truly unique, and S4HANA will continue to spur strong interest and therefore Also strong revenue growth going forward. Now we know as well that S4HANA is a great opportunity for us to drive Exponential growth on a continued basis in our cloud business. And we are working heavily and have a strong focus on building out S4HANA as the cloud choice for companies of all size to move their core business processes into the cloud with SAP. So you will ask, maybe, so why is then our implied guidance 2016 only in parentheses assuming a flattish license performance.
Well, for one part, it's because as CFO, I don't want to ever get into a situation that I don't meet the guidance. So it makes sense to have prudent planning. We have certain forces that are at play in the industry. And one important one is that in the LOB, nimble Line of business solutions, we will continue to see a strong trend towards the cloud and we are driving this trend ourselves. We are actively positioning our cloud solutions.
And in this area, you will continue to see classical on premise licenses will be on the retreat. But that's a good news for us because we have the right assets in the cloud. We keep our customers, we grow our customer base and we add Total customer lifecycle value for SAP. On the other hand, of course, also the macro environment is not getting easier. I don't want to downplay I think that SAP Solutions are really responsive towards the challenges that companies across many industries are facing In a downturn scenario, as you are facing it currently in some emerging markets or some industries, that's why we were performing pretty well towards the end of the year, even in those volatile environments.
But it's something to plan out. The one thing that I can guarantee to you is, we will absolutely do better than the rest in the of the industry in classical on premise licenses. And there is always a chance to over perform. We have seen that in 2015. And of course, this team is in for the right and will do its best to achieve an optimal outcome.
But we are very confident around on premise. The next thing that is important is Support revenues. Now for many years, SAP has been telling the story that support revenues is our Fort Knox that this is not going to go away. Nevertheless, there has been constantly that slight concern from the financial markets that And transformation to the cloud may result in an erosion of our support revenue streams. So here is my answer to that.
No, This is absolutely not going to happen. We are in our cloud transformation now for 4 or 5 years. Our support renewal rates Have remained ever steady at roundabout97%. We don't see this changing at all. Yes, we have a cloud conversion program that allows our customers, if They have on premise licenses that they don't use anymore or want to convert the usage of their licenses towards a Commence Red Cloud solution to trade in maintenance at a higher multiple into cloud subscription streams.
So it's a net positive for SAP. But this has a very, very Small impact in the low to mid double digit millions per year. What is a bigger impact is the opportunity for our customers to buy new And hence meet the threshold to migrate their support offerings from enterprise support to product support for large enterprise, which comes at a lower maintenance rate of 17%. They need to hit a maintenance base of €30,000,000 or an ongoing maintenance payment per annum of €5,000,000 or the corresponding local currency amount in order to do that. And this is happening.
It's happening year after year. And especially as we have a lot of success In our innovative solutions in positioning them, we have customers that are moving to PSLE. This is also good news because at the Same time, they typically sign up for premium engagements, but those are shown under services revenues. This has a slightly higher impact than the one of Cloud conversions and this will continue in the future. Net new customers, virtually all of them, in the last year 99% of them are choosing Enterprise Support.
So this is not a debate any longer. So if you want to use a midterm modeling factor, and sum all of these effects up, including the PSLE migration effect of customers hitting the thresholds. I recommend you to model a mid Term support renewal rate net of all of these effects. So classical renewals plus the PSLE effect of 96% at an average maintenance rate of 20% across our entire spectrum. And what does that mean?
It means that it's A matter of fact that our on premise license and support business in combination will continue to grow. If you have the assumption that our licenses May decline just illustratively and hypothetically by a 5% CAGR year after year. You see here an example of a pool of customers worth €1,000,000,000 How they would then create new maintenance revenues by buying every year, 5% less in licenses. And you see that both support revenues continue to grow as well as the sum of license and support revenues continues to grow. That's why support is not something that we should be worried about.
It's a very sticky, very predictable business at high profitability and will remain exactly that. Now let's come to the Cloud, because there the questions are completely different. The first question that we sometimes get is, You're obviously on a great role in the cloud. You have very strong organic growth, at around 30%. You had that for a number of years.
But can you sustain that going into the future? And the answer is yes, absolutely we can. Because it's not only that we had So far a very strong track record that has proven that. It's not only the case that we have already €4,600,000,000 Business in the house among deferred revenues as well as backlog that will find its way into the P and L of SAP over the coming quarters years. It's also that we are not standing still.
We are not only focusing on the portfolio that we are positioning today. We are coming with new innovations on top. The growth that we have seen up until now was mainly growth in our existing Software as a Service offerings, in the business network as well as early traction in the HANA Enterprise Cloud. There are future opportunities that are tremendous. For example, you will see with the digital boardroom, the solution, that is powering this, great Innovation, cloud for analytics.
This is a completely new cloud solution for analytical insights that we have released at the end of last year. I believe it will be absolutely a top seller in our portfolio. We have the HANA Cloud Platform, which is gaining early But we will expand tremendously. We have S4HANA, which we are piloting with customers currently in the cloud, which will become a scaling business very quickly also in the cloud. And of course, we can continue to expand our existing offerings around HANA Enterprise Cloud.
We're working on expanding our partner networks in this space. We are working, of course, also on gaining the further synergy potentials from our acquired entities. Concur has With the Group for 1 year now, there is a lot of further space for growth in this business as well as in the other network businesses. Steve will talk further about this. So that growth trajectory until 2020 from my perspective is very safe.
And I only put safe things into our financial The next question that is often asked is, okay, now how about driving efficiency in our Cloud business? Is it really making continuous progress? And we have seen in 2015 and at the end of 2014 that we had 4 quarters in a row where we sometimes substantially increased the current gross margins. We had in Q4 a situation in which we invested Consciously based on the situation that we had very strong bookings growth in 2015 and we wanted to prepare our cloud data center operations for digesting this growth and setting the customers' life in a stable fashion. But we also gave you a clear outline where these businesses will go.
And we remain steadfast and committed, as Pilar said, to achieving those targets. Our Business Network and Public Cloud Software as a Service Businesses We'll reach an 80% gross margin by 2020 period. They are already on a very good road towards that. Business Networks are around 75% gross margins for the full year 2015, Public Cloud at around 70%. However, with big discrepancies between The scale asset around SuccessFactors, which is at a similar gross margin profile as the Business Network entities and are more, let's say, still Scaling, maturing cloud solutions which come at a lower gross margin, but we'll reach that level as well.
The private cloud comes with a lower gross margin profile as Bill has said, But it's a strategic enabler for the adoption of our solutions. It drives a lot of license business and in the future also more subscription business as customers consume as for HANA in the cloud subscription option. So this is a strategically important business for us. And while it is still negative, We absolutely we have seen in December 2015, the 1st month in which we had a small positive margin contribution from HANA Enterprise Cloud. Through the course of 2016, this business will turn gross margin positive and we're absolutely confident that we'll reach our long term gross margin target latest by 2020 in this business as well.
So absolutely, are we committed to increasing the effectiveness, but also the efficiency of our cloud business. The next question then Bill has alluded to this as well. So if the gross margins are improving, what about the overall margins in the Cloud? And That's almost the nature of law. If you expand your business as it scales even further, as the ratio of Bookings that you get from renewals for which you're not incentivizing the sales force any longer as opposed to net new bookings increases, therefore.
And you see here the comparison from the current state of sixty-forty in a fast growth phase to a mature state where this ratio is probably more like an eighty-twenty. You effectively halved, therefore, the sales commission expense as a relative share of the revenues that you are driving. And that, of course, then boosts the overall profitability in the cloud tremendously. So this effect, as it will be more pronounced, the more you grow first And therefore, your renewal base gets a lot higher. It's one that will call upon us for the next years to put our feet onto the accelerator as hard and fast as we can, drive as much as possible market share gains Because then the end game in terms of the overall efficiency of that business model and the profit that we can drive from it is just getting bigger and more So there is nothing that should worry us from being as aggressive as possible in scaling our cloud business because the returns from the long term are extremely attractive.
And that brings me to the last point, which is the absolute operating profit and cash flow profile of SAP as a company. It has been debated of SAP as a company, it has been debated a lot as at the beginning of last year. We removed basically an overarching company level operating margin metric as the key Uber steering factor of the company. Is this something that investors should worry about? I have a clear answer here as well.
No. It would make no sense In a situation in which SAP is commanding so distinctly different business models, on premise, Private Cloud, Business Networks and Public Cloud, which all have a great growth potential, which all will contribute to absolute operating profit expansion, to discriminate one against the other just because they are on a different profile of growth as well as then metrics of how they can expand their profitability. We will work on the effectiveness and the efficiency of each one of those business models In its own right, we will be vigorously optimizing all of them in line with their individual capabilities, but we will definitely not discriminate one against the others. It's also very important to understand, as I've said it at the beginning, in our industry, we need to continue to invest into growth. There are opportunities out there, Bill has said it, in the incubation areas that are tremendous.
And we need to find the right talent in order to reap those. We need to find the right talent to also open up in our already established businesses the full potential of going to market and really taking market share as we can, as we have now the most modern portfolio that you can find in the industry. That's why we will continue to invest at similar levels like in 2015 in additional headcount, in additional Capacity to support our growth opportunities. And we will also continue to transform our Services business to be really focused on driving What comes for our customers? Services is strategic to us.
I think sometimes we have discussed it about a business that was in need for transformation, for restructuring, for reduction. That's not the real story. We have optimized our business from a capacity perspective. We need to optimize it for outcomes with our customers. That's a much more strategic undertaking for services than just milking it for contribution.
That's also important to understand. However, if you put all of this together, The company, as you have seen from our midterm outlook, is absolutely committed to driving while we are in this fast growth phase, Well, virtually everybody else in the industry is sacrificing profit expansion towards even trying to get close to our growth rates. We are absolutely committed to expanding profitability from the already very high levels. You see the €6,350,000,000 that we have achieved at the end of 2015 to Further heights over the next few years. And you see as well that in the later years of our midterm guidance, when the cloud business has already reached a strong scale that the exponential profit contribution from the cloud will send the CAGR of operating profit growth higher, even higher than it is currently.
So this is a very, very, very strong outlook for the future and a very strong prospect that makes SAP truly sustainable. And cash flow, as a last statement, because this is important as well, should Now as of this year, continue to improve in line with the expansion of profitability. We all know that in the past 2 years, we had special one off effects. Our transformation, restructuring expenses have taken their toll on cash flow. We don't expect that such one off effects will be applicable in 2016.
So the cash flow progression should absolutely be positive. So let me sum it up for all of you what this in my point of view means. SAP, as I said at the beginning, is truly unique. We have a powerful combination of a rapidly expanding cloud business. We are growing faster than most of the pure play cloud competitors that are still scrambling to make even €1 of profit, while at the same time, we have a growing core, which distinguishes us from our traditional competitors who are really heavily declining in this space.
We are, Through our business model transformation, pushing relentlessly towards a much larger, stickier and more predictable business, Creating very predictable outcomes, ultimately also from a bottom line and EPS perspective because we can plan our investment levels in a much more predictable fashion, which will be extremely pleasing to shareholders, but also very important to strengthen our resilience in light of volatilities that we make face in the markets. And at the same time, we are committed to increasing profits across the company. We ran a very successful transformation in 2015, where we really try to make SAP as lean as possible by taking out roles in the company that were faced towards non core activities And making sure that we invest in the right places where we can drive exponential growth. And we will remain committed to doing that, Although we have come so far that we have also clearly said that we have no need in 2016 for additional corporate wide restructuring or transformation needs. So ultimately, SAP is in a very strong path for the future.
And this management team, Bill has said it at the beginning and my colleagues will confirm it as well, have tremendous confidence both for 2016 as well as beyond. And with that, let me come back to my starting statement that without innovation in our industry, you can go nowhere. We have a lot of innovation across the company. Who would be better skilled in order to take you through an outline of where we are Where we want to go next, then our Head of R and D, Bernd Leuchat. Pleahens, please come on stage and take us out.
Thank you.
Thanks, Helica. And
good morning as well from my side. I think you have heard a bold vision from Bill and a strong confidence for 2016 and beyond. I think in addition, Luca has laid out the framework, the financial framework, which makes you confident for 2016 and beyond. And I want to share with you the product and the strategy behind that, that is the inner source why This will happen. And I will talk to you in a strong confidence that we feel older than ever before.
Could you put on the change the slide and the notes on these screens? I just want to start with you sharing a personal anecdote and a few facts which I got from IDC. And talking to them and getting their insights on our customers will go into the future. They shared with me that by end of next year, already 2 third of the 4th Global 2,000 company will have digital transformation at the center
of their corporate strategy.
And 60% of these companies Expect that they will double productivity by transforming processes. And when I say processes, any process in a company from a human based into a software based process delivery. So the digital transformation is no longer just a future scenario, a future vision. And Bill articulated this very nicely. In the meantime, it's not a question if and when a company is doing it.
The conversation with us It's just how we do it and how can SAP help. And technology as an enabler for that transformation He's embraced by the CEOs of companies. I have personally been there in Davos with Bill, with Steve at the World Economic Forum. And what I can share with you that All the CEOs, all the executives see technology as an enabler. And when you heard Bill and when you So Luca's statement, we have gone bold in saying we want to stay a technology partner, a trusted adviser for making all our customers successful in that digital age.
While others, Bill had a few names on the slide, My intent to disrupt their customers. I leave it up to you to judge which strategy is more successful. But what comes clear in that conversation that the transformation is not just an application of Technology of the next generation of technology, which might have been as it was in the past, it means that you have to connect Technology with the design, with the interaction with your customers, with the devices, even with your business strategy and your Processes and in many cases, it's a complete revolution of your business model. And therefore, in Davos, the headline was 4th Industrial Revolution. And what makes that digital transformation so challenging is there is not a one size fits all approach.
There is not a single recipe. But every corporate function is effective. Each and every employee in a company and therefore we have developed a digital framework That allows us to have conversation with our customers in all aspects of their business. And every customers had in the past And we'll have in future customers they serve. They will have employees to engage with.
They will have, and Steve will talk about that later, Suppliers and business networks, they have to even build stronger than in the past. And they will have assets to manage. In the past, more physical assets. In the future, more digital assets connected with Internet of Things. And with our digital business framework, We have a unique position to have a dialogue and a solution for our customer.
1st of all, in any dimension, As well in the core, but more than that. We are the only company can have that is able to have Connectivities between these different dimensions of the transformation. And I would say, In many dialogues, there are fundamental questions which pop up. How do I find customers that want to do business with me, not just in the past, As well in the future in a digital engagement, how can I differentiate as a company between what I did in the past as well successful in the future? And fundamentally, change my offering, my way of selling, My way of delivering, my way of producing, but as well serving and engaging with the customer across the entire lifecycle, not just in a single event.
And we have built with HANA a platform that is able to highly scalable Intelligently and in a smart way, these interactions, the connectivity of the processes and you will see that later, not just in individual domains, but as well on how to run and to steer a company. So let me start with the question where is that digital transformation usually starting. And in my experience and hearing customers, the center of the transformation starts with a different engagement of our customers with their customers. They have the clear idea, mandate and vision to operate with their customers in a digital marketplace with a much more personalized interaction that goes across channels That is much more individual that addresses the individual consumer or the individual customer. And therefore, we have made a bold move in September 2015 to redefine the category of CRM.
Customer relationship management was appropriate in times where business to business, where business to consumer It was okay to manage the engagement with the customers. But now you have to go beyond that. Companies are eager to forge, are eager to build a much deeper relationship, which means you have to simplify the front office. Customers don't like that you transfer your internal complexity to them. So consumer to business is the new reality.
And we have extended an asset which we got from hybrids e commerce With offerings across e commerce, sales, service and marketing, we have added organic investment with high risk profile, with high risk customer experience in order to make across these four dimensions of customer interaction, A comprehensive view for our customers, allowing to have a single contextual view of each Customer they are engaging with, which is consistent, which is personalized and which brings an experience that they could not deliver to their customers before. And I want to share with you an example. Essex, another sports company, They needed 1 central marketing execution platform for consumer information, but of course, across the physical And the digital channels. And they want to reuse that data, that digital information in a consistent manner. They want to have a real time engagement with their consumers.
They want to target And getting that recommendation and translate this in higher conversion rates, again, in stores and as well in the digital interaction. And with SAP Hybris and our IS Retail Customer Activity Reporting, We brought together the strength of HANA as a platform, the strength of Hybris in the marketing space With our industry experience in retail and get a detailed overview of any customer interaction, in this case for ethics, They can target their customers, in this case consumer, using this data and directly interact with them in a digital format. And this was just one little example of a digital transformation that started at the front office, and we made that simple for them. And since we have redefined the category of CRM with Customer Engagement and Commerce, we have won more than 1,000 net new names. I'm not talking about the installed base, which are very loyal to us and Luca shared the maintenance Renewal rate of 97%, they will all go with us.
But 1,000 net new names since we redefined the category of CRM, and then I stopped counting because that journey will go on. But one attribute that runs in that conversation Through all the agenda is differentiation. And when you have that dialogue with the customer, it gets obvious That software, or Gartner calls it algorithms, will become the competitive advantage, will become the differentiation capability And algorithms leveraging this data, in the example I have given you of ethics, it's consumer data. And IP, in many cases, is a question mark. Customers want to have a dialogue with us because they don't want to risk that suddenly they lose the IP and are reduced to a widget maker or to somebody making shoes and the IP is somewhere within IT key company.
And based on the trust and the commitment from us that we just want to be They are technology partner and enabler. Then it's a home run, while others cannot give this answer. But you need as well an answer for them that in addition to our standard offering, we need a foundation That allows them to transform that individual human based knowledge into software and into algorithms. And our answer to that question is the SAP HANA Cloud Platform. It is the most comprehensive Platform as a service tech, which exists in the industry.
Because first of all, it is our answer to extend all our offerings, To extend any application we have in the portfolio, it comes with an integration layer. So it's not isolated Like in some other solutions, you have with HANA Cloud Integration, an integration layer that allows you to connect these new applications in the digital world with your existing landscape. And what makes HANA Cloud Platform different is that we have decided to go for industry standards. Whether you look now for the languages, for the programming languages, you need to build Applications on top of the HANA Cloud platform where we go with standards like Java, like JavaScript. But as well, the way you operate the systems with Cloud Foundry And OpenStack is something where we do not want to lock in customers with their IP into a data center and in a platform we want to From we want to convince with superior value.
And on top of that, of course, we unleashed a massive value of HANA. Our customers can build analytical and transactional applications on that same platform. And again, with seamless integration in their existing landscape. And we have decomposed our entire technology stack and provide these services for usage, for a huge community of developers, of partners and customers. So new UIs, User Experience as a Service is of course available on that platform.
Analytical capabilities, which they have consumed in the past on premise in the business information warehouse are now available as a service. Internet of Things are additional services, which are present in that platform. Social as a service, so collaboration between companies, within companies, between customers, suppliers Essential. And as well mobile as a service is available. So there is no need anymore to implement a mobile infrastructure In your on premise space, in order to build a mobile app, just use the HANA Cloud platform, build the app, put it in a store, download it.
So this is Run Simple Edge is best. So HANA Cloud Platform for us becomes the center of gravity for a modular suite And as well for an extension platform for our entire offering. But we have not stopped there with unleashing technical services. We went beyond that. And with the announcement of hybrids as a service, which is a clear commitment From SAP as an entire company to a microservice based architecture, we are as well providing the ecosystem, the customers access to their data and as well to software services, which we use ourselves to build the next generation of solutions.
So this means a set of prefabricated business services in addition to the technology services are all available on the HANA Cloud platform. And therefore, it's not just an infrastructure as a service, it is a business platform as a service, which we share and where we bring in our more than 43 years, almost 44 years of industry experience into that platform. We saw tremendous growth. We have more than 120,000 Accounts already of customers, of partners. Partners are in the 100 and we have doubled the number of customers Using that platform and going away from customizing and modifying on premise systems like in the past And making a distinction between standard consumption and in future enhancement of their solutions.
So we are pretty proud of the adoption course of our HANA Cloud platform. But in addition to what I shared with you Of a customer specific personalized experience in the front office, in many cases, digital services Become the ultimate product, not just an extension of the product itself. In many cases, these digital services become the future of our customers. And then I talk about changing of business models. It changes, 1st of all, the business models of our customers.
But as a consequence, we have to change our business models as well. So we talked about on premise license. Luca showed cloud subscription, but I see more and more in an outcome based economy, a pay per use, which gives us tremendous opportunities because if we build these models with our customers, If they are successful, we are successful as well. And this leads me to a topic of Internet of Things, where a study from the MPI Group showed That 76% of manufacturing companies will invest in smart devices. That 2 third of all manufacturing companies will massively invest in Internet of Things enabled products within the next 2 years, not within the next 5 or 10 years.
And what amazes me is that gives Then a massive opportunity to not talk with their customers about quality and about service anymore, because breaking down of products can be prevented. And I want to share with you just one example we have implemented with Italian Railways in Europe. Italian Railways was known as a railway company, not very customer focused. Customers didn't have the best experience to go by train in Italy, and we were sitting with them more than a year ago. And they were challenging us how can you help us to go with our business into the digital age.
So what we did is, we analyzed their cost structure and immediately saw there is a tremendous amount of cost for maintaining these strengths. What I can share with you, what all the others did as well, they do planned maintenance based on operating hours of trains. But do you believe that an air conditioning in a train, that the door to a bathroom in a train Needs to get maintenance based on operating hours of a train or rather by usage of that individual equipment. So we equipped There are trains and the most important elements in the trains, which influences customer experience with sensors. So we have now more than 2,000 trains, locomotives and the wagons and the equipment equipped with 6,000,000 sensors We are permanently transferring data.
We analyze it in real time and they have changed their maintenance strategy from an planned operating hour base To do maintenance whenever it's needed. And they have as well with us incorporated knowledge they have Into software, into algorithms, so predictive maintenance is all over the place. And the result is a significant higher customer satisfaction as the things do not break. And for their financial business, it's an 8% to 10% reduction in annual maintenance costs, Not a reduction of a one time effect. It's an annual reduction of maintenance costs of 8% to 10%.
This is just one little example, where we have moved our business and the business of our customers towards outcome and not towards implementing just technology. And all these capabilities are built with the HANA Cloud Platform, where we can Net assets, in this case, trains, where we do real time processing of the data, build analytics on top of that and In corporate, our industry strength that we have, of course, a core business with S4HANA that can take that information in real time and trigger necessary service orders and service technicians. So in addition to predictive maintenance, We are investing in connected manufacturing, in connected logistics, in vehicle networks, but as well Enhance the partner ecosystem. And I have shared with you that we have more than 380 partners already building applications. We could name Accenture.
Rob announced this just a couple of days ago where we built asset health. We have customers like Siemens We have chosen the HANA Cloud Platform with the Internet of Things services, who built their Internet of Things capabilities for their customers. And the possibilities, I can tell you just looking at the time, are endless. And it requires just an imagination how technology And software can influence the business of the customers. And we have reached out to Boston Consulting.
And they predicted The IoT spend by 2020 will be €250,000,000,000 Big number. But I think we are proud already and hopefully Luca you forgive me That we have already made more than €135,000,000 in software revenue in 2015 in that business and we're just getting started. I predict that we see rapid growth in that business going forward. But for everything I have shared with you, we're redefining customer engagement, we're redefining customers business. You have one prerequisite.
Otherwise, you will not succeed in that business. And the prerequisite is what Bill called a central nervous business of a system. And this is a system which does not have the aggregates, which means the inflexibility, which does not have the complexity By legacy technology, which we had in the past, but which allows us to flexibly react To the interaction with the customers, to the interaction with the assets. And therefore, S4HANA Was the strategic decision for us to completely redefine our core ERP. It is the next generation ERP system We have the underlying technology with HANA allowed us to make that massive revolution.
And since the release of our November shipment where we have included all ERP modules, because this was a question I heard many times, From inventory management to the whole sales distribution, warehouse management, but as well the entire Discrete Industries A framework was incorporated in that product and saw great, I think, great adoption just in the last couple of weeks of 2015. Adding industry specific capabilities allowed just in time processing, Kanban allowed real time insight of stock In Automotive Industries, which is something we as SAP and none of the other competitors could offer so far in the market. So we see this as a unique differentiator. And I would say a digital core that brings intelligence, that brings smartness into the business of our customers. And as well here, just some examples.
Merck is turning their ERP into S4. A large division of Airbus has gone live with S4HANA. But as well small companies Like Savanta, which is a small professional service company in Germany, got the software November 15 and their COO Called me 25 days later that they are ready that they go live. So a go live of an entire new application on S4HANA So HANA in 25 days for a small enterprise is something we are really proud of because it shows That the simplicity in the architecture is not just theory. It shows that it's reality.
And that we have Come to more than 2,700 customers in 2015, alone in the last quarter, this number was doubled. We have in the meantime more than 100 lives across all our 25 industries we are serving and across the entire globe Brings me to the bold statement that while everybody at SAP who is longer with the company is so proud of the success story of R3 in the 90s. I can share with you that S4HANA's adoption curve is significantly faster and is significantly better than R3 in the 90s. It took us in R3 2 years to come to these numbers. And now we launched the product in February and end of 2015, we have already more than 2,700 customers.
But we would be not SAP if we would not go bolder. By redefining our Analytics We as well redefined the way how you manage, control and steer a company. From our perspective, in a digital age, Running a company means it has to be data driven, it has to be fact driven, it has to be real time and it has to incorporate not just data from the past, Simulation, planning and prediction has to be part of a technical capability how to run a company. And therefore, we have used our newest member in the analytics portfolio, Cloud for Analytics and build a digital boardroom for the company. Since Summer 2015, we run all Board meetings and all Supervisory Board meetings with our digital Boardroom, which has content From cloud for analytics.
And when I say cloud for analytics, it means that the product, the code itself runs in the cloud. Data can be in the cloud, of course, but it can reside as well on premise. Some companies are still concerned of giving all the data into the cloud. It's their decision. So we give the flexibility to them.
And we allow them to not just Look at prepared binders of hundreds of PowerPoint pages and Word pages, we allowed them to have an interactive dialogue In any Board meeting, any question can be answered in real time. While others still think and that differentiates us, But we are proud of being that thought leader. They think they have to copy, I call it, suitcases of data From one system to another system where they have a fast planning simulation analytics engine to get insights and then what are you doing with the insights But somehow you have to transfer again the insights back into your execution system. We have gone a different approach with the digital boardroom. And therefore, it's my pleasure to have Christian Klein with me, our Chief Controlling Officer, Who gives us an insight on how a digital boardroom is used at SAP, at our boardroom, at our supervisory board meetings.
So Christian, first of all, thanks for coming with us to New York. Thanks for staying with us at the Capital Markets Day. And please give us And inside, and according to Luca, do not disclose all the details of our Q1 business already to their audience.
Let's see.
Okay. Thank you, Bernd, and also welcome from my side. So my name is Christian Klein. I'm running Global Controlling of SAP. So today, I'm very excited to show you in the next 10 minutes about the product innovations Bernd just outlined about how they completely changed the way how we handle big data, how SAP, but as well as many other S4HANA customers are able to analyze, predict and plan the financial performance of the company.
The boardroom we see here is connected to the S4 productive System of SAP, so we see real data, we see live data and we will show you how we are able to Process millions of internal, but as well as external unstructured data out of the web. Also, because I have here a very educated Audience in front of me, I also have to say that we falsified some of the data because we will look at live pipeline, live customer data. And I just want to avoid that the content is maybe getting too much of interest. So thanks for your understanding. Okay.
Let's go into that. Here, as Bernd said, we are using actually the Board room already live internally. So here you see the agenda of the Board meeting in January. Luca was up to present the financial results of 2015 as well as then based on that given outlook on our financial plan for 2017. So here, You see, 1st of all, a company overview.
That's how it starts. You see the main metrics of SAP P and L metrics. You see the revenue, Operating profit, operating margin coming live out of Simple Finance. You see the analyst comparison. So to check how we are doing against market expectations, You see the latest stats on customer count and headcount coming live out of Centimeters and SuccessFactor.
And then last but not least, we also Look at our very positive share price development against our competitors and also have here on the left hand side the market news to understand real time about what's going on in the market. Very important also to mention here, this product is now designed in a very flexible way. So we had other sessions in the Board where we talked about the delivery, the cloud delivery strategy of SAP. So what are the end users are able to do? Change the content in a very flexible way.
So to really have the Board have an educated Discussion around what are the operational KPIs of our cloud business, what are our TCO targets for the cloud delivery. So this can be changed in a very flexible way. Also very important, the analytics solutions, which I know out there in the market, I would say the journey stops here. If you are lucky, you get some semi automated data integration, for sure no real time data, But I would say the journey stops here. Let's continue our journey with the Digital Boardroom.
And let's go deep into the various segments of SAP. If we go into our on premise segment, you see here, software license, a very positive trend in 2015. Yes, we see here the support revenue, my people can put live commentary into the solution, color coded The highlights and the lowlights of the quarter here very positive, the low churn Luca was talking about. And then we have last but not least here also the services revenue where we also see a positive trend after we launched 1 services at the beginning of 2015. On the 3rd screen, we see the context.
So when I look here on software revenue, I see here the world map showing me the performance of our different market units. So if you example look here, the size of the bubbles signals the volume which was closed on the software revenue side by each market unit and the color coding shows me Did the market unit made a plan in 2015? Yes. I can also go here deeper. And when I click here, I see here for the U.
S, Jennifer Morgan is here, Very successful year, biggest market unit of SAP and they made their plan. Congratulations to you, Jen. Okay. But this is still not enough. Let's go deeper.
So now I want to also understand Here in a very aggregated form, how did our regions perform, how did our solution portfolio perform, I get this condensed Out of Simple Finance. And then I know the Board quite well. So in the 1st week of January, it was all about celebrating the great results we had in 2015, But I knew exactly that Bill was asking, latest in the 2nd week of January, what is the status on Q1? So what we also then did here is, We have here a live snapshot of our Q1 pipeline. The bubbles here, the size of the bubble signals The size of the customer opportunity when we have here and we have also here the possibility for our business analysts on the ground to drill even deeper.
So if we do this for a second, you can say here, open Explorer. This is for me now the workbench. Now we can see here the customer bubbles. Even I can even go down to the transactional level. When I click here on one of the bubbles, I see here the customer name coming up.
And also and if I would like to, I can drill into I can see then Which sales executive is working on this customer opportunity, I can see the status of the deal. So I get really I can really drill down to the lowest level of information if I want to. So that's especially for our business analysts on the ground. I can slice and dice the pipeline. I can look into now if I would like to into EMEA.
So I get the live pipeline out of EMEA of Frank Cohen's team. Also very important to mention is now that this is also still not enough. Now we have a lot of data, CRM data, pipeline data. But what is even more beneficial for the business is now behind each of these bubbles, there's a certain likelihood of closing the deal And there is a certain closing date maintained in the system. So what I can now do with the boardroom with the new generation of analytics solution, I can Go into the software projection of Q1, and this data is now falsified.
You see here the blue line is now thousands of this bubbles of the CRM opportunities. The system is now predicting for me the software revenue performance of Q1. And Rob and Sean can probably also agree with me, The accuracy in the last quarters what we had on this was really absolutely fantastic. So we can see here the blue line, CIM data, but it's still not enough. Now I want to also understand how the linearity is looking like.
I plugged in From Simple Finance, the actual data of 2015, how did the linearity look like? Rob will agree linearity is looking good. So the risk profile of mid quarter is quite low. Good. Also, I take the planning, the Q1 budget Out of our planning system and see how do I compare against our plan.
And everything here on a transactional data, I can really drill down if I want to. Of course, we don't do plan by each day. But into the actual data, I can really drill down to the lowest transactional level if I would like to. Let's stop here for a moment because there's a lot of talk about the business value of S4HANA And the board consumes solution on top. This is where also the customers who are co innovating with us on that Will you stop and say, Christian, this is now really the solution.
This is where I can real time manage my business. This is where I understand the risk profile. And no matter what industry they are coming from, I mean, we have multiple of business scenarios in there, sales operations of Rob. What they can do is Now plug in here the sales capacity. Do I have enough sales coverage on the street to make To close all of this pipeline we're having throughout 2016 or let's get rid of the software revenue, let's go into the cloud bookings And predict the CapEx demand I have for hardware, for infrastructure during the year if we are really able to close most of the pipeline.
And so that's very important to understand. This is really where we and many other customers see the business benefit of S4HANA. Now we talked about actuals. We talked about the current year about how managing that. Let's go back to the agenda because Luca had a second item and it was about the financial plan for 20 in 2017.
So first of all, what we did is then based on the actuals when we had that, we processed millions of data and came up With the guidance proposal for the Board, based on the actual outcome, we looked at the subscription revenue runway and said, Dear Board, this is our Guidance for 2017. And just to also give you a better understanding about how we are doing this now is Really going deep into our different segments of the business. So we see here what we are planning on the cloud side of the house, the explosive growth we are having there, The cloud subscription revenue share. And now what we are also then is checking besides the internal plan, we go again then also into Internal data and validate this against GDP growth of each and every market unit against the addressable market. We are uploading this And then compare, and it's and there's 1,000,000 of data behind where we can really go into this.
And for example, take here Germany And then look at the GDP growth, check that against our internal plan ambition and also check that against the addressable market, which is in there for SAP. And this is still not enough. So also here you have then the possibility to drill down into the different segments of SAP. We look into the operating profit expansion each and every business has to contribute. And also then here, you see here on premise business, cloud business, We also compare ourselves, of course, also against competitors to also make sure that we have a competitive plan in place to outpace them in the future as well.
And the same here on the for the total group of SAP and have here also the comparison against our largest competitor in the U. S. Okay. So this is an example on Especially in this dynamic market, which we are in, on how to assemble a really robust and reliable plan of a company. Come from the actual performance, look at the status where the company is in, then challenge this against the external macroeconomics, Look at the competitor data and then come up with a plan with a guidance which is ambitious, but which is also then driving the company into the right direction.
Last but not least, let's go into the planning system of SAP. This year is maybe hard to read, but what we did is, in SAP, we have a lot of Metrics, how to steer the business. And sometimes in the past, we had a very uneducated discussion around all these metrics. What is the impact of a cloud delivery TCO on the overall financials of SAP? And that's why we build this value driver tree here.
You see here, for example, we have linked all the top line parameters towards the total revenue goal of SAP. So all of our businesses, For example, Steve Singh's business, we have in here the transactional volume we are doing on the Ariba network. We have the bookings in. We have the enterprise support acceptance and weight in and we link this towards the financial goals of SAP. And the same we do on the bottom line To have everyone, the whole company geared towards the financial guidance we have given to the market.
And then on top of that, That's also very attractive again for other customers. We can simulate. We can take one of these value drivers here. For example, take the The new and upsell bookings growth simulate, okay, what is what happens if we go more aggressive on the cloud side versus maybe some moderate assumptions on the core business. The next release will also then show how currency fluctuation is changing impacting our P and L quite a lot in 2015.
But I want to have this real time. I don't want to have my people filling out and just to give you a feel, this is a 400 megabyte axle which we used in strategic planning. And you know this better than I do. Currency fluctuations 2 weeks from now update everything in the Excel and then maybe being able To give the Board an update on some planned simulations in 2 weeks from now. This goes now real time.
We have
here Connecting the actuals to it, we are challenging validating the plan to make sure that we are still on track to reach our ambitious plan for 2017. With that, thank you for your interest and also thanks to the customers who are innovating on that. And thanks, Bernd, to your team We're really working very closely with us in order to make this solution even better going forward.
Ladies and gentlemen, Christian Klein. Christian, thanks a lot. So if anybody doubts that we can bring human intelligence into software and make it use, this was A live demo and thanks to software, we didn't have to go to our boardroom. We can do board meetings here in New York. We can do it in Singapore.
We can do it in the Bay Area. We can do wherever we want then. Let me just summarize of what we talked about. The digital business framework, which we have built and which is designed to enable our customers to win in the new economy, It's not just a collection of assets we have built in the past. HANA as a platform allowed us To redefine certain categories of our portfolio, we have redefined customer engagement and commerce.
We have redefined CRM. We have redefined our core. We have redefined how to steer a company. We are just at the starting point of redefining how to manage assets. In future, it is the challenge to manage digital asset with Internet of Things.
And I think you will hear later that we have a unique differentiator with business networks and Steve will talk about that. So to summarize it, we feel we just Do not have a great vision, Bill articulated. We do not just have great numbers of 2015, which we use in XL and predict what We have a rock solid product portfolio where we are thought leader in all of the categories that are essential for our customers going forward. Thanks a lot for listening. And according to Stefan, you want to do 1 or 2 Q and A.
Thank you, Bernd.
I think we have now time for 2 questions before we go into the coffee break. And later on, there will be a longer Q and A session with all the executives on stage. Here's now your opportunity to ask our Head of R and D directly. Who wants to get started here in the room in New York? I see Walter Pritchard here from Citi.
No, no, don't yell.
Thanks. Bernd, I'm wondering how you're thinking about the HANA database and the HANA Cloud platform as a kind of independent cloud substrate for startups and maybe your customers to build things that are unconnected from SAP. I think we Totally understand the plan around. It's an embedded database for the S4 applications and we understand that the cloud platform is for integration of things that you'd ordinarily connect into SAP or to customize. But there's been talk in the past about this being sort of a PaaS, a generic PaaS.
Where are the
how much R and D priority is going in that direction and do customers want that?
First of all, it's a great question. And just to start, We clearly distinguish between HANA as a disruptor for the classical database and then the HANA Cloud Platform It's a unique capability in the Platform as a Service business. Of course, the HANA Cloud Platform That's the huge advantage that all the capabilities of HANA will be unleashed into the HANA Cloud Platform. But I hope I could Use the 25 minutes to tell you that it is more than just a database, that it is a web development environment, That it has an integration layer where we had in old times PI, that it has business application services. I made the example with Hybris as a service.
And we have more than 2,700 startups. And we have in the meantime more than 380 partners. And the number of partners Startups are growing every day where we are convinced that we built a healthy ecosystem, number 1, for extending our portfolio, But as well as you said, for building complete new applications, which probably have nothing to do with our SAP portfolio itself. And the number which we enhanced by more than 1,000 over the last couple of months is a testimonial That this is not just theory that we take it then serious. Yes, we are at the beginning of a journey and the microservice based approach To decompose our entire portfolio and allow the entire ecosystem community to allow startups, to allow partners to benefit from these services and have the most efficient way to not just get to data, but as well to build new applications on that platform It's something where we feel it's unique.
Going forward, and we are in discussion with many data center providers, we do not want
to have
A lock in position. So the HANA Cloud Platform might run on other infrastructures as well. And as we do not plan to make both announcements today, I leave it with that, but this is a clear plan that HANA and the HANA Cloud Platform Might run-in future at big customers, but as well at data centers of infrastructure providers, which are well known in the market.
Thank you. The second question maybe here, Adam Wood, Morgan Stanley.
Thanks, Bernd. I just wanted to ask maybe a little bit about the functionality you rollout of SVHANNA. We obviously had Simple Finance available from a year ago. The logistics launch was in November. Could you just help us understand how much of the functionality from R3 in the business suite has been ported Over to S4, how much of the vertical functionality and what's the time frame for rolling the rest of that out?
And are there any key milestones within that that customers are asking about? We really need this to
I'll give you a short answer. And then we have unleashed the entire roadmap on our service marketplace, which So I would love to share later. So with the release of the November shipment, the entire ERP core as a functional scope is available in S4. Now we have, as you know, 25 industry flavors. The entire Discrete Industries and Milk Products is as well already available.
And we have in many of the other industries, The functionality which our customers have been asking us already incorporated into the product. There are minor Very industry specific things which are not available. I give you an example. Catch rate management is a small little thing where you have to deal In retail business, if you buy meat, it's not just a cow, because thanks to nature, cows have different weight. You have to deal with 2 currencies, a piece and the weight itself.
These are functionalities which are not in S4, But we as well do not have the vision that we simply move existing functionality 1 to 1 into the future. The same with the Boardroom. We could have just taken existing reports, Existing analytics capabilities and move it into S4 and simply say it runs faster. Now we have gone an alternative approach. We co innovated the next generation Business in analytics, and we will do the same with catch rate management and with all the industry flavors.
So we have a series of co innovation partners Across many industries, and we will, I think, close that industry road map with the existing capabilities over the course of 2016. And then I think it's not a surprise for you if I share with you that there is a series of bold new innovation which comes out, which we have to a certain extent already released. But a pipeline of, let's say, a firework of new innovations this coming set fire and later on.
Very good. Thank you very much, Bernd, for your time.
Yes, and thanks
a lot.
Looking forward to
We're a little bit behind the agenda. We have so much stuff to tell. But now we go into the coffee break. The coffee break will be approximately 10 minutes. We make sure we serve coffee and tea in high And then we continue here in the room with our customer session, which we're looking forward to.
Thank you very much.
Good morning, everyone.
I took away Stefan's job. My job to get everybody seated. Hi, I'm Rob Ensign. I'm the President of Global Customer Operations. Delighted to be with you here today to share how SAP is embarking on our journey with our customers on the digital transformation.
It was right here in New York City. February last year, we launched S4, 1 year ago. And from my Perspective, the investment SAP has made in S4HANA has provided customers with rich future applications. No other company has done this. And I think SAP is the only company that has provided these companies with an amazing future.
It is an essential piece of the picture that allows our customers to connect to the digital core, extracting even greater business value from all areas of their business. As you heard from Bill McDermott this morning, SAP offers a number of line of business portfolios. These line of businesses Have individually exceeded our expectations and demonstrated that SAP's leadership in all of these critical business areas. For example, our SuccessFactors business achieved 40,000,000 total users in the cloud, Eclipsing 1,000 customers on our market leading Employee Central product, and we also added 1,000 Customers in Europe for Employee Central. As we enter 2016, the acceleration of this business continues Delivering value through new capabilities like intelligent services and total workforce management and scaling the Learning and Education business.
Within our commerce engagement and commerce portfolio, we've elevated the entire discussion related to customer engagement following an extremely successful launch of Beyond CRM in New York City. This program featured 7 customers, all of whom are reshaping their own businesses via the Hybris and the Cloud for Customer platform. In 2016, we'll continue to deliver key strategic products to enable A single view of the customer and contextual marketing and other experiences. And at the same time, we will further simplify the front office with SAP Hybrid Suite and move the industries beyond CRM. Our rising Internet of Things business It's fueled by the success of the HANA Cloud Platform.
HCP now boasts more than 2,000 live customers, tens of thousands of trial systems running And more than 100,000 active developer accounts. Finally, later today, you'll hear from Steve Singh on the accomplishments of our business network group. Evidenced by what was shown this morning and the surging growth in 2015, It is clear that our customers believe in the business benefits that each of these line of businesses provide. What is also clear Is the immense demand for accelerating the value by connecting S4HANA, a digital core to our business. As you saw and as Bernd spoke about, more than 2,700 businesses selected S4HANA this past year, and we only launched it in February.
This level of adoption validates that SAP is offering customers a clear path to innovation with a changing world. Simply said, S4HANA is a system that brings simple to life. Many of you spoke about the packaging, promotional packaging. So we launched the promotional package in 2015 around S4, One that was designed to respect the investments our customers had made and that were loyal to SAP, but also to eliminate the barriers for them to get on the next wave of adoption that S4HANA provided. The offer expired at the end of last year, but the overwhelming feedback from our customers was to continue The pricing mechanism, what it's for, in a manner that reflects the widespread interest of our customers to transform to a digital call.
We listened to our customers and massively simplified the pricing in 2016. Customers wanted low entry points to S4HANA to eliminate any financial boundaries that were put in front of them. Therefore, the 2015 promotional offer has been standardized and is embodied in the price that we charge for S4 today. Customers must license the S400 database. Additional innovations on top of the foundation Can easily be licensed separately.
Cash Management and Central Finance are currently already available as additional products, And there will be 6 more additional products announced very shortly. This new pricing model has been widely regarded by customers around the world. So let me go through a couple of quotes. First of all, we went around to pretty much every user group in the world. Starting with the German user group, and here's a quote from the German user group.
DSEG and SAP engaged strongly to maximize the value of SAP solutions for the 55,000 plus DSAG members in Austria, Switzerland and in Germany. We are in continuous dialogue with SAP on all aspects of S4HANA, including the licensing structure. In our intensive discussions with SAP, we placed the prospect and needs of our members. For example, as far as the new pricing model for S4HANA It's concerned. SAP has listened to us and has made the investment attractive.
That is one important aspect to help The SAP customers, our members to decide in favor of S400. From Australia and New Zealand. The Australia and New Zealand user group welcomes the new pricing model and discount structure that has been offered by SAP in relation to the S4HANA suite of products. The user group believes that S4HANA is the strategic platform for the future for all existing And prospective SAP customers and any initiatives that SAP can take to enhance the adoption rates is a step in the right direction. From Sweden, for some time, we have presented our requirements as to what preferred license structure should look like.
The latest SAP S4HANA pricing now includes, in principle, all the requirements we have previously proposed. And from the Chairman of the Japanese user group, I value this license model highly because I see this is based on good intention for existing SAP users. I would like to share broadly with our members. From the Chairman of the SAP UKI, United Kingdom User Group, Philip Adams, We've had good dialogue with SAP over the S4HANA license model and are pleased that SAP will be clarifying the situation for our members and users worldwide. Regardless of whether you see S4HANA as an upgrade or a new platform, it is clear SAP has recognized that existing customers paying maintenance have made significant financial contributions to the development of the platform, which will reduce financial barriers to adoption.
Based on our recent member surveys, customers have stated that they are keen to adopt innovations from SAP. Finally, I invite you to hear what Jeff Scott, the CEO of the Americas SAP User Group, has to say.
It was nearly a year ago that I was here in New York City at SAP's S4HANA launch event. A lot has happened in this past year, and I'm excited to talk about the new levels of collaboration and spirit of cooperation we've had with SAP with S4HANA. This is an incredibly important software evolution for SAP, and it is equally important for our nearly 4,000 member companies. When we think about S4HANA, there's a lot to talk about. We all operate digitally transformed, digitally disrupted enterprises, and SAP is at the center of that disruption and that transformation.
S4HANA is important to us, and we all need it to be the very best software it can be. Earlier this year, we were working with SAP on pricing, and they are listening to the member base, they are listening to the customer base. And And when it comes to pricing, we've seen better models, simplified models of how our members and how SAP's customers can adopt The software faster and get to faster value realization. S4HANA is the next generation of enterprise software, and we're extremely happy at the levels of Collaboration and cooperation we've had with SAP to bring this software to market.
Thanks, Jeff. So our customers have spoken. To further support our customers' desire and S4HANA adoption in 2016, we built out a blueprint methodology for delivering digital to the business to understand the value. We're also pleased to announce that we've provided service incentives for the first half of the year to help these customers move along fast. These offers are access to discovery workshop where we actually identify the value, where they will get the value and how they'll use the value.
Customers also have access to a readiness check, a readiness check that tells them whether their business is ready to actually take S4 and move with it as fast as possible. And lastly, we're offering active embedded planning services, so we can safeguard these customers to ensure that they will be successful. These services we will be providing to our customers for free in the first half of this year. And I trust that these incentives will reflect our commitment to moving every one of SAP's customers and prospects into the digital world. In order to go to the next step, I've now taken the user groups.
We saw the user groups and their commitment to S4, but I also think it's time that we actually spoke to our customers and let our customers come on stage. So with that, I'd like to ask John Henshaw, one of the Board members of HPE, to join me on stage. John? Official title, Executive President and Chief Customer Officer, Hewlett Packard Enterprise.
So I
just know you guys, John.
Thanks, Rob.
Thank you. Okay. So to set the stage, John, Why don't you give us a little bit of color on HPE's business, where you guys are? I know the announcement you guys made a couple of months back. And obviously, you've been extremely busy with that.
So if you can give a little color on the business and where you guys are headed?
Sure. Yes. So we did one of the biggest Corporate splits in history by taking Hewlett Packard Enterprise, which is focused on all of our enterprise customers around the world and splitting it off From what is HP Ink, the PC and printing business. And Meg and I stood on the stock exchange floor November 2 and launched the new HPE Cymbal, so we've now been operating for just about a quarter as a separate company, totally focused on helping enterprises transform From where they are today in their IT journey to where they're headed in the future and accelerating their capabilities within their enterprises. And We did this, so that we could operate in a more simple, fast framework within the company.
When you're running a company that goes from a consumer buying a PC all the way to the world's largest customers, such as governments And large enterprises, it's a lot to keep track of in a given day or week, whereas now we're very, very focused on enterprises and how we And it's been a terrific journey thus far.
So, John, no doubt you guys are going to be successful, great leadership. But you had a lot of decisions to make when you were going through that discussion. Yes. One of them, you spent some time with us and with other companies, But you decided to make an investment in S4. Why did you decide to make the investment in S4?
And how is that going to help HPE?
One of the beauties of separating the company was that we could start in many ways with a clean sheet on how we wanted to run Julie Packard Enterprise. We had a lot of legacy environments and we said, you know what, this is a great chance to start fresh and create a simple environment to run-in. And so we looked at The technology platform associated with that, the CIO works for me, and we sat down and looked at what are our options for our future technology platform. It was perfect timing because you had just released S4. I joined you at your SAPPHIRE conference, learned all about the product.
Jen and I spent a lot of time working Through how we could work together, terrific support from Bill and the whole SAP team. And we decided that S4HANA was right for us to Simplify the way we are going to run Hewlett Packard Enterprise from closing the books to our supply chain to our data warehouse, the whole nine yards. So we are really Happy to help power this transformation internally with us in 50.
Do you really believe in HPE that this is the digital platform for the future that could be the core will be the core of your business. It will be.
Yes, we have already started the transformation. We have got the teams in Palo Alto and in Germany working closely on how to make this happen. And the great thing about it is we are going to do Internally and then be an example for our collective customers on how to do it as well.
So it wasn't a situation, you're an existing SAP customer And automatically, therefore, S4 was by de facto the next step that you're going to take.
No. I mean, that would
We had to earn it from the beginning, right?
You had to earn every bit of it, and you did. We have a lot of options and choices and a lot of people lobbying to be a marquee Account with Hewlett Packard Enterprise, but you guys earned it both in your vision, which is terrific, but more importantly in your execution And how you're delivering the product and how it works and how we're working together to engineer the product not only for our company, but for other large enterprises like ours.
So you and I engaged with quite a few large companies in the last term. We have a great partnership. Where do you believe that partnership is Going on not only the HANA Enterprise Cloud, but the engineering work we're doing together and really driving the adoption globally.
It's a terrific partnership. In fact, as I look at all of our partnership Across Hewlett Packard Enterprise, it's the best example of how companies can work together. And I think in the last year, we've really accelerated That partnership in multiple ways. We have 4,000 enterprise customers that run on SAP today. Every one of them So how can you and SAP help us get from where we are today to the future, get to S4.
And so that partnership, not only in what we are doing internally, but how we are going to market Internally, it's growing. Our SAP business double digits, which is great. Our cloud platform we work on together is fantastic. And then you and I get to have some fun as well out jointly with customers, which is great.
Yes, ladies and gentlemen, I mean, our HANA Enterprise Cloud is over 1500 companies running on it today, and it's expanding at The dramatic rate and HPE is a significant partner for us in bringing that to market. And together, we're able to get these customers productive really fast And really quick and take away the constraints they have to go into S4. So, John, not only as a customer, and I know we've got to earn that every day, but as a partner, Together, the future looks bright. Thank you very much.
Thank you, Rob. Terrific partners. Thanks a lot.
Thank you.
Thanks so much.
John's got a rush. He's got another customer call. This is like live, right? He's got a customer call at 12:30, and he actually wants to read the briefing document before Okay, Tom. Thank you, John.
And then I'd like to invite on stage a gentleman That I actually, to be quite honest with everyone in the room, actually only heard about 4 weeks ago and the Company 4 weeks ago, and I think it's a fascinating company. It's on the opposite end of the spectrum to an HPE based out of Estonia, doing business in Switzerland. But rather than me talking about it, Mr. Jan Tsar, would you join me on stage, please? And the Head of Process At Swiss Properties and IT for Swiss Properties, Jan?
Big round of applause. That would be nice. Thank you.
One of those dull moments in this room. So when you have a dull moment, you got to clap. It always works out well. Please join us. Thank you.
It's Greg Speaker. Thank you for coming all the way from Estonia. Why don't you tell us why don't you educate all of them about Swiss Properties? I think it's fascinating. It's a cool website as well.
Well, yes, unlike HP, which everybody knows, very few have probably heard about Swiss Property. But it's a Swiss company. It was founded by Oliver Wolfensberger with the goal of building residential real estate in a very industrialized way. And we call our approach lean digital building, and we try to be 2 steps ahead of the competition. And that's actually one of the reasons why we chose S4HANA as our ERP platform as well.
And We operate in 2 countries, in Switzerland and Estonia. And we have currently about over 80 employees. But we are very ambitious in our growth. And we aim to reinvent the value creation chain of residential real estate. And the key for this is integration actually.
So what makes us different is that we take care of the entire building lifecycle. So we have By
the way, I had to tell people last night this 5 times over that you do the entire thing because they all said that's not possible.
Well, that's look at us, it's possible. So we are doing it. We are making it a reality. And so we search for the land. We acquire the land.
We develop a project. We do the architecture, the engineering. We do the production by utilizing an industrial prefabrication as timber as our main constructive element. And then we assemble the building. And also after that, we manage it, whether it's either rental or It's sold to the end client.
And so we take the whole building lifecycle and we manage all of it. So this gives us a huge opportunity to do things better than is done currently in the construction industry. As anybody Who's built a house probably knows that there's plenty of room for improvement in the industry, and we aim to do that. And at the heart of this is what we call intelligent digital building system. And We are applying lean principles from the automotive industry, standardizing our designs And putting a lot of effort into actually not reinventing the wheel with every project that we have, which is customary for any traditional construction, because everybody will tell you that a building is unique, it's new, it has It's wow, it's every time we have to start over.
But actually you don't, because 80% or 90% of the building is actually the in construction material. So we focus on creating the standards, creating our digital building system, which holds all of this knowledge and all of these key elements as components sort of like Legos. And we put more effort into customizing and offering more value to our customers. And yes, this is our ambition, and we are we like to consider ourselves quite innovative, and that's why I think it's spectacular, to
be honest. I actually think it's a spectacular story when you read it, and just listening to you. You chose 4, which kind of debunks this theory about SAP running only for the large companies. Why did you select S4 For your business, such an innovative company?
Well, yes,
if you think about it, SAP would not be the Probably for a company of our size, the first ERP system you would put on the table for discussion. But we had a quite a lengthy procedure when we were evaluating what kind of an ERP system we need. We are a production Company because we prefabricate the elements. We try to prefabricate as much of the house as possible to ensure It's in a controlled environment. It meets time, quality and cost.
And therefore, integration was, as I already mentioned, very important to us. And we needed something that would support the whole building life cycle And a future proof platform that we could build on, especially in terms of the digital building system to hold all this knowledge. And we are a small company at the moment, but our enterprise structure is actually not that small because we operate in 2 countries. We have several legal entities. And we have set up our company with the aim of growing and becoming, while there.
So and therefore, when we were evaluating different options, we constantly ran into a problem with either It didn't support the enterprise structure. It wasn't as good a platform to build on. And the key elements of why we chose SAP would be probably The cross platform support you have, you can run SAP on anything. You can run it on tablets, whichever computer. Of course, HANA with the in memory database, that's something spectacular.
And SAP offers a solution where we can integrate everything, where we can bring our vision into kind of reality in terms of The digital age. And we want to before we start construction of a building, we do everything in a virtual environment. We designed the building, completing 3 d, adding 45 d elements. And when we reach the stage where we actually start production, We have already gone through it, everything in a digital form. And therefore, we can do it faster and in better quality when we actually in real life start producing building and putting it up.
So that's great. So we're very happy. We're honored that such a great innovative company. We select S4. But you still got to do the implementation, right?
So you selected the software, now you got the implementation. I know you had a great partner. We spoke about that. Give us a little color. I mean, it was quite remarkable, 2 months or so that you implemented?
Yes. Well, We had a
strong driver for doing it on a very tight schedule. We have a project that is already running and we needed DRP software for managing the logistics to the supply chain management. And therefore, we had a very tight schedule of just 2 months. And I must say, our very skilled consultants, Peter Perna and his team at Intesis did an amazing job of putting it all together. And Before we actually started the implementation of S4HANA, of course, we did the business blueprinting and we had an end to end proof of concept system before that as well.
But I think the keys to the successful implementation of going live on January 18 In 2 months was that we didn't have any legacy Birrah new company. We didn't have any baggage, so to say, that we had to carry along. So we took best practices and we implemented those. And in the end, I think the agility of our small consultant firm helped us immensely.
So up and running, implementation going, amazing company, innovative company. How do you believe SAP will help support your growth in the future?
Well, after hearing all the great speeches here today, I have more confidence in the choice that we made with SAP, because I really see it as a platform for the future that we can build on. And we have A lot of ambition we have, the vision of our lean digital building is something It's new to the construction industry. If you look at other industries, it's maybe not so AG. But in In the construction industry, it is something very disruptive. So and this is something you guys are doing.
I mean, SAP with HANA is also disrupting the business. So We feel it's a very good match and we really hope to capitalize on this with using SAP S4HANA as the platform to build our intelligent digital billing system.
Great, Julian. It's a fascinating story. It's an innovative story. I'm definitely going to attract your company success and I look forward to meeting your founders, and I wish you all the best. And thank you for taking the trip and bringing it and sharing it with everybody in the room.
Thank you very much.
Thanks for having me.
Okay. Thought in summary. We do a couple of things in my thing. I actually took out parts of the speech to make it a little bit shorter, so I can give you some time back. But one, we want to Talk about where we take in S4, how the lines of businesses connect with each other and how the core is the center of running simple and running live and how all of those pieces do connect.
Otherwise, it's important that we share with you what users are saying. I don't think you would get a bigger user population than Australia, New Zealand, Sweden, Japan, The German user group, the Americas user group, all speaking to the strategy and the pricing related to S4 and how it connects. And as I told folks here, the beauty of S4, we see a significant opportunity not only moving forward in 20 But how it brings the other LOBs into play and completes the vision for our customers. And lastly, with HPE and John And Jan, proof points that not only can we bring out S4-fifteen eleven, that's Bernd's code name for it means Version, it means 2015 in November, we actually released a new version. So 1511 And in 2 months' life, a customer's life with the full end to end, not just financials, but the full end to end piece, and they're running their business and being extremely successful.
With that said, I'd like to introduce a man who actually does not need an introduction. His Friend and colleague, he's running the Business Network Group, ladies and gentlemen, Mr. Steve Singh. Thank you. And the temperatures feel it.
You get pictures? All right. Well, first of all, thank you very much. I appreciate all of your times. In fact, this is my 2nd Capital Markets Day.
I'm very happy to be back here. This is it's fun just to I live in this business along with my colleagues, But it's fun to listen as we talk about our business. This is an incredible company with a rich legacy, not just in the businesses that we operate in, but also, Frankly, the innovation that we're driving across the entire organization, some of the things that Bert talked about, about you're starting to see in the marketplace, And you see even more and more of that as our products and services are adopted more broadly. So look, as much as I would love to spend A couple of hours deep diving into the 3 businesses that I have the privilege to oversee. I want to be respectful of your time and really hit a couple of core points.
First of all, I'd love to tell you give you a brief update on how we're doing since we met last year. I'd like to talk to the drivers of the growth that we're seeing across the Business Network Group Companies and also what our expectations are on a going forward basis. I'm supposed to have a clicker, aren't I? Okay. Let me be very clear on what the Business Network Group products and services are.
They are 3 market leading best in class companies, Concur, Ariba and Fieldglass, focused on the travel and expense space, the procurement space and the continued labor market. I hope all these brands I'm very familiar to you. They're literally the best in class companies in their respective space. As we think about how do we drive the investment decisions And priorities for each of these businesses, there are 2 core drivers that come to mind. Thanks.
We look at it from the following point of view. Each of these markets is at scale A multi $1,000,000,000 opportunity. Concur has the potential to be multi billions in revenues. Ariba has that exact same potential. Fieldglass has that exact same potential.
What's important to note in each of these businesses is that today we're operating in single digit for Fieldglass, low single digit market penetration For Concur, single digit market penetration and for Ariba maybe low double digit market penetration. Very, very early stages of adoption. And I'll just share a metric that I know I've used this with you before. The just to kind of put this in perspective. If you look at the companies that we can serve effectively in cloud based offerings around procurement travel and continued labor, Companies have 50 employees or more where we can drive incredible value for those businesses.
Across the Americas And the EU, there's roughly about 1,000,000 corporations that fit that definition. Today, Concur happens to be the most penetrated of those three assets within the Business Network Group. And then we serve about 35,000 customers. So we've got a little room for improvement. Right now, I realized that I'm Totally messing up the guys on the slides.
I am off script. I apologize for that. If you think about that as opportunity. One of the drivers of how we think about investment decisions, market penetration is one of those drivers. The second is that we think that every one of these Segments, not only do we deliver incredible value for our customers, we have to make sure that we are in a position to be absolutely the best company in that space from an innovation perspective and also from a reach perspective.
And so not surprisingly, the investments we make really focus on 2 categories, Driving the innovation curve in each respective market and driving distribution investments. And those distribution investments can be focused specifically within those groups, But they also are very heavily focused on leveraging the relationship that we enjoy with the rest of the SAP Global customer team that's obviously led by Rob. Why don't we move one slide forward? Thank you.
Let me tell you
a little bit about each of these businesses. So, I know Concur is a relatively new member of the SAP family, and I think all of you have some insight into the Concur business prior to the SAP acquisition because it was a public company. We were growing at best in class growth rates, 30% plus bookings growth rates on a year over year basis. In the 12 months We've now been a part of SAP a little bit more than 12 months. We've seen those bookings growth rates accelerate above and beyond that.
In fact, they're literally operating at best in class Growth rates that we're seeing across other cloud services. So, fantastic progress in the last 12 months. There's a couple of things within that I'd love to share with you. It would be natural to assume that as a part of SAP that the lion share of the growth we're seeing is within the SAP customer base. And what I'm really proud of within the Concur business is, of course, we're leveraging the strengths of the GCO organization and seeing great adoption within the SAP customer base, but we continue to see fantastic adoption outside of the SAP customer base.
So about ballpark numbers, I'm not speaking to specifics, About 75% of our business still comes from outside of the SAP customer base. And that's an important metric for us. We want to continue to drive that level of engagement across the universe of customers that are outside of SAP. Let me highlight a few metrics around Ariba. So, Ariba is a business that I know all of you are very familiar with.
One of the first priorities in 2015 for us in the Ariba business Was to drive further investment in innovation around customer centric features, things that our customers are looking for that could drive value today for our customers. And we had a lot of new innovation, things like Ariba Pay, things like Spot Buy that we delivered into the marketplace And a very dedicated group of individuals led by a fantastic executive named Alex Esberger, what we've seen across the last 12 months is Not only faster innovation delivery, but naturally when you drive faster innovation delivery, what you're also going to see is faster customer Adoption, in fact, in the most recent quarter, the Q4 quarter for Ariba was literally the strongest quarter in the history of Ariba, And we see the opportunity continue to drive that kind of growth for the Ariba business for years to come. By the way, that's the same statement that I can easily make for Concur. Strongest year that we've ever seen for Concur, and we see years and years of opportunity within the Concur business space.
Let me also just give
you a couple of highlights around Fieldglass. Fieldglass is a, And Frank, in partnership with SuccessFactors, delivers total workforce management solutions for our customers. But by itself, it's focused primarily on continued labor management. It's a marketplace that is very young. It's a marketplace in which Fieldglass sees It's still fragmented marketplace, but Fieldglass is the number one player within that marketplace.
And what we saw in 2015 is about a 25% growth in the number of customers that we serve with the Fieldglass Services. Frankly, we expect that growth rate to continue to be as strong or even stronger in the years ahead because of just the young the early stages of market penetration that we're in within that business. One of the things that's important if you can deliver best in class applications, which is The top priority across all three of those organizations, one of the things that we look for is, well, what's the measure of success If you're really investing to deliver best in class applications, obviously, customer success, customer happiness is a big part of that. But Like every other business owner, what you want to see is, I want to see win rates go up, right? I want to make sure that we continue to see fantastic win rates in our business.
And again, I'm not going to be very too specific on this, but at Concur as a public metric, prior to the acquisition, you saw our win rates in the 80% plus range. What I'm really happy with is what we've seen is that those win rates have continued to climb at Concur, they continue to climb at Fieldglass, they continue to climb at Ariba. If we can operate at those levels, Then my feelings are starting to do a fantastic job. And that's what we're focused on. I'm going to move forward just a couple more slides.
One of
the things that I hope you hear from me is that this concept of focus, It's really critically important to us because it actually drives incredible success for our company. Each of these businesses, if That big an opportunity, they deserve the time and attention and focus that should be afforded to them so they can actually fully realize their potential. And In fact, that focus is not just within the existing marketplaces that we operate in. One of the things that I think is a huge leverage opportunity for SAP going forward is really an attribute that we Brought into the SAP business really from Concur, right? SAP is a fantastic go to market model for our ERP solutions into the SMN marketplace.
But for our cloud solutions, one of the great strengths of the Concur business is that we have an exceptional go to market machine around small, medium and national accounts. In fact, for Concur, about half of the business that we signed in any given quarter is really focused on that segment.
One of
the priorities you're going to see across Ariba, Fieldglass and frankly other cloud solutions at SAP is we'll continue to optimize our solutions to serve that market segment, Small, medium and national accounts. And we'll take the expertise that we have within the Concur business, the SMN channel and replicate that or augment it to make sure we can actually leverage that advantage for all of our public cloud applications. The objective is we want to be able to make sure that no matter what size company you are,
We want to be able
to run your entire business for you with best in class applications. Now, look, obviously, we realize that our customers will sometimes choose A wide range of products, they may come from SAP, they may come from other companies. But our view is, if we can make sure we're best in class, Make sure we drive incredible integration across our products and services as well as external products and services. Our customers get to choose. And our view is if we're best in class, they're more than likely going to choose us.
And in fact, that's actually what we're seeing. Let me advance one more slide. Bernd spoke to this concept of microservices and how integration is actually occurring or can occur across a wide range of disparate business applications. I wanted to kind of bring that down to a very simple example. And this example is important because if you're that if you can drive that level of integration And truly focus on every single area that we have, whether it's travel or procurement or continued labor or whatever cloud service we deliver.
If we can drive that level of integration and be best in class, you absolutely have the capacity to say, Mr. Customer, choose what you'd like And all these products and services will integrate naturally. So I'm going to give you a real quick example. This is true experience that I had a couple of days back and I guarantee you, If you're using Uber, Spotify, Concur, you can enjoy this exact same experience. I happen to use the Uber app called a car.
Of course, I'm a Spotify customer. And I've got my Spotify playlist and I happen to be listening to it on my iPhone. As I hopped into the Uber car, it automatically connected to the car and my music was playing on the in the car. And as I exited the car, what happened was what you would expect. As I exited the receipt for that car ride went automatically into the Concur expense application.
What happened here was really interesting. You saw a very connected seamless experience that happens automatically behind the scenes for you. And for me, the actual transaction underneath that was invisible. It just happens. The experience is what I actually enjoy.
And that type of connected experience, that loosely federated model of how applications come together, that's the future of how applications will work with one another. That is, by the way, not just an example that you ought to see within the consumer space, the example I just highlighted, but But it's also what you want to see within the enterprise application space. So for example, today, Fieldglass and SuccessFactors Through Web Services, integrate and deliver on a customer by customer basis, what's specific to that individual, what's needed for that customer, A total workforce management solution that's optimized for that particular customer. That's the value of Web Services. That's the value of incredible focus within our businesses.
And frankly, that's the benefit we're seeing as we run these companies and Business Network companies in a model that says go focus on your particular Please make sure you're exceptional at it and make sure that the integration is a standard part of how we operate through Web Services. Let me wrap up with the following. I really believe There's a few things that I hope you'll take away from this, from the set of comments you heard today. Not only are we continuing to grow wonderfully in our core business. Actually, let me back up.
Now we continue to go wonderfully in our cloud businesses, the acquired businesses, which you would expect. In fact, we're seeing those growth rates not only hold, but in some cases actually go up. But we're also seeing an incredible opportunity to drive growth in our core. There's not a lot of companies in the world that can say that. That's an incredible position for our company to be in.
Now driving that value, It's easy for you to take that and say, well, that's really at the global and large enterprise segments of the world. That's today. What you're going to see from SAP over time is we're going to be able to take those set of integrated services, best in class integrated services and drive them through to customers of all sizes, consumable in the way the customer wants to consume it and usable in the way the customer wants to use it. That for me is an incredible opportunity for this company, incredible opportunity for our shareholders. So with that, I'm going to wrap it up And I guess we have Q and A.
Great. We'll invite the rest of the board back up for Q and A.
Thank you very much, Steve. We now have a final Q and A session with all the executives. I'd like To ask Bill, Luca, Bernd, Rob and Steve to join me
here on stage for the
Q and A. Also a reminder to those of you who are Following this event over the web, we do have the opportunity to take questions by e mail. So please do send us questions by e mail to investor. Sap.com. We just wait one moment till the chairs are on stage, and then we can get started.
Good. I think we are complete. And maybe we start with a question here in the room first. I have one for Mohit Wawalla, Goldman Sachs.
Yes. Just a question around these investments that you're making. Can you perhaps, Rob, initially talk about The kind of increase in your coverage area that just gives you tying back to the point Bill made that it's about kind of growing the market share. What Luca said that going as fast as possible to gain some of that market share in the cloud. So where are these investments going?
What are they specifically? And what's the kind of The increase that will bring to drive that revenue acceleration.
I think there's let me I'll do it first. I think we made, obviously, some investments in terms of the data center structure, not only internally, but with partners. We actually have More than 100 data centers where customers can actually drive S4 and other products into. We've seen a tremendous amount of Productivity increases before we actually needed to put headcount increases in from a sales organization as the different line of business Organizations together with the core industry account executives have come together. I would say the productivity has increased by probably close To 18%, 20%.
And now in 2016, obviously, we have to put some more Feet on the street, and we've actually done some changes to do that. And as part of the 2016 plan, we'll put in I don't know what it is, a percentage, Luca, And we are putting more coverage model add on into the field.
But you will still need to increase the productivity even in
We will still need to increase the productivity. We still need to increase the revenue, and we increase the scale as well.
And have you given any thoughts you potentially have more kind of specialized segments within the sales force, given a lot of these newer products Actually,
we have
and Steve can actually jump in because Steve is the new member of this group here. But we've actually been specializing for the last 4, 5 years. So we actually have a specialized success factors, HCM practice, 1 for customer engagement and commerce. We have a platform sales team. We have Ariba
core group, a Concur core group.
And it all comes together as how we manage customers at the industry account level. So we've been doing that for a couple of years and to the point where I think we've perfected it now. And I think the results show that we're actually able to scale every business at the same time as driving the core of these businesses. I told What's beautiful about S4 is when you see a company invest in S4 and they focus on the digital platform, you actually start See them saying, well, now I need to acquire SuccessFactors. Now I'm looking at Concur.
These pieces start to fit together, and it makes a lot more sense for them. Steve?
I'll just add a couple Thanks to this.
Being best in class is more than just being best in class in products and services. It's being best in class in distribution, helping our customers understand the value they can get out of our products and services. So, investing in specialty parts of our sales organization, they understand that particular category is critical. Having said that, I would say that we do this with incredible discipline. I mean, one of the things that I think is underappreciated in the SAP story is that our Cloud businesses, The things that today are still high growth, heavy investment parts of the business.
These are businesses that operate at best in class operating margin.
And at scale, all of them individually at scale.
And maybe just the last comment from a structural perspective. It's important to understand that Given the company that we are right now and the fact that we run highly integrated business models in which a singular focus only on R and D or only on go to market investments and only on And only on cloud delivery investments would not yield the perfect outcome from a customer value perspective. We run An integrated portfolio planning process, which starts at the level of our R and D innovations, which then extends nevertheless logically to provide the go to market capabilities as well as the cloud delivery capacity in order to drive that. And maybe Ben To round that up, you can give a just very brief outline of what the key investment areas from an R and D and innovation perspective are in our overall portfolio. Yes.
I would add that we have 2 main areas. 1 is to feed the market With new innovation, but as well looking at the rich portfolio we have, we have a huge investment into a converged cloud, because we want to allow our customers to focus on innovation and not like other vendors do, to spend time on integrating different technology stacks into an end to end solution. So our entire cloud We'll run on HANA and we will, as I unleashed before, we will rearchitecture Our entire portfolio to expose services on the HANA Cloud Platform. This is a significant investment we have started last year, including the Business Network Division areas. And then while we bring out New capabilities, new innovative solutions to the market.
In future, it's not just an investment into development and Go to market, it has to be on day 1, including a cloud delivery capability across The relevant market segments where we think we will have significant success.
Thank you. We take a next question here from Mark Midler, Sanford Bernstein. And there was a question here in the second row. It's the next one, please.
Thank you. And thank you for the additional information and color you've been giving today. I'd like to drill in on HANA and HANA opportunity. Specifically, given the new Pricing on S4 for HANA, how should we think about the lift that is generated by the attach of HANA to S4, If you can even drill into how we think about
the lift that the client is running on
premise, enterprise cloud, HANA Enterprise Cloud versus SaaS?
Well, I
think the first thing I would like to mention, because I hear a lot of technology being discussed today, And that's good because we have the best. Is the design thinking and the innovation that goes into these enterprise relationships It's of paramount importance because once you explain all that you've heard today to an intelligent C level executive, they all want it. Then it becomes, do you know my industry? Can you architect this for me? And how quickly can you get me to value?
Design Thinking and Innovation It's at the bedrock of SAP. And please know that we've been investing in that for about a decade now. So we're way ahead of anyone. And anyone that needs to buy it is going to still be many years behind us. On the subject of HANA, S4HANA and the HANA Enterprise Cloud, A lot of people don't realize this.
It's a great question. HANA is now a $4,000,000,000 business. So when you think about what HANA has become Since we introduced it to the market, if you take the licenses and the support of HANA from 2010 till today, this is a greater than 4,000,000,000 business. Now your point is well taken. HANA on a standalone basis, as Bernd rightfully said, It's a very disruptive database because soon everyone is going to realize that you have to have in memory Pure play column store database to do the Internet of Things and the other elements we've discussed today.
Furthermore, on the HANA On a cloud platform, we just really introduced that to the market last year in Las Vegas with Bjorn and Steve Lucas, and it was a big hit. And now the pipeline is overflowing with HANA Cloud Platform for using unique Applications that are the secret sauce like Jan talked a little bit about, some unique magic for his unique business. And then you have the HANA Enterprise Cloud, where like the customer I told you about yesterday, he doesn't want his IT team to touch this. He's like, just run it for me in the HANA Enterprise Cloud. So now we have a database conversation, we have a platform conversation and we have a brand new cloud conversation.
And incidentally, as Rob said and Steve, every time we have these conversations, we end up winning the line of business against the narrow ones. And we end up entering into the business network conversation. And what's really fascinating, When Steve talks about only 25% coming from the SAP install base, can you imagine when everybody across 305,000 Companies in the SAP installed base in sales or the partner network starts selling this stuff. So I can easily see the period from 2016 to 2020 Being the glory days of HANA compared to the 1st 5 years where everybody did everything they possibly could to disavow it, And now it has become the standard in memory database for enterprises They want to capitalize on the beauty of this digital age, as I think Jan, you pointed out quite beautifully today. So everything comes together in every enterprise around this concept of design thinking and innovation Per industry with that as the ultimate platform.
Maybe to just expand on that from a quantitative perspective to give you a certain impression Kind of the trajectory in terms of additional attach. If you take a look at our combined cloud and Software revenue growth of 12%, if you take a look then at the comparison to our combined cloud and Where order entry growth, which was at 18% for the full year, if you then add the fact that a substantially larger percentage than that was actually driven by multi element transactions irrespective of their size, but by deals that in terms of the growth that had more than just one sales bag attached to them. So including different elements of the cloud, including, for example, also analytics software that is more and more bundled together with HANA like those solutions that you have seen in Ben's presentation before. It gives you a feeling that with Hana being now available as the powerhouse of a completely rejuvenated and re Architected suite, that attached possibility has just multiplied itself because the value that
you can create through end to end Process integration across the cloud and as well as across the core has just magnified. And S4HANA, just for the record, is the HANA database. So only HANA with S4 can do the things we discussed today. That doesn't mean SAP is uncooperative with other companies. It just means you have to have the new architecture and it has to be on HANA to do what we told you customers want to do today, Just so there's no confusion on that.
It's HANA and it's S4 in combination. That's what we're doing.
Okay. Thank you. Take the question here.
Hi, thank you. It's Keith Bachman from Bank of Montreal. I wanted to ask 2 questions if I could. First, you mentioned the pricing changes to try to Tice customers, how investors see that? In other words, what's the economic impact of extending those pricing changes?
Will that Impact the maintenance areas or how will investors judge that? And then secondly, I wanted to ask about the business network. When I have attended some conferences around SuccessFactor and other areas, the comment has been back. It's not well integrated back to the rest of SAP and I understand that you are focused on that. But how might that be a further lift as the integration I presume between Fieldglass and the business network improves over the course of the next year or so?
Thank
Maybe I can take the first part on the pricing and impact on maintenance, because the impact is So we will sell more licenses and therefore maintenance will go up. So there is not at all a negative impact on maintenance here. Actually, what we did now is actually we took the classical pricing structure that we had in place With the Business Suite, we simplified it. That is making the conversation with the customer easier. We extended a pricing for the S4HANA foundation, which is extremely reasonable, very comparable With the Business Suite foundation pricing that we had in place before for the classical suite, so it's a very attractive pricing.
We continue to harvest, of Of course, the potential of HANA through the corresponding HANA licensing. And we see, of course, the great potential with The new scenarios that we can now drive to expand the reach of S4HANA in our customer base, which will result in additional users being deployed under the simplified pricing structure that we have in place, which will drive additional upsell opportunities beyond just converting 2 S4HANA with the HANA licensing that obviously needs to occur. That's the way to think about it. So very non disruptive, very well accepted by the customers and simplifying the conversation between the customers and SAP. To the business network?
No, no. I'm fine. So Let me speak first to the integration and then to the opportunity that it affords us. 1st and foremost, there's actually a number of our integration touch points that Existing across not just each of the business network applications to one another, but also obviously back to S4 or R3. In Ballpark is the summertime period of 2016.
You're going to see native ACI integration deep into the S4 environment as well as frankly into R3. And so I think some of the real time benefits of that integration will be fully realized. And I think some of those the comments around integration will be a thing of the past. Having said that, it's also important integration to understand that if you think about how applications are used And the complexity that comes with multiple customers using it in different ways, you really want to be able to drive integration in a real time model through web services and a real time That's appropriate for that particular customer. And so even when we're done with the HCI integration, you're still going to see years and years With additional web services level enablement of integration across all of our products and services.
By the way, just one more data point and then I'll speak to the value around that. Think about something like Fieldglass. It's already got natural integration touch points into Ariba. It's got native integration touch points into SuccessFactors. The value fundamentally is exactly what you'd expect, which is the customer gets a better experience.
And that really drives Greater adoption of each of our best in class applications. And so the strongest position to be in, in my mind is saying, look, Mr. Customer, you have choice on whatever you want to buy. You don't have to buy everything from us. But if we're absolutely best in the world at what we do, deliver the best value equation and we integrate it, I'm pretty sure we're going to win a lot of business.
And that's what we're starting to see. So the net is we're seeing uptick in opportunity across our customers to buy more and more of our products.
Thank you. Before we take a question from Phil Winslow, Credit Suisse, we have one question here on the by e mail from John King, Bank of America Merrill Lynch. And again a question on S4HANA pricing, maybe Rob you want to address this. So is the upgrade if the upgrade itself is at no additional cost, Can you help us understand what is the single biggest contributor currently to licensing?
Is it upsell, particularly new modules or net new customers? So with kind of 10 months under the belt selling S4, right, I would say The move by 2,700 companies to move to S4 meant that 2,700 actually licensed intana as a starting point. I would also say that probably every one of them actually added new users because it's so much easier to use S4. It's tailored to what you saw Christian Klein present. So we're starting to see much more companies get a higher user base.
And the Question to upsell. Pretty much the new products that are designed on top of S4 are being sold e factor into these bases. So we see a combination of all of this, high customer adoption in the existing customer base, adding new users to that at the same time, And they're actually taking on the new models like cash management. And even more than that, the analytics, the digital boardroom, Pretty much probably every one of those companies actually signed up for that as well. When it comes to new customers, I I think when new customers look at this, they look at S4 as really the only platform that does what it does in the market today.
It's the only solution in the ERP space, which is newly architected for the future, which is rapidly simple, Avoids the complexity of the '90s and 2000 and gives them a real chance to compete in a digital world, whether you are a 100 person company or a company that's been around for 100 years, this is what the massive difference is. And when you compare what else do you compare with? You could compare with cloud based ERP software that is 10 years old or you could compare with on premise software, which has been rewritten, which we don't know whether it's This is clearly the only future ERP platform that will meet the digital thing.
And I
think these numbers basically state that.
And one piece of information that you might want is also on the SME side. Business One has gone past 50,000 customers now And Business One is on HANA. And we're going to put a tremendous focus on SMN at the low end of the market through the cloud to radically expand that as well on HANA. And some of you probably have a question like, well, you acquired these companies. It's hard to argue that we acquired the best ones at this point.
So I think that debate has been settled. But you might say, are they running on HANA? And all of the innovative applications that they're bringing to market now are already running on HANA and the whole companies will run on HANA. And we built that into the operating plan as we move everything on HANA. So just let's put a stake in the ground on that conversation in case there were any leftover questions.
Very good. Thank you. Now, Phil?
Two questions, one for Bernd and then a follow on for Bill. Bernd, obviously, you had a big release in November 2015, 2011 in the Enterprise Management suite there. Obviously, I'm sure that probably drove some of the uptake that Rob was talking about for the 2,700 customers. But You've talked about a multiyear roadmap for moving to S4HANA. That was a big release.
But what are sort of the next steps in that process that you're looking to knock down? And then the I want for Bill is obviously that 2015 relevant release was a big deal. When you think about the business side of this, maybe Rob you can touch on this too, how Or sort of into the base does this get us? Does this address 60% or where are we from think about sort of revenue opportunity? And then so
I'll leave it there.
Want me to start? Go ahead. So first of all, I think with that 15, 11 release, thanks Rob for explaining 2015, 2011 means November. We have delivered the entire ERP core. And for 2016, we want to complete our industry roadmap.
This is the big task for the engineering organization 2016, which does not mean that we have no industry flavors. But it means you have to Transfer the capabilities of HANA into the applications. Does it technically run? Yes, all industry development Run already today in S4HANA as we speak. But I want more than just porting.
I want that Every individual industry capability has the advantage of running without aggregates, without pre calculated Sums and totals as you have seen it with Christian in the digital boardroom this morning. So we have to simplify The architecture across the entire industry portfolio, this is the big task for 2016. But in addition to that, I as well want to entirely change the user experience, the interaction of an end user with the system. I I could share with you an example in we had with a customer in material requirements planning, where a planner had to exercise 12 steps in order to get his job done. Now since the 2015, 2011 release, he is still having the same tasks in the organization, but it's Four clicks.
So this is a productivity increase for that individual of 2 thirds. And this is something where design thinking comes into the game, where we will have a completely different way of developing. It's not Requirements, development, release to the market, let's see it works. And if it resonates with the end user, It is a permanent engagement with the end users across all our 104 business roles we support in S4. And we have in focus that we do this for the 80%, which are highly used.
And there are very industry specific ones where we engage with thought leaders, you could take oil and gas. But these roles does not mean that there is no potential, but they are more in the focus 2017 beyond. But this is just a renewal of all the capabilities we have. And then with Internet of Things, with sensor technology, I think the whole area of product life cycle management, of manufacturing will be redone. And I want to illustrate it with a simple example.
In the past, when a product was manufactured and built, The product came to the machine and the machine was controlled with a system knowing that product wants a hole in at that particular place. In future, the carrier of the information is the product itself And the request goes to the machine and say, I need a drill into that specific situation. And now you can imagine that The whole manufacturing process will be completely redone. Does this mean at the end you still produce products? Yes.
But the way you do it in a digital factory is massively different. And why do we do it? Not because we Put in technology, no, because in the engagement with the consumer, consumers wants to have personalized individualized product of products which have been mass production before where the task for the system was to optimize lot sizes. Now the task of the system is the huge variety of the products to build, produce them in time, but as well incorporating the follow-up logistic processes. We are the only company who has within S4 a complete Warehouse management, transportation management and manufacturing capability.
And as Steve said it nicely, yes, you can pick and choose Silo solutions and then engage your IT department to assemble them and maintain them over time. That is an option that is still valid. But why going that path if you get a pre integrated solution where the rearchitecturing of solution is not just Porting, it is a complete redefinition of all these individual segments will be done. Tell you from 1 big automotive companies they have today to run their service parts business through ERP systems, not because They need it because no traditional database is able to manage their volume. With S4HANA, we can do it in one system day.
This will be a huge consolidation project, but this is all work. It does not come just with saying it runs on HANA.
So with all that innovation, Phil, there's going
to be no
limitation to how far we can take the product and to whom we can take the Product, one of the things that you pick up pretty quick after being in this software industry for a long time is when you got a killer app, You got an inspired workforce. You got a turned on ecosystem. Everybody wants to co innovate with you and you sell a lot of software. And basically, If I was to give you our strategic framework that we talked about today, that is the innovation side. And the The thing that we always underplay at SAP is the handshake part of that with the customer, which is our services business in our ecosystem.
Everything Is on fire right now. So as we think about the addressable market, I don't think we've even scratched the surface on what's possible.
Thank you. We take 2 questions here. Michael Reese first, and then I think we have Kirk my turn. Let's get the microphone to the left hand side, please.
Great. Thank you, Stefan. Luca, you alluded to the line of business areas are still being something that's shifting to the cloud and that's a pressure on your license business. You maybe give us a feel for how large that is within your licenses? Is it 10%, 20% of the total?
And then Bill, maybe on S4, Of the 2,700 customers, I guess several of those will be net new names. What is the win rate that you're seeing with that? Is that a tick up from the previous product. And also standardization is S4 generating conversations where customers are now moving off of, say, PeopleSoft or Siebel doing sort of big shifts to SAP.
Yes. So first of all, if you take the core LOB applications that we're talking about that are certainly slated for a move to the cloud. So that's certainly HR And that's certainly the customer relation management piece. And that's at the end of the day also the procurement space. Those 3 in combination would be between 10% 15% probably of the overall license spectrum.
That's not saying that there is not a viable scope for on premise deployment in these areas. There are very differentiating deep level capabilities, for Sample in direct procurement, yes, in which certainly differentiated on premise case may still make absolute sense. And we have some of these capabilities, of course, in our core solution set. And that's not very likely to migrate to a non differentiating public cloud solution anytime soon. So you should not see this as that whole percentage Shifting to the completely to the cloud in, let's say, the next 12 to 24 months.
But that's giving you kind of the overall That we are talking about the vast majority is really our core assets in terms of As for HANA, in terms of the underlying database business and of course also many of the analytical assets that are still on premise. Although you have seen here, I believe analytics is a very strong opportunity for us to also drive some transformation in towards cloud based solutions like we have seen them Digital Boardroom. And now to the
And I'll just summarize. We got in 6 months 2,700 customers on S4HANA. I asked Rob the other day what the pipeline looked like. We did a forecast call with the field, and I thought the number 7,200. And then he explained to me, Bill, you're way too conservative.
It's much bigger than that. So We don't lose S4HANA business ever. And therefore, I reiterate, We have the killer application. The second thing that I've learned in these customer engagements, and I spent a fair amount of time, Because in the end, the customer alone will determine your win rate. And they'll buy based upon what's in their best interest.
Here's what I see happening, Michael. They're basically saying in those line of business cloud face offs, Because of SAP's completeness of vision, you don't have to worry about the core line of business maintenance Being eroded by the movement to the cloud, because there's so much net new that we're going to do with these enterprises anyway, Don't worry about it. It would get lost in the decimal points. You would be focused on the wrong thing. Take my word.
What you're seeing now is where you had sort of the narrow focus point solution and it might have been a real big battle 2 years ago, 12 months ago, Here's what they're saying now. Because of S4HANA, just make that problem go away, okay? Make my HR Director stop talking to me. Tell the IT manager that we have no interest in that debate. I want to go for the big picture, the completeness of vision.
I got a company to run here. So we're scooping up a lot of that business. And then on the CRM side, You said, do you have big Siebel replacements and so forth. I think we are now entering into a market that realizes That the CRM conversation has evolved, as Bernd just said, to the personalized customer engagement and commerce Conversation. Therefore, I fully expect the cloud rental model to get punished on price as it relates to the narrow point solution provider.
And I fully expect the extension of S4HANA into the line of business cloud to add extreme value and get extreme price compared to the rental cloud LOB alternative. Now we have to prove that. But the early signs are good because it's growing in triple digits and we're only getting warmed up.
Thank you. And now we take first question please.
Thanks very much. Kirk Materne with Evercore ISI. Maybe I'll start with Luca. I have 2 quick ones. Luca, last year you guys Wisely said, I think a pretty conservative view around the emerging markets after 2014 was a tough year from a license perspective.
Given all the macro questions we're Fielding, I'm sure you all are fielding. Can you just sort of level set us on what the baseline assumptions are for sort of the emerging markets in 2016, Sort of if they get better, that's great. That's sort of left as upside. But just sort of your thought process, I'm sure Rob has some thoughts on that as well. And then Steve, it's great to hear there's so much organic growth in businesses like Concur right now.
I was just kind of curious what needs to happen from a go to market perspective or So maturing of the field, so that you can start getting pulled in even more so into broader sort of existing SAP customer engagements? Thanks.
Yes. So maybe at an aggregate level, I would say, we are entering the year 2016 with More or less similar expectations that there will be continued volatility in quite a few of these emerging markets, but they are some of them are a little bit different, so to say. So if you compare the situation in 2015, what we saw was a very difficult macro environment in Latin America in In particular, Brazil with all of its individual problems, but also other parts that suffered as a consequence, so to They have certain ripple effects.
I think
we have seen at the end of the year, a stabilization in the second half of Our business that's also due to the new leadership that we have in place here, coming with a lot of structure. But But I think we will definitely continue to weather quite an interesting environment there, where our products will be responsive to some What the customers will need to do to drive predictability and efficiency in this uncertain environment. So it's not impossible as we have seen in the second half to drive growth in this market. But from a pure macro perspective, we expect continued volatility there. Situation has improved for us in Russia in particular.
So there I think We see that we probably have seen the worst and we see that customers are starting to make wise investments Again, and many of them are in SAP, especially in Process Industries, where they are suffering from a lower oil price and see us as a means to improve their efficiency. So we had some very nice wins in this area. The Middle East has enjoyed a long streak of successes and growth over the past few years. On that one, we will need to see how the oil situation looks like. But there are still Strategic investments that they are making.
And so therefore, I think we have a very good team meanwhile on the ground there. When I look at the Asian markets, Bill has said that nicely. Yes, China's growth is coming down. But if you think about the fact that so far with the number of customers that we have in the country if we have 10,000 customers and counting. What is this against the 1,000,000 of Companies that are there that are realistically addressable by an SAP across all of our solution spectrum.
So there is definitely the potential for growth. China has been elevated to one of our top 5 markets by now. So it has come a long way also due to a lot of Strategic investments that we have made into the country. And I would be actually more optimistic maybe than quite a few people around our prospects in China. So it's a mixed picture.
Africa had a very good year In total, for us, with, let's say, situations that are improving like in Russia, Situations that stay more or less the same for us from macro perspective, like in Latin America. But all in all, we expect That we will have surprises, sometimes positive, sometimes negative with a higher volatility than mature markets. But overall a very relevant solution portfolio to address the challenges that customers are facing in these markets.
I would just say simple. I mean, I feel 2016, We are in a much better situation to deal with whatever gets thrown at us. 2015, we got a better management team today in all of these markets. We are better prepared, better trained and better ready to execute whatever gets thrown at us. And then through a lot of it a lot at us in 2015.
So to answer your question on the penetration of the Concur product into the SAP customer base, First of all, we're actually seeing fantastic penetration of concurrent to the SAP customer base, Not just because Rob and his team have put in place a very meaningful model for us to engage across the GCO organization. But frankly, the scale of the opportunity within that is so large that it's easy to be inefficient in how you actually go And so what we look at more so is say, how do we on a phased basis make sure that we can be incredibly effective in reaching across the entire SAP customer base. And so this in my view, this is a multi year opportunity. Having said that, look, I have a really high quality problem to deal with, which is we also see incredible growth outside of the SAP customer base. And I want to go chase that.
But we're doing that in a very disciplined model that allows To continue to grow the operating margin within the Concur business. Then if you look at it and say Ariba and Fieldglass, and to be fair, I mean, we're one integrated business Across all of our public cloud products, there's the opportunity to cross leverage the benefits of our Very diversified distribution model. Not only can we continue to take all the acquired public cloud products across the SAP customer base, Look, across the 75% of the customers that Concur has that are not SAP customers, we're coming in and delivering incredible value. And to the question you asked earlier, if we can deliver a set of integrated services that where each one is best in class, We've got a really compelling story to talk to that customer about. So the question just becomes how do you prioritize all this?
It's a high quality problem to have.
Thank you. I think we have time for 2 more questions. I see one here in the back, Ross MacMillan from RBC.
Thanks. Question it's a 2 part question, but Luca, when you think about the ambition for 2020 on Cloud, call it $8,000,000,000 and you think about $3,000,000,000 today. What is your assumption in terms of core, So non line of business, but core moving to cloud to get to $8,000,000,000 And then related to that, What do you need to do to get there? So do you need to find more partnerships to run core in the cloud, for example, with AWS? Is it going to be your own enterprise cloud?
Can you just maybe talk about that roadmap? Yes.
So first of all, I tried to lay it out. It's a multipronged opportunity for us. It not only rests on converting S4 to the cloud, which We will do definitely. It's also the other element scaling the HANA Cloud Platform. For example, we are in the HANA Enterprise Not only at the beginning of our infrastructure as a service offerings.
And of course, we fully expect that are very fast growing Business Network Group assets as well as SuccessFactors and the other Public Cloud assets that we have already today will continue to grow fast. So yes, we expect a contribution from S4 in the cloud, which will in the later years, let's say, 2018 until 2020 and progressively increase. These are solutions that as you have heard, you can sometimes in 2 months get Into a cloud based deployment, that was something I think that was not mentioned in the customer example. That's a solution that as far as I know is Actually, in the Amazon, cloud. So it's possible to do this, very fast.
What do we need in order to achieve this? I mean, we are working of course on broadening our partnerships in this space. But I expect especially on the transformational Transactions that we do that also SAP itself will be part of that action. So we will have in our own data centers obviously As for our cloud customers and we will continue to look for partnerships to expand our reach and focus because many customers also prefer to work with their established vendor in order to drive maybe consistency in terms of the deployment not only SAP, but God beware if they have maybe some non SAP applications left to get it out of one vendor. So both is important and we will scale our capabilities both in the ecosystem as well as in our own data centers to support this.
But this will be a gradual move Over time, it will not be the case that in order to fulfill our growth ambitions going into 2020, We need to convert all of our S4 customers to the cloud. But there is an opportunity to maybe even exceed current Expectations if we are progressing as fast as possible on it. As the customer example with Swiss property as actually proven it's possible to do this
very fast. And just one minor build on that you might be interested in, Ross. You actually have Large, global, very powerful companies that don't have what we have That want S4HANA very badly to complement their technology offerings. And what that means for us is we make them relevant, but also we have access now to their channel And their go to market and their marketing strategies, which Luca has given you the financial profile of the line of business, The core and the network and the margin profile of that. But as you know, if you're working on that dimension, the margin profile goes way up.
So the point that I'm making is there could be very good news based on how fast we see leaders, CEOs of these companies Clamoring to meet our reference architecture in high security standards, so they can have our offering in their cloud, Our offering on their hardware, our offering around their services team. And that's what I mean. When you have the killer app, Everybody comes to the Honey. The Honey pot is S4HANA, and they're all coming to it. And that's why this thing is going to go on a global tear.
Thank you. I tend to say this honeypot is a nice segue into lunch. But before we do that, the final question from Alex, please.
Slightly hypothetical Question, but if you had been charging for the Espohanna Foundation, how much of a typical Espohanna license sale Would it have represented? Because obviously, you have multiple components in a license sale. But in effect, how much of a discount are you offering, If that's something you can break out. And then just related, do you need to adjust the licensing On a per seat basis, given that the objective in S4HANA is to drive a lot of additional efficiency and automation, Does seat based licensing kind of run counter to that?
I just want to make one point very clear. No one got anything for free with the promotion on Ask For HANA. So there was a price of admission called HANA Even if you brought through the idea of customer loyalty on the application side. Colleagues can size that for you on an average deal size, But it was all an upsell. The fact that we finally have our act together on good marketing should not in any way Upset you and the models that you have for SAP making money on everything it transacts because we do.
And all we did is carry through a very well architected communication plan with the customer where they get HANA, They get S4HANA, we get money and they get fairness. So we got money every place we went. I just want you to know that. There was like no free lunch.
And just to make a comparison here, what we actually did and what we do now, there has always been as part of The Business Suite, a foundation license that was required, right. It came with a handful of users and it came with the technical license, so to say, to run the This was a relatively low 5 digit euro number from a price list perspective, fully discountable. So that's kind of the measure of comparison, if you would compare it, to the free foundation promotion. So it's not relevant. Customers have gotten value and they have paid a fair price for the monetization of Hana for it.
And it's Basically what we are now under simplified construct with a nominal pricing for the foundation continue with a simplified user structure, but which does not mean that it's a loss or a win for the customer. It tries to be targeted towards the value that the customer It's getting from the solution. And therefore, I think it's a better pricing, but not necessarily one that you could judge as economically more or less favorable to either the vendor or the customer. Anything to add from your perspective?
I would summarize it in saying that it's Getting customers to adopt S4 faster, quicker with low barriers to entry. And S4 provides We're entering this organization an opportunity to develop next generation products that are coming to market which no one else has, And we've seen it with things like cash management, Boardroom of the Future. This is accelerating the growth. And if we we have to accelerate The opportunities for these companies, and this is what the pricing has done, the simplified one user, one metric system makes it much easier The sales organization to be much more productive in explaining what customers get. I see this as a huge benefit not only for