Good morning, 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, warm welcome to everyone who is following this event over the web. It's now the third Capital Markets Day. I still remember two years ago, we started here at the Ritz, last year, combined with the SAP S/4HANA launch at the New York Stock Exchange, and this year back in familiar territory. My name is Stefan Gruber, Head of Investor Relations at SAP. I'd like to walk you through the agenda for today.
You see the theme is Leading Customers' Digital Transformation, this is like the red thread for the entire day. You can see the agenda here. Our CEO, Bill McDermott, will kick it off with an update on SAP's strategy and vision, our growth potential around SAP S/4HANA, and the future of the industry. We have the financial side of the house. This will be covered by our CFO, Luka Mucic. As you know, SAP is unique in combining a fast-growing cloud business and a growing core. Luka will talk about the financial impact of that. We move to the innovation side. Bernd Leukert, Executive Board Member of SAP, in 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.
As part of Bernd's session, we also have a live product demo here on stage. It will be the SAP boardroom of the future, the boardroom redefined. You can see how we manage the company using real-time data. There will be a short break afterwards, we move to the customer perspective. This session will be hosted by Rob Enslin, Executive Board Member in charge of global customer operations. We know from all your feedback over the last years, you find these sessions with the customers extremely valuable. This year, we have a combination of a long-time SAP customer, HPE, Hewlett Packard Enterprise, is represented by John Hinshaw, Executive Vice President. On the other side, a brand-new customer of SAP, Jaan Saar, from Swiss Property, actually joining us from Tallinn, Estonia. We are very pleased to have such an interesting combination.
Before we go into the final Q&A for the day, there will be, of course, the session on business networks. Steve Singh, Head of the Business Networks at SAP, will talk about the Ariba, Concur, and Fieldglass 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 Chan Jones, our Chief Marketing Officer. Quentin Clark, our Chief Business Officer. Arlen Shenkman, the CFO of SAP North America. They will be around later on in the breaks and for lunch for further discussions. To the housekeeping items, the favorite part. This event is being webcast on the SAP Investor Relations website, please use the roaming microphones later on for the Q&A session.
You can also send us questions by email to the usual email address, investor@sap.com. 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 are discussed more fully in the company's most recent filings with the Securities and Exchange Commission. It's my pleasure to ask Bill McDermott to come to the podium. Bill will be joined by Nick Tzitzon, our Senior Vice President in the Global Corporate Affairs team. Bill and Nick, the floor is yours.
Thank you.
Thank you very much, Stefan.
Thank you. Thanks, Stefan.
Hello, Bill.
Thank you very much.
Good to see you. Thank you.
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.
You done?
Yeah.
Okay. 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 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. You'll see us on an annual guidance, you'll see us on a midterm, and you see us on a five-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. 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? Are we on the same page?
Perfect. Every presentation you make, every conversation you're in, it seems like you always want to look back before we look forward. If I take you back, just for the benefit of some perspective here. 2010, coming out of the financial crisis, nobody thinks SAP's got a chance to be a growth company. If you look at this particular graphic, that story really speaks for itself. How do you connect the two 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. We're on that. 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. We were in the process of doubling the addressable market and reinventing the purpose of SAP. We said that we would double the revenues of the company, we would get over EUR 20 billion, 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 document said EUR 20.3 billion in revenue. We did EUR 20.8 billion. We said that we would be well over 75 million users in the cloud. We're over 95 million users in the cloud. We kept our promise on the operating profit. The company is strong and it's keeping its promises.
We put it in context, 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. 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?
When you have a once in a generation invention, think about SAP's history. When we went from mainframe to client-server, going from R/2 to R/3. You now have gone from R/3 to S/4HANA. 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. I think the best way to tell the story is just with the mathematics. Facts don't lie. 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&A effect from Concur. 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. 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.
Let me dig down a little bit on two pieces of that real quick. 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.
Yeah. Number one, we don't have any bad businesses. When you think about the SAP portfolio, we're not in the hardware business. We knew that was a loser. Just talking about vertically integrated technology stacks is complicated in and of itself. We talk about obliterating hardware spend at a factor 10x. We didn't go down any bad paths here. Everything we went into is outpacing the growth expectations if we bought it, and certainly the things that we built, like HANA and like S/4HANA, are just going like a hockey stick. SAP is in great businesses, 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.
Yeah. 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, making sure we have a healthy, vibrant, open ecosystem. If we can run hardware from a company in China that's saving the customer 10x on the hardware spend, we should do that. Similarly, that open ecosystem, if they can take advantage of HANA and S/4HANA, the cloud and the network assets of SAP, and strengthen their point of view with their customers, they should do that. This idea of open ecosystem, healthy ecosystem, and choice is a key part of our strategy.
Before we shift gears to 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.
Yeah.
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 commissioner 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. Now you see this coming through in the brand. 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 200 million USD in revenue. Today, they've blew through EUR 4 billion. They got a market cap near EUR 20 billion, and they're the fastest-growing player in their global marketplace, and they're expanding into new business models and new industries. What we mean and what the brand means to the world has fundamentally changed.
You've 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 Run Simple that we've achieved that again?
I think the idea of Run Simple and radical simplification of the system, HANA for one, and S/4HANA for another, and then integration into the cloud and the network assets we'll talk about in a little bit, is fundamentally breathtakingly interesting because we radically simplified the technology stack at such a level that some people find it hard to believe. Simple is a revolution at SAP. The other revolution is Run 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. Everything becomes breathtakingly simple. It also becomes breathtakingly fast. That immediate access to that data and creating digital boardrooms for CEOs enables companies to Run Live and Run Simple. That's where we're taking the brand of the company.
Let's shift gears. Let's talk about the software. I want to show you an image, and I wonder, do you remember, there's one meeting I'm thinking of 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 is 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 SAP HANA platform will in fact change the world. Others haven't made this adjustment yet to a full column store database. They will have to. If you look at the digital core to natively integrate the SAP application suite into HANA, 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. This has changed everything.
If you think about HANA, S/4HANA, connecting to the cloud for human capital management or customer, or extending that to the business network, we're in businesses now that no other company in the world is in. 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 of 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 S/4HANA, 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 EUR 25 million in hardware. When he looked at it on HANA and S/4HANA, it was less than EUR 2.5 million. Fundamentally changing the world for speed throughput, radical simplification, and of course, things like backup and so on. Bernd Leukert will go into great detail on this today. I have a question to ask you. Would you be interested in a no PowerPoint approach on the thought leadership side for HANA and S/4HANA, 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.
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 SAP HANA and SAP S/4HANA 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 ask you not to forward it, but you're going to get it today. Bill.
Hey, Stefan, you might want to get the lawyers involved for that. Let's go back to this graphic for a second. You have the SAP HANA platform. You have SAP S/4HANA 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. Something's happening. When you listen to the customer stories, you'll understand how they're rethinking their business and fundamentally leveraging that, 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 want one belt and one road and smart healthcare, smart manufacturing, smart cities, connecting every device. The Internet of Things needs an 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. We get that with HANA and S/4HANA. 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 four years ago. It's only going to get worse. On the Salesforce side, Salesforce 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. When they connect with them, they have a mass-customized segment of one 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.
The problem that we need to solve in this market is 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. 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?
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 S/4HANA? Why wouldn't you? It's all common sense. That's why people like our story. It's simple. 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.
Quickly on business networks as a follow-up. You have Ariba, Fieldglass, and Concur, three best-in-class businesses. There was some hay made, I don't know if you remember this, you seem to have a very short memory, about that Concur acquisition.
Yeah.
Some people challenged you on that.
I think we had one company that asked the question, "Why didn't SAP buy Dairy Barn?" That 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. I realized why we didn't do it, because they're not growing. Concur was the second-largest software as a service company in the world with a $700 million USD run rate at that time and the best margin profile of any cloud company in the world. 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 a machine.
What's interesting about his machine is he has a lot of small, medium-sized customers in his portfolio. 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. 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." You see, it's not just the network extending 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, S/4HANA, the cloud, and the network and extend it to an inter-enterprise 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. You got to remember, I've been around here for 14 years, so I've seen different boards come and go. Every position on the board, you're going to get to see the colleagues today. We trust each other, we vigorously debate, we come out with the best idea because the best idea always has to win. We're building this thing on total trust and respect. I feel that the people in our company see that, they feel that. You see that, you feel that. It's absolutely showing up in the results. I feel great about this team.
You just made a trip around the world for the field kickoff meetings. I see Jennifer 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, it's led by the absolute premier executives in the industry. 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 the go-to-market and the go-to-market leaders of a company. This is the strongest leadership team, the strongest go-to-market in the enterprise application software industry. When you come in to SAP territory or SAP accounts, you're entering into a house of pain. When we decide to assert our will on a market opportunity, when you have this kind of innovation, we're pretty good at it. Combine all those forces, I think we're going to make it very difficult on narrowly focused point solutions.
I think architecturally, because our new architecture is so superior, we'll do extraordinarily well against the big players. We have leaders that love their job, they're loyal to the company, and they're executing beautifully. Yes, Jennifer Morgan is a perfect example. I could say Adaire Fox-Martin. I could say Franck Cohen. I just think this whole team under Rob Enslin is best in class.
Let's talk a little bit about the business model, because I think if you read the analyst reports, there's still a heavy interest in rationalizing the top and the bottom-line story of SAP. 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?
First of all, we're going to give you a company here that by 2020 has 75% recurring revenues. When the new year starts, three-quarters of the revenue is already in the bank. Each year, we're steadily improving this. 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 or our line of business cloud assets, we have phenomenal margins, and Luka 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. That's only going to continue to get better.
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. It helps us upsell, cross-sell, and do a lot of strategic things for the customer. We want you to believe in the fact that we will brutally and aggressively manage the margins in the company. We also have to be a growth company and capture the market share in the cloud while we can. 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. 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.
We've talked about where the company has come. We've talked about the business value to the customer in the present. Let's spend the remaining few minutes on the future.
Sure.
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. 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?
In general, context-aware, data-driven, machine learning-oriented applications are absolutely the future of the enterprise. In no industry is this more relevant than healthcare. Today, if you look at the healthcare 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. 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 U.S. with a 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. 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'll 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. Today, as you renew your insurance policy, not only did you get tortured in the medical system, 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 one someday. This is bizarre, and we have to change it.
SAP HANA, S/4 HANA will be at the epicenter of completely revolutionizing and rethinking the healthcare industry, we think is very in keeping with helping the world run better and improve people's lives. Also, it can drive huge results. 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 go and take charge of the situation.
I'll just be honest, I hate interviewing you because I always feel like you're going to come out of the chair and attack me. 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. As you think about where SAP has been, where we are, and where we're going, maybe some summary statements from you there. Also, you've been in N.Y. 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? 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 Tzitzon, 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. You see that in our hiring practices. 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 are 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, I'll give you one story, and we'll just focus on that.
I go in, I meet a guy who's running a EUR 5 billion company, a beautiful retail brand. 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. He basically tells me, "I got to get simple." I explain the SAP HANA column store database story, SAP S/4HANA 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, I explain the network and how it all integrates back into the core. I basically take his strategy in my pre-call plan, 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? 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, none of it integrates. I can't get any information, I don't see any visibility. 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. The only way I can do it is through M&A. I got to be able to buy companies, snap them into my core architecture, and run them like a new line of business.
When I add up the money, it says double digit, not one, two, or negative." We're solving a different problem, ladies and gentlemen. We are fundamentally rethinking how these customers can run live, how they can Run Simple, ultimately, how they can grow and deliver unique advantages to their stakeholders and their shareholders. 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 email I send you later, to listen to my colleagues today on the unique architecture, the unique advantages that we have, you can soundly sort through the choices that you have and think about SAP's higher purpose in the world.
We are going to help the world run better and improve people's lives one quarter at a time, one year at a time, but with a bold and ambitious plan for the future. 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 much. Stefan, over to you.
Thank you, Bill.
Thank you.
Thank you.
Thank you.
That was a very inspiring outline of our market position and the growth potential. Bill already alluded in his talk with Nick Tzitzon. Of course, we also focus on improving the effectiveness and efficiency in the company. That's a good segue into the next presentation. It's my pleasure to introduce our CFO, Luka Mucic, to the podium, and he'll walk you through the financial side of the house. Luka, the floor is yours.
Thank you. Thank you very much, Stefan. Why is it that I don't get to sit on these nice armchairs? That's unfair, I have to say. I need to do another call out to Stefan 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. That's true precision planning, I would say. Precision planning actually is 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 year when I announced that SAP would become the founding member of a segment of one in our industry, that the so-called RSSG or Rock Solid Super Growth segment in our industry.
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, at the same time, we become more efficient in the enterprise at the same time. It is 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% total revenue contribution from the cloud, and more importantly even, to combine with the strong, resilient, continuously growing support revenue stream that we command.
We will have up to three-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. I would say our performance and our progress in 2015 has been stunning for many market observers, has been very positive. At the same time, of course, it has been spurring some very important questions. I am here to give you an answer from the SAP CFO and SAP board perspective on those important questions. Here is 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 external markets.
Actually, in Q4, one of our best performing industries was energy and natural resources, where we have the whole oil price topic around. 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 is very important to observe, and I have been in this 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. 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.
SAP, over the past five 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 combined 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 is happening. It is disrupting businesses if they do not choose to disrupt themselves and disrupt the rest of the market by innovating. 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.
It's getting even stronger through the strong value proposition that we have to really be able to integrate seamlessly and 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 customer engagement and commerce solutions, be it the Internet of Things and big data scenarios through the SAP HANA Cloud Platform and our IoT scenarios. This is a unique picture, and it drives stickiness, it drives growth, and it drives cross-fertilization. We are seeing this not only in my statements, you're seeing this in the numbers, 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 sizes increase, not only the volume and amount of deals. That's simply because of the fact that our solutions are mutually reinvigorating growth because they're highly synergistic. Let's come to another set of very important questions. You have seen in 2015 that we are 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. 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.
There it has been obvious that SAP S/4HANA has been a great source of strength and 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. SAP S/4HANA is truly unique, SAP S/4HANA will continue to spur strong interest and therefore also strong revenue growth going forward. We know as well that SAP S/4HANA is a great opportunity for us to drive exponential growth on a continued basis in our cloud business. We are working heavily and have a strong focus on building out SAP S/4HANA as the cloud choice for companies of all size to move their core business processes into the cloud with SAP. You will ask maybe, why is then our implied guidance for 2016 only, in parentheses, assuming a flattish license performance?
For one part, it's because as a CFO, I don't want to ever get into a situation that I don't meet the guidance. It makes sense to have prudent planning. We have certain forces that are at play in the industry, one important one is that in the LOB, nimble line of business solutions, we will continue to see a strong trend towards the cloud, we are driving this trend ourselves. We are actively positioning our cloud solutions, in this area, you will continue to see classical on-premise licenses will be on the retreat, that's 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 this. 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 of the industry in classical on-premise licenses, and there's always a chance to over-perform. We have seen that in 2015, and of course, this team is in for the ride 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.
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 the migration and transformation to the cloud may reside in an erosion of our support revenue streams. Here's my answer to that. No, this is absolutely not going to happen. We're in our cloud transformation now for 4 or 5 years. Our support renewal rates have remained ever steady at around about 97%. 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 commensurate cloud solution to trade in maintenance at a higher multiple into cloud subscription streams.
It's a net positive for SAP, but this has a very, very small impact in the low to mid double-digit EUR millions per year. What is a bigger impact is the opportunity for our customers to buy new licenses and hence meet the threshold to migrate their support offerings from enterprise support to Product Support for Large Enterprises , which comes at a lower maintenance rate of 17%. They need to hit a maintenance base of EUR 30 million or an ongoing maintenance payment per annum of EUR 5 million or the corresponding local currency amount in order to do that. 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. This is not a debate any longer. 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 midterm support renewal rate net of all of these effects. Classical renewals plus the PSLE effect of 96% at an average maintenance rate of 20% across our entire spectrum. 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 5% CAGR year after year. You see here an example of a pool of customers worth EUR 1 billion, how they would then create new maintenance revenues by buying every year 5% less in licenses. 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 it will remain exactly that. 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 roll 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? 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 EUR 4.6 billion in contracted business in the house among deferred revenues as well as backlog that will find its way into the P&L of SAP over the coming quarters and 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 traction, but which we will expand tremendously. We have S/4HANA, which we are piloting with customers currently in the cloud, which will become a scaling business very quickly also in the cloud. 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 been with the group for one 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. That growth trajectory until 2020 from my perspective is very safe, and I only put safe things into our financial plan, I can assure you of that. The next question that is often asked is, okay, now how about driving efficiency in our cloud business? Is it really making continuous progress? We have seen in 2015 and at the end of 2014 that we had four quarters in a row where we sometimes substantially increased the cloud 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 live in a stable fashion. We also gave you a clear outline where these businesses will go, and we remain steadfast and committed, as Bill has said, to achieving those targets. Our business network and public cloud software-as-a-service businesses will 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%.
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 will 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 S/4HANA in the cloud subscription option. This is a strategically important business for us. While it is still negative, we absolutely have seen in December 2015, the first 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 are absolutely confident that we'll reach our long-term gross margin target, latest by 2020 in this business as well. Absolutely are we committed to increasing the effectiveness, but also the efficiency of our cloud business. The next question, Bill has alluded to this as well. If the gross margins are improving, what about the overall margins in the cloud? 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, you see here the comparison from the current state of 60/40 in a fast growth phase to a mature state, where this ratio will probably more like an 80/20. You effectively halve, therefore, the sales commission expense as a relative share of the revenues that you are driving. That, of course, then boosts the overall profitability in the cloud tremendously.
This effect, as it will be more pronounced, the more you grow first, and therefore your renewal base gets a lot higher, is one that will call upon us for the next years to put our feet onto the accelerator as hard and fast as we can to 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 attractive for SAP. There is nothing that should worry us from being as aggressive as possible in scaling our cloud business because the returns from a long term are extremely attractive. 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 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're in 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. 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. We will continue to invest at similar levels, like in 2015, in additional headcount, in additional capacity to support our growth opportunities.
We will also continue to transform our services business to be really focused on driving outcomes 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, where 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 EUR 6.35 billion that we have achieved at the end of 2015 to further heights over the next few years. You see as well that in 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. This is a really very, very strong outlook for the future and a very strong prospect that makes SAP truly sustainable. 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 two 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. The cash flow progression should absolutely be positive. 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 EUR 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 may face in the markets. At the same time, we are committed to increasing profits across the company. We ran a very successful transformation in 2015, where we really tried 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.
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. Ultimately, SAP is on 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. 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 and where we want to go next than our head of R&D, Bernd Leukert. Bernd, please come on stage and take us out. Thank you.
Thanks, Luka. 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, Luka has laid out the framework, the financial framework, which makes you confident for 2016 and beyond. I want to share with you the products and the strategy behind that is the inner source why this will happen. I will talk to you in the strong confidence that we feel bolder than ever before. Could you 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. 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 two-third of the Forbes Global 2000 company will have digital transformation at the center of their corporate strategy. 60% of these companies expect that they will double productivity by transforming processes. When I say processes, any process in a company, from a human-based into a software-based process delivery. The digital transformation is no longer just a future scenario, a future vision, 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 is just how we do it and how can SAP help. Technology as an enabler for that transformation is embraced by the CEOs of companies. I have personally been there in Davos with Bill, with Steve at the World Economic Forum.
What I can share with you that all the CEOs, all the executives see technology as an enabler. When you heard Bill, when you saw Luka's statement, we have gone bold in saying we want to stay a technology partner, a trusted advisor for making all our customers successful in that digital age. While others, Bill had a few names on the slide, might intend to disrupt their customers. I leave it up to you to judge which strategy is more successful. 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 business processes.
In many cases, it's a complete revolution of your business model. Therefore, in Davos, the headline was Fourth Industrial Revolution. What makes that digital transformation so challenging is there is not a one-size-fits-all approach. There is not a single recipe. Every corporate function is affected, each and every employee in a company. Therefore, we have developed a digital framework that allows us to have conversation with our customers in all aspects of their business. Every customer had in the past, and will have in future, customers they serve. They will have employees to engage with. They will have, 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.
With our digital business framework, we have a unique position to have a dialogue and a solution for our customer. First of all, in any dimension, as well in the core, but more than that. We are the only company that is able to have the connectivities between these different dimensions of the transformation. 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, but 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 to 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 life cycle, not just in a single event. 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. You will see that later, not just in individual domains, but as well on how to run and to steer a company. Let me start with the question, where is that digital transformation usually starting? 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. 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 was okay to manage the engagement with the customers. 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.
Consumer to business is the new reality, we have extended an asset which we got from Hybris e-commerce with offerings across e-commerce, sales, service, and marketing. We have added organic investment with Hybris Profile, with Hybris 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. I want to share with you an example. Adidas, another sports company. They needed one central marketing execution platform for consumer information. Of course, across the physical and the digital channels. 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. 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. This was just one little example of a digital transformation that started at the front office, and we made that simple for them. Since we have redefined the category of CRM with customer engagement and commerce, we have won more than 1,000 net new names.
I am not talking about the install base, which are very loyal to us, and Luka shared the maintenance renewal rate of 97%. They will all go with us. 1,000 net new names since we redefined the category of CRM, and then I stopped counting, because that journey will go on. One attribute that runs in that conversation through all the agenda is differentiation. 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. Algorithms leveraging this data. In the example I have given you of ethics, it is consumer data. IP, in many cases, is a question mark.
Customers want to have a dialogue with us because they do not 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 with an IT company. Based on the trust and the commitment from us that we just want to be their technology partner and enabler, then it is a home run, while others cannot give this answer. 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. Our answer to that question is the SAP HANA Cloud Platform. It is the most comprehensive platform as a service stack which exists in the industry.
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. It is not isolated like in some other solutions. You have with SAP HANA Cloud Integration, an integration layer that allows you to connect these new applications in the digital world with your existing landscape. What makes SAP 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 SAP HANA Cloud Platform, where we go with standards like Java, like JavaScript. 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 convince with superior value. On top of that, of course, we unleash the massive value of SAP HANA. Our customers can build analytical and transactional applications on that same platform. Again, with seamless integration in their existing landscape. We have decomposed our entire technology stack and provide these services for usage for a huge community of developers, of partners, and customers. 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, collaboration between companies, within companies, between customers, suppliers are essential. As well, mobile as a service is available.
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. This is Run Simple at its best. 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. We have not stopped there with unleashing technical services. We went beyond that. With the announcement of Hybris 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.
This means a set of prefabricated business services, in addition to the technology services, are all available on the HANA Cloud Platform. Therefore, it is 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 hundreds, 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. We are pretty proud of the adoption curve of our HANA Cloud Platform.
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. When I talk about changing of business models, it changes, first of all, the business models of our customers. As a consequence, we have to change our business models as well. We talked about on-premise license. Luka showed cloud subscription. I see more and more in an outcome-based economy, a pay-per-use, which gives us tremendous opportunities. If we build these models with our customers, if they are successful, we are successful as well.
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 two-thirds of all manufacturing companies will massively invest in Internet of Things-enabled products within the next two years, not within the next five or 10 years. What amazes me is that gives them a massive opportunity to not talk with their customers about quality and about service anymore, because breaking down of products can be prevented. 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.
We were sitting with them more than one year ago, and they were challenging us, "How can you help us to go with our business into the digital age?" What we did is we analyzed their cost structure and immediately saw there is a tremendous amount of cost for maintaining these trains. What I can share with you, what all the others did as well, they do planned maintenance based on operating hours of trains. 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? We equipped their trains and the most important elements in the trains, which influences customer experience, with sensors.
We have now more than 2,000 trains, locomotives, and the wagons, and the equipment equipped with 6 million sensors who are permanently transferring data. We analyze it in real time, and they have changed their maintenance strategy from a planned operating hour base to do maintenance whenever it's needed. They have, as well, with us, incorporated knowledge they have into software, into algorithms. Predictive maintenance is all over the place. The result is a significant higher customer satisfaction as the things do not break. For their financial business, it's an 8%-10% reduction in annual maintenance cost. Not a reduction of a one-time effect. It's an annual reduction of maintenance costs of 8%-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.
All these capabilities are built with the HANA Cloud Platform, where we can connect assets, in this case, trains, where we do real-time processing of the data, build analytics on top of that, and incorporate our industry strengths that we have of course, a core business with S/4HANA that can take that information in real time and trigger necessary service orders and service technicians. In addition to predictive maintenance, we are investing in connected manufacturing, in connected logistics, in vehicle networks, but as well enhance the partner ecosystem. 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 build asset health.
We have customers like Siemens who have chosen the SAP HANA Cloud Platform with the Internet of Things services who build their Internet of Things capabilities for their customers. 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. We have reached out to Boston Consulting, and they predicted that the IoT spend by 2020 will be EUR 250 billion. Big number. I think we are proud already, and hopefully, Luka, you forgive me, that we have already made more than EUR 135 million 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. For everything I have shared with you, with redefining customer engagement, with redefining customers' business, you have one prerequisite.
Otherwise, you will not succeed in that business. The prerequisite is what Bill called a central nervous business of a system. 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. Therefore, SAP S/4HANA was the strategic decision for us to completely redefine our core ERP. It is the next generation ERP system, where the underlying technology with SAP HANA allowed us to make that massive revolution.
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 framework was incorporated in that product and saw, 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. 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. As well here, just some examples. Merck is turning their ERP into S4. A large division of Airbus has gone live with SAP S/4HANA.
As well, small companies like Savanta, which is a small professional service company in Germany, got the software November 15th, and their COO called me 25 days later that they are ready, that they go live. A go live of an entire new application on SAP S/4HANA 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. 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 live.
Across all our 25 industry 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 R/3 in the 90s, I can share with you that S/4HANA's adoption curve is significantly faster and is significantly better than R/3 in the 90s. It took us in R/3 two 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. We would be not SAP if we would not go bolder. By redefining our analytics segment, 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. Therefore, we have used our newest member in the analytics portfolio, SAP Cloud for Analytics, and built a SAP Digital Boardroom for the company. Since summer 2015, we run all board meetings and all supervisory board meetings with our SAP Digital Boardroom, which has content from SAP Cloud for Analytics. When I say SAP 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, as some companies are still concerned of giving all the data into the cloud. It's their decision, we give the flexibility to them. We allow them to not just look at prepared binders of hundreds of PowerPoint pages and Word pages. We allow 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, and analytics engine to get insights. Then what are you doing with the insights? Somehow you have to transfer again the insights back into your execution system.
We have gone a different approach with the SAP Digital Boardroom. Therefore, it's my pleasure to have Christian Klein with me, our Chief Controlling Officer, who gives us an insight on how a SAP Digital Boardroom is used at SAP, at our boardroom, at our supervisory board meetings. Christian, first of all, thanks for coming with us to New York. Thanks for staying with us at the Capital Markets Day, please give us an insight, and according to Luka, do not disclose all the details of our Q1 business already to that audience.
Let's see. Okay, thank you, Bernd, and also welcome from my side. My name is Christian Klein. I am running global controlling of SAP. Today, I am very excited to show you in the next 10 minutes about the product innovations Bernd just outlined, about how they completely change the way how we handle big data, how SAP, but as well as many other SAP S/4HANA customers, are able to analyze, predict, and plan the financial performance of their company. The boardroom we see here is connected to the S/4 productive system of SAP. 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.
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. Thanks for your understanding. Okay, let's go into that. Here, as Bernd said, we are using, actually, the boardroom already live internally. Here you see the agenda of the board meeting in January. Luka was up to present the financial results of 2015, as well as based on that, give an outlook on our financial plan for 2017. Here you see, first of all, a company overview. That's how it starts. You see the main metrics of SAP, P&L metrics. You see the revenue, operating profit, operating margin coming live out of SAP Simple Finance.
You see the analyst comparison, to check how we are doing against market expectations. You see the latest stats on customer count and head count coming live out of CM and SuccessFactors. 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. We had other sessions in the board where we talked about the cloud delivery strategy of SAP. What are the end users are able to do? Change the content in a very flexible way.
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. This can be changed in a very flexible way. Very important, the analytic 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. I would say the journey stops here. Let's continue our journey with the SAP Digital Boardroom, 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. 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 Luka was talking about. We have, last but not least here, also the services revenue, where we also see a positive trend after we launched SAP ONE Service at the beginning of 2015. On the third screen, we see the context. When I look here on software revenue, I see here the world map showing me the performance of our different market units. If we, example, look here, the size of the bubbles signals the volume which was closed on the software revenue side by each market unit. The color coding shows me, did the market unit made the plan in 2015? I can also go here deeper, and when I click here, I see here for the U.S., Jennifer Morgan is here, very successful here, biggest market unit of SAP, and they made their plan. Congratulations to you, Jen.
This is still not enough. Let's go deeper. 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 SAP Simple Finance. I know the board quite well. In the first week of January, it was all about celebrating the great results we had in 2015. I knew exactly that Bill was asking latest in the second week of January, what is the status on Q1? 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. We have also here the possibility for our business analysts on the ground to drill even deeper.
If we do this for a second, can say here, Open Explorer. This is for me now the workbench. We can see here the customer bubbles. Even I can go down to the transactional level. When I click here on one of the bubbles, I see here the customer name coming up, 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. I can really drill down to the lowest level of information if I want to. 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. I get the live pipeline out of EMEA of Franck Cohen's team.
Very important to mention is now that this is also still not enough. We have a lot of data, CRM data, pipeline data. 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. What I can now do with the SAP Digital Boardroom, with the new generation of analytic solution, I can go into the software projection of Q1, and this data is now visualized. You see here the blue line is now thousands of these bubbles, of these CRM opportunities. The system is now predicting for me the software revenue performance of Q1. Rob and Shan can probably also agree with me, the accuracy in the last quarters what we had on this was really absolutely fantastic.
We can see here the blue line, CRM data, but it's still not enough. I want to also understand how the linearity is looking like. I plugged in from SAP Simple Finance, the actual data of 2015, how did the linearity look like? Rob will agree, linearity is looking good. The risk profile of the 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. 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 is a lot of talk about the business value of SAP S/4HANA and the Boardroom solution on top. This is where also the customers who are co-innovating with us on that really 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." No matter which industry they are coming from, 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 close all of this pipeline we're having throughout 2016?
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. That's very important to understand. This is really where we and many other customers see the business benefit of SAP S/4HANA. We talked about actuals. We talked about the current year, about how managing that. Let's go back to the agenda because Luka had a second item, it was about the financial plan for 2017. 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 a guidance proposal for the board based on the actual outcome.
We looked at the subscription revenue one way and said, "Dear board, this is our guidance for 2017." 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. 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. Now what we are also then is checking besides the internal plan, we go again then also into external data and validate this against GDP growth of each and every market unit, against the addressable market.
We are uploading this and then compare. There is million of data behind where we then really go into this and, for example, take here Germany, 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. This is still not enough. 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. 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.
The same here for the total group of SAP, and have here also the comparison against our largest competitor in the U.S. Okay. This is an example on, especially in this dynamic markets which we are in, on how to assemble really a 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, then come up with a plan, with a guidance, which is ambitious, 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 here is maybe hard to read, but what we did is in SAP, we have a lot of metrics, how to steer the business.
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? That's why we built 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. 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 rate in, we link this towards the financial goals of SAP. 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. Then on top of that, and 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 upsell bookings growth simulate. Okay, 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 show how currency fluctuation is changing, impacting our P&L. Quite a lot in 2015. I want to have this real time. I don't want to have my people filling out. Just to give you a feel, this is a 400-megabyte Excel, which we used in strategic planning, and you know this better than I do. Currency fluctuations, two weeks from now, update everything in the Excel, and maybe being able to give the board an update on some plan simulations in two weeks from now. This goes now real time. We have here connected 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. Also thanks to the customers who are innovating on that. Thanks, Bernd, to your team, who are really working very closely with us in order to make this solution even better going forward. Thanks a lot. Ladies and gentlemen, Christian Klein. Christian. Thanks a lot. Thank you. If anybody doubts that we can bring human intelligence into software and make it useful, this was a live demo. 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, is 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 assets with Internet of Things. I think you will hear later that we have a unique differentiator with business networks, and Steve will talk about that. 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 Excel and predict what will happen in 2020. 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. According to Stefan, you want to do one or two Q&A. Thank you. Thank you, Bernd. I think we have now time for two questions before we go into the coffee break. Later on, there will be a longer Q&A session with all the executives on stage. Here's now your opportunity to ask our head of R&D directly. Who wants to get started here in the room in New York? I see Walter Pritchard here from Citi.
Microphone or just yell?
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 S/4 applications, and we understand that the cloud platform is for integration of things that you'd ordinarily connect into SAP or to customize. There's been talk in the past about this being sort of a PaaS, a generic PaaS. How much R&D priority is going in that direction, and do customers want that?
First of all, it's a great question. Just to start, we clearly distinguish between HANA as a disruptor for the classical database, and then the HANA Cloud Platform as a unique capability in the platform as a service business. Of course, the HANA Cloud Platform has the huge advantage that all the capabilities of HANA will be unleashed into the HANA Cloud Platform. 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.
We have more than 2,700 startups. We have, in the meantime, more than 380 partners. The number of partners, of startups, are growing every day, where we are convinced that we built a healthy ecosystem, number one, for extending our portfolio. As well, as you said, for building complete new applications, which probably have nothing to do with our SAP portfolio itself. 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 damn serious.
Yes, we are at the beginning of a journey. 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, is something where we feel it's unique. Going forward, we are in discussion with many data center providers. The HANA Cloud Platform might run on other infrastructures as well. As we do not plan to make bold announcements today, I leave it with that. 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. Second question, maybe here, Adam Wood, Morgan Stanley.
Thanks, Bernd. I just wanted to ask maybe a little bit about the functionality rollout of S/4HANA. We obviously had SAP 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 R/3 and the business suite has been ported over to S/4, how much of the vertical functionality, and what's the timeframe for rolling the rest of that out? Are there any key milestones within that that customers are asking about, we really need this to make that move to S/4? Thank you.
I'll give you a short answer. Then we have unleashed the entire roadmap on our service marketplace, which I would love to share later. With the release of the November shipment, the entire ERP core as a functional scope is available in S/4. Now we have, as you know, 25 industry flavors. The entire discrete industries and new products is as well already available. 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'll give you an example, catchweight management. As 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 two currencies, a piece and the weight itself.
These are functionalities which are not in S/4. We as well do not have the vision that we simply move existing functionality one to one into the future. The same with the boardroom. We could have just taken existing reports, existing analytics capabilities, move it into S/4 and simply say it runs faster. We have gone an alternative approach. We co-innovated the next generation business in analytics. We will do the same with catchweight management and with all the industry flavors. We have a series of co-innovation partners across many industries. We will, I think, close that industry roadmap with the existing capabilities over the course of 2016.
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 is coming.
Very good. Thank you very much, Bernd, for your time.
Stefan, thanks a lot.
Thank you.
Looking forward to it.
We're a little bit behind the agenda. We had so much stuff to tell. 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 speed. Then we continue here in the room with our customer session, which we're looking forward to. Thank you very much.
Every day's a holiday. Whoa, yeah. Monday's here again and I'm feeling fine, yeah. Tuesday's calling me, but Friday's on my mind. Don't waste another minute. Put yourself right there in the middle of it. Every day's a holiday when I see you smile, yeah. Don't know where I'm going, but I know where I'll arrive. Whoa. Don't need all the answers, just got to be alive. Don't waste another minute. Put yourself right there in the middle of it. Every day's a holiday when I see you smile, yeah. Every day's a holiday when I see you smile, yeah. Whoa. Every day's a holiday. Every day's a holiday when I see you smile, yeah. Wednesday, Tuesday, Sunday's always on my mind. Wednesday, Tuesday, Sunday's always on my mind. Every day's a holiday. Whoa, yeah.
Hold on for a while, 'cause I can't wait forever. Tell me once again to make it okay and I'll always be true. Knock me down next time. Lay your worry on me. I can take it. You can fake it. Cover my eyes to see you so clearly. What a surprise to hear that you need me. Never gonna run away from you. I can hold on. Hold on. Let me stay with you. Make this my time only. I would be okay to lay it all down if only to see you. Tear down your disguise. What will you uncover? I can't take it. You can fake it. Cover my eyes to see you so clearly. What a surprise to hear that you need me. Never gonna run away from you. I can hold on. Cover my eyes to see you so clearly.
What a surprise to hear that you need me. Never gonna run away from you. I can hold on. What does deep mean? Death? Suppose I'll take a guess, 'cause I can't hold back any longer. Cover my eyes to see you so clearly. What a surprise to hear that you need me. Never gonna run away from you. I can hold on. Hold on. Hold on.
Leather on, the night is cold. Everything's so beautiful. As our heads connect in smiles. I could feel your beating heart. Walk the beach and touch the shore. Nothing left for anymore. Leather on, the night is cold and beautiful. As I say your name, I can almost hear you call again. When our faces touch the bed, I'm empty when I said, "You and me inside the dark, nothing could tear us apart." Lights were off, the night was cold and beautiful. We all float down the river. We all float.
Another boy and girl in a story of love set to song. They're gonna find their way if they follow their hearts and keep on keeping on. He's the kind of boy who lived his life like a rolling stone. Never had a real job still he made his way through this cold world all alone. Yeah, he knew inside that there's gotta be more to this life than this. He opened his eyes and before him stood the thing he missed. He said, "How could I have been so blind? Now I see that to me you're everything I've ever dreamed of. You're everything this heart desires." She's the kind of girl who dreams of love as like a fantasy. Says she never found anyone worthy enough to take that dominant. She never doubts that a true love really does exist.
You would think by now her prince would come after all those frogs she kissed. Maybe the time is right for her to see that he is everything she's ever dreamed of. Everything her heart desires. You're everything I've been sowing the seeds of. You're everything in this world that's right. You're everything I've ever dreamed of. You're everything this heart desires. You're everything I've been sowing the seeds of. You're everything in this world that's right. You're everything in my world that's right.
Ladies and gentlemen, our program will resume in five minutes. Thank you.
Can't stop, own up, gotta shout it out. Stand for, hit the door, gotta scream and shout. Nothing in the world, nothing in the world, nothing in the world can stop us, can stop us, can stop us. Nothing in the world, nothing in the world, nothing in the world can stop us, can stop us, can stop us now.
Ladies and gentlemen, we would kindly ask that you please make your way back into the ballroom as our program is about to begin. Thank you.
Up and down, double down, gotta ride it out. Any time, out of line, gotta get it now. Nothing in the world, nothing in the world, nothing in the world can stop us, can stop us, can stop us. Nothing in the world, nothing in the world, nothing in the world can stop us, can stop us, can stop us now. Is there anybody out there? Is there anybody anywhere who can tell me what I'm feeling now? Can't stop, own up, gotta shout it out. Nothing in the world, nothing in the world, nothing in the world can stop us, can stop us, can stop us. Nothing in the world, nothing in the world, nothing in the world can stop us, can stop us, can stop us.
And nothing in the world, nothing in the world, nothing in the world can stop us, can stop us, can stop us. And nothing in the world, nothing in the world, nothing in the world can stop us, can stop us, can stop us now.
Ladies and gentlemen, the program will begin momentarily. Please make your way back into the ballroom. Thank you.
Good morning, everyone.
Good morning.
I took away Stefan's job. My job to get everybody seated. Hi, I'm Rob Enslin. I am 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 S/4, one year ago. From my perspective, the investment SAP has made in S/4HANA 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 million 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 intelligence 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 seven 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 the single view of the customer and contextual marketing and other experiences. At the same time, we will further simplify the front office with SAP Hybris suite and move the industries Beyond CRM. Our rising Internet of Things business is 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 I've 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 S/4HANA, a digital core to our business. As you saw, and as Bernd spoke about, more than 2,700 businesses selected S/4HANA 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, S/4HANA is the system that brings simple to life. Many of you spoke about the promotional packaging. We launched the promotional package in 2015 around S/4, one that was designed to respect the investments our customers had made, and they were loyal to SAP, but also to eliminate the barriers for them to get on the next wave of adoption that S/4HANA provided.
The offer expired at the end of last year, but the overwhelming feedback from our customers was to continue the pricing mechanism with S/4 in a manner that reflects the widespread interest of our customers to transform to a digital core. We listened to our customers and massively simplified the pricing in 2016. Customers wanted low entry points to S/4HANA 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 S/4 today. Customers must license the S/4HANA 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 six more additional products announced very shortly. This new pricing model has been widely regarded by customers around the world.
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. "DSAG 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 S/4HANA, including the licensing structure. In our intensive discussions with SAP, we place the prospect and needs of our members. For example, as far as the new pricing model for S/4HANA is 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 S/4HANA." From Australia, New Zealand.
The Australian New Zealand User Group welcomes the new pricing model and discount structure that has been offered by SAP in relation to the SAP S/4HANA suite of products. The User Group believes that SAP S/4HANA is the strategic platform for the future for all existing and prospective SAP customers, 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 S/4HANA pricing now includes, in principle, all the requirements we have previously proposed." From the chairman of the Japanese User Group, "I value this license model highly because I see it as based on good intention for existing SAP users.
I would like to share it broadly with our members." From the chairman of the UK & Ireland SAP User Group, Philip Adams. "We've had good dialogue with SAP over the SAP S/4HANA license model and are pleased that SAP will be clarifying the situation for our members and users worldwide. Regardless of whether you see SAP S/4HANA 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 Geoff Scott, the CEO of the Americas' SAP Users' Group, has to say.
It was nearly a year ago that I was here in New York City at SAP's SAP S/4HANA launch event. A lot has happened in this past year, I'm excited to talk about the new levels of collaboration and spirit of cooperation we've had with SAP with SAP S/4HANA. This is an incredibly important software evolution for SAP, it is equally important for our nearly 4,000 member companies. When we think about SAP S/4HANA, there's a lot to talk about. We all operate digitally transformed, digitally disrupted enterprises, SAP is at the epicenter of that disruption and that transformation. SAP S/4HANA is important to us, we all need it to be the very best software it can be. Earlier this year, we were working with SAP on pricing, they are listening to the member base, they are listening to the customer base.
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. SAP S/4HANA is the next generation of enterprise software, we're extremely happy at the levels of collaboration and cooperation we've had with SAP to bring this software to market.
Thanks, Geoff. Our customers have spoken. To further support our customers' desire and SAP S/4HANA 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 S/4 and move with it as fast as possible. 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. 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 S/4. I also think it's time that we actually spoke to our customers and let our customers come on stage. With that, I'd like to ask John Hinshaw, one of the board members of HPE, to join me on stage. John. Official title, Executive Vice President and Chief Customer Officer, Hewlett Packard Enterprise. I just know you as John.
Thanks, Rob.
Thank you. Okay. 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.
Yeah.
You've been extremely busy with that. If you can give a little color on the business and where you guys are headed.
Sure, yeah. 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 Inc., the PC and printing business. Meg and I stood on the stock exchange floor November 2nd and launched the new HPE symbol. 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. 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 focused on enterprises and how we transform them. It's been a terrific journey thus far.
John, no doubt you guys are going to be successful. Great leadership. You had a lot of decisions to make when you were going through that discussion.
Yeah.
One of them, you spent some time with us and with other companies, but you decided to make an investment in S/4. Why did you decide to make the investment in S/4, and how's 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 Hewlett 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." We looked at the technology platform associated with that. The CIO works for me. We sat down and looked at what are our options for our future technology platform. It was perfect timing because you had just released S/4. I joined you at your SAPPHIRE NOW 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.
We decided that S/4HANA was right for us to simplify the way we're going to run Hewlett Packard Enterprise, from closing the books to our supply chain, to our data warehouse, the whole nine yards. We're really happy to help power this transformation internally with SAP.
Do you really believe in HPE, that this is the digital platform for the future that could be the core, will be the core?
It will be.
Of your business.
Yeah, we've already started the transformation. We got the teams in Palo Alto and in Germany working closely on how to make this happen. The great thing about it is we're going to do it internally, and then be an example for our collective customers on how to do it as well.
It wasn't a situation, you're an existing SAP customer and automatically, therefore, S/4 was by de facto the next step that you want to take?
No. No.
You had to earn it
That would be nice.
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. You guys earned it both in your vision, which is terrific, but more importantly in your execution, in 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.
You and I engage with quite a few large companies.
In the last term, we had a great partnership.
Yeah.
Where do you believe that partnership's going? Not only the HANA Enterprise Cloud, but the engineering work we're doing together
Really driving the adoption globally?
It's a terrific partnership. In fact, as I look at all of our partnerships across Hewlett Packard Enterprise, it's the best example of how companies can work together. 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 says, "How can you and SAP help us get from where we are today to the future, get to S/4?" That partnership, not only in what we're doing internally, but how we're going to market externally, it's growing. Our SAP business, double digits, which is great. Our cloud platform we work on together is fantastic. Then you and I get to have some fun as well out jointly with customers.
Yeah
Which is great.
Yeah, ladies and gentlemen, our HANA Enterprise Cloud is over 1,500 companies running on it today, it's expanding at a dramatic rate, HPE is a significant partner for us in bringing that to market. Together, we are able to get these customers productive really fast and really quick, take away the constraints they have to go into S/4. John, not only as a customer.
Yeah
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 partnership. Thanks a lot.
Thank you.
Thanks a lot.
Yep. John's got to rush. He's got another customer call. This is live, right? He's got a customer call at 12:30 P.M., and he actually wants to read the briefing document before he gets on. Thank you, John. 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 four weeks ago, and the company four weeks ago. 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. Rather than me talking about it, Mr. Jaan Saar, would you join me on stage, please? The head of process at Swiss Property and IT for Swiss Property. Jaan? Big round of applause. That would be nice. Thank you.
It's one of those dull moments in this room. When you have a dull moment, you got to clap. It always works out well. Please, join us. Thank you.
It's great to be here.
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 Property?
Yeah.
I think it's fascinating. It's a cool website as well.
Well, yeah, unlike HPE, which everybody knows, very few have probably heard about Swiss Property. It's a Swiss company. It was founded by Oliver Wolfensberger, with the goal of building residential real estate in a very industrialized way. We call our approach lean digital building, and we try to be two steps ahead of the competition. That's actually one of the reasons why we chose S/4HANA as our ERP platform as well. We operate in two countries, in Switzerland and Estonia. We have currently about over 80 employees. We are very ambitious in our growth, and we aim to reinvent the value creation chain of residential real estate. The key for this is integration, actually. What makes us different is that we take care of the entire building life cycle. We have-
By the way, I had to tell people last night this five times over, that you do the entire thing, because they all said it's not possible.
Well, that's what-- Look at us. It's possible. We are doing it. We are making it a reality. 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. We assemble the building, also after that, we manage it, whether it's either a rental or it's sold to the end client. We take the whole building life cycle, and we manage all of it. 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. We aim to do that.
At the heart of this is what we call intelligent digital building system. 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, actually, any traditional construction. Everybody will tell you that a building is unique, it's new, it's wow, it's every time we have to start over. Actually, you don't, because say 80% or 90% of the building is actually the same construction material. 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. We put more effort into customizing and offering more value to our customers.
Yeah, this is our ambition, and 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 S/4, which kind of debunks this theory about SAP running only for the large companies. Why did you select S/4 for your business? Such an innovative company.
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. We had 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. 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.
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 bigger. 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. 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 tablet, whichever computer. Of course, HANA, with the in-memory database. That's something spectacular. 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.
We want to, before we start construction of a building, we do everything in a virtual environment. We design the building completely in 3D, adding 4D, 5D elements. When we reach the stage where we actually start production, we have already gone through 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, putting it up.
That's good. That's great. We're very happy. We're honored that such a great, innovative company would select S/4. But you've still got to do the implementation, right? You selected the software, now you've 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 took to implement it?
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 ERP software for managing the logistics, the supply chain management. Therefore, we had a very tight schedule of just 2 months. I must say, our very skilled consultants, Peter Berna and his team at Intessence, did an amazing job of putting it all together. Before we actually started the implementation of S/4HANA, of course, we did the business blueprinting, and we had an end-to-end proof of concept system before that as well. I think the keys to the successful implementation of going live on January 18th in 2 months was that we didn't have any legacy. We are a new company. We didn't have any baggage, so to say, that we had to carry along.
We took best practices, and we implemented those. In the end, I think the agility of our small consulting firm helped us immensely.
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 edgy, but in the construction industry, it is something very disruptive.
Right.
This is something you guys are doing. SAP with HANA is also disrupting the business. We feel it's a very good match, and we really hope to capitalize on this with using SAP S/4HANA as the platform to build our intelligent digital building system.
Great. Well, Jaan, it's a fascinating story. It's an innovative story. I'm definitely going to track your company success, and look forward to meeting your founders. I wish you all the best, and thank you for taking the trip and bringing and sharing with everybody in the room. Thank you very much, ladies and gentlemen.
Thanks for having me.
It's great. 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. One, we wanted to talk about where we've taken S/4, how the lines of businesses connect with each other, and how the core is the center of Run Simple and running live, and how all of those pieces do connect. Otherwise, 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 DSAG, the Americas' SAP Users' Group, all speaking to the strategy and the pricing related to S/4 and how it connects.
As I told folks here, the beauty of S/4, we see a significant opportunity not only moving forward in 2016, but how it brings the other LOBs into play and completes the vision for our customers. Lastly, with HPE and Jen, proof points that not only can we bring out S/4 15.11, that's Bernd's code name for it, means 2015. In November, we actually released a new version, so 15.11. In two months, a customer's live 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. He's friend and colleague. He's running the Business Network Group. Ladies and gentlemen, Mr. Steve Singh. Thank you.
Thank you.
The temperature's going up. I can feel it.
Are you going to take the chairs? All right. Well, first of all, thank you very much. I appreciate all of your time. In fact, this is my second capital markets day. I'm very happy to be back here. It's fun. 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 Bernd talked about, you're starting to see in the marketplace. But you'll see even more and more of that as our products and services are adopted more broadly.
Look, as much as I would love to spend a couple of hours deep-diving into the three 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 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. All right. Let me be very clear on what the Business Network Group products and services are. They are three market-leading, best-in-class companies, Concur, Ariba, and Fieldglass, focused on the travel and expense space, the procurement space, and the contingent labor market.
I hope all of these brands are very familiar to you. They're literally the best-in-class companies in their respective spaces. As we think about how do we drive the investment decisions and priorities for each of these businesses, there are two 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-billion-dollar 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. For Ariba, maybe low double-digit market penetration. Very early stages of adoption.
I'll just share a metric that I know I've used this with you before, 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 contingent labor, companies that have 50 employees or more, where we can drive incredible value for those businesses. Across the Americas and the E.U., there's roughly about 1 million 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. We've got a little room for improvement. Right now, I realize 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 an 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. Not surprisingly, the investments we make really focus on two categories: driving the innovation curve in each respective market and driving distribution investments. 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. 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 that 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've seen across other cloud services. 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's share of the growth we're seeing is within the SAP customer base. 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. 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, and 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. 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. We had a lot of new innovation, things like AribaPay, things like Spot Buy, that we delivered into the marketplace. A very dedicated group of individuals, led by a fantastic executive named Alex Atzberger. 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, right?
We see the opportunity to 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, frankly, in partnership with SuccessFactors, delivers total workforce management solutions for our customers. But by itself, it's focused primarily on contingent labor management. It's a marketplace that is very young. It's a marketplace in which Fieldglass is still a fragmented marketplace, but Fieldglass is the number one player within that marketplace. What we saw in 2015 is about a 25% growth in the number of customers that we served 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 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.
Again, I'm not going to be 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, and they continue to climb at Ariba. If we can operate at those levels, then my feeling is we're 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 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 they're 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. 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. SAP has a fantastic go-to-market model for our ERP solutions into the SME marketplace. 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 sign 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 will continue to optimize our solutions to serve that market segment, small, medium, and national accounts. 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. 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.
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. Our view is if we're best-in-class, they're more than likely going to choose us. 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.
This example is important because 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." I'm going to give you a real quick example. This is a true experience that I had a couple of days back, and I guarantee you, if you're using Uber, Spotify, and Concur, you can enjoy this exact same experience. I happened 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 in the car. 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. For me, the actual transaction underneath that was invisible. It just happens. The experience is what I actually enjoy. 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 it's also what you ought to see within the enterprise application space. 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. Frankly, that's the benefit we're seeing as we run these companies, the business network companies, in a model that says, go focus on your particular marketplace, 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 that there's a few things that I hope you'll take away 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. Not only are we continuing to grow 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. 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. With that, I'm going to wrap it up, and I guess we have Q&A? Great. We'll invite the rest of the board back up for Q&A.
Thank you very much, Steve.
Thank you.
We now have a final Q&A session with all the executives. I'd like to ask Bill, Luka, Bernd, Rob, and Steve to join me here on stage for the Q&A. A reminder to those of you who are following this event over the web, we do have the opportunity to take questions by email, so please do send us questions by email to investor@sap.com. We just wait one moment till the chairs are on stage, then we can get started.
Good. I think we are complete. Maybe we start with a question here in the room first. I have one from Mohammed Moawalla, Goldman Sachs.
Yeah. 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 this gives you, tying back to the point Bill made, that it's about growing the market share, and what Luka said, that going as fast as possible to gain some of that market share in the cloud. Where are these investments going? What are they specifically, and what's the kind of capacity increase that will bring to drive that revenue acceleration?
Well, I think there's. Let me, I'll go 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 S/4 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 closer to 18%-20%. Now, in 2016, obviously, we have to put some more feet on the street. We've actually done some changes to do that.
As part of the 2016 plan, we'll put in, I don't know what it is, a percentage, Luka, we are putting more coverage model out into the field.
You will still need to increase the productivity even in 2016.
We will still need to increase the productivity, we still need to increase the revenue, and we increase the scale as well.
Have you given any thought to potentially a more kind of specialized segment within the sales force, given a lot of these newer products you're talking about?
Actually, we have, Steve can actually jump in because Steve's the new member of this group here. We've actually been specializing for the last four or five years. We actually have a specialized SuccessFactors HCM practice, one for customer engagement and commerce. We have a platform sales team. We have a Ariba core group, a Concur core group, and it all comes together as how we manage customers at the industry account level. We've been doing that for a couple of years, and to the point where I think we've perfected it now. I think the results show that we are actually able to scale every business at the same time as driving the core of these businesses.
I told somebody early on, what's beautiful about S/4 is when you see a company invest in S/4 and they focus on the digital platform, you actually start to 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 of things 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. Investing in specialty parts of our sales organization that understand that particular category is critical. Having said that, I would say that we do this with incredible discipline. 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.
It's scale. All of them individually at scale.
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&D or only on go-to-market investments and only on cloud delivery investments would not yield the perfect outcome from a customer value perspective. We run, obviously, an integrated portfolio planning process, which starts at the level of our R&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. Maybe, Bernd, to round that up, you can give a just very brief outline of what the key investment areas from an R&D and innovation perspective are in our overall portfolio.
Yeah. I would add that we have two main areas. One is to feed the market with new innovation. As well, looking at the rich portfolio we have, we have a huge investment into a converged cloud. 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. Our entire cloud will run on SAP HANA, and we will, as I unleashed before, we will rearchitecture our entire portfolio to expose services on the SAP HANA Cloud Platform. This is the significant investment we have started last year, including the business network division areas. Then, while we bring out new capabilities, new innovative solutions to the market, in future, it's not just an investment into development and into go-to-market.
It has to be on day one, including a cloud delivery capability across the relevant market segments where we think we will have significant success.
Thank you. I think we take the next question here from Mark Moerdler, Sanford Bernstein. There was a question here in the second row as the next one, please.
Thank you. Thank you for the additional information and color you've been giving today. I'd like to drill in on HANA and the HANA opportunity, specifically, given the new pricing on S/4 for HANA, how should we think about the lift that is generated by the attach of HANA to S/4? 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.
I think the first thing I would like to mention, because I hear a lot of technology being discussed today, that's good because we have the best, is the design thinking and the innovation that goes into these enterprise relationships is of paramount importance. Once you explain all that you've heard today to an intelligent C-level executive, they all want it. It becomes, do you know my industry? Can you architect this for me? How quickly can you get me to value? Design thinking and innovation is at the bedrock of SAP. Please know that we've been investing in that for about a decade now. We're way ahead of anyone that needs to buy it is going to still be many years behind us. On the subject of HANA, S/4HANA, and the HANA Enterprise Cloud.
A lot of people don't realize this. It's a great question. HANA is now a EUR 4 billion business. 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 EUR 4 billion business. Now, your point is well taken. HANA on a standalone basis, as Bernd rightfully said, is a very disruptive database. 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 Cloud Platform, we just really introduced that to the market last year in Las Vegas with Björn and Steve Lucas. It was a big hit.
The pipeline is overflowing with SAP HANA Cloud Platform for using unique applications that are the secret sauce, like Jaan talked a little bit about, some unique magic for his unique business. You have the SAP 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 SAP HANA Enterprise Cloud." Now we have a database conversation, we have a platform conversation, we have a brand-new cloud conversation. As Rob said, and Steve, every time we have these conversations, we end up winning the line of business against the narrow ones, we end up entering into the business network conversation.
When Steve talks about only 25% coming from the SAP install base, can you imagine when everybody across 305,000 companies in the SAP install base in sales or the partner network starts selling this stuff? I can easily see the period from 2016 to 2020 being the glory days of SAP HANA compared to the first five years where everybody did everything they possibly could to disavow it. Now it has become the standard in-memory database for enterprises that want to capitalize on the beauty of this digital age. As I think, Jaan, you pointed out quite beautifully today. Everything comes together in every enterprise around this concept of design thinking and innovation per industry with that as the ultimate platform.
To give you a certain impression of kind of the trajectory in terms of additional attach. Our combined cloud and software revenue growth of 12%, a comparison to our combined cloud and software order entry growth, which was at 18% for the full year. The fact that a substantially larger percentage than that was actually driven by multi-element transactions, irrespective of their size, but by deals that had more than just one sales bag attached to them. Including different elements of the cloud, including, for example, also analytics software that is more and more bundled together with SAP HANA, like those solutions that you have seen in Bernd's presentation before.
With SAP HANA being now available as the powerhouse of a completely rejuvenated and rearchitected suite, that attach possibility has just multiplied itself because the value that you can create through end-to-end process integration across the cloud as well as across the core, has just magnified.
S/4HANA, just for the record, is the HANA database. Only HANA with S/4 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 S/4 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. Two questions if I could. You mentioned the pricing changes to try to entice customers. How will investors see that? In other words, what's the economic impact of extending those pricing changes? Will that impact the maintenance areas? How will investors judge that? Secondly, I wanted to ask about the business network. When I've attended some conferences around SuccessFactors and other areas, the comment has been back, it's not well integrated back to the rest of SAP, and I understand that you're focused on that. 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 you.
Maybe I can take the first part on the pricing and impact on maintenance, the impact is, we will sell more licenses and therefore maintenance will go up. 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 S/4HANA foundation, which is extremely reasonable, very comparable with the business suite foundation pricing that we had in place before for the classical suite. It's a very attractive pricing. We continue to harvest, of course, the potential of HANA through the corresponding HANA licensing.
We see, of course, the great potential with the new scenarios that we can now drive to expand the reach of S/4HANA in our customer base, which will result in additional users being deployed under that simplified pricing structure that we have in place, which will drive additional upsell opportunities beyond just converting a customer to S/4HANA with the HANA licensing that then 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?
Anything you want to add first?
No, I'm fine. Let me speak first to the integration and then to the opportunity that it affords us. First and foremost, there's actually a number of our integration touchpoints that already exist, across not just each of the business network applications to one another, but also obviously back to S/4 or R/3. In ballpark, it's the summertime period of 2016, you're going to see native API integration deep into the S/4 environment as well as, frankly, into R/3. I think the comments around integration will be a thing of the past.
Having said that, it's also important in 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, in a real-time model that's appropriate for that particular customer. Even when we're done with the API integration, you're still going to see years and years worth of 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 a Fieldglass. It's already got natural integration touchpoints into Ariba. It's got native integration touchpoints into SuccessFactors. The value fundamentally is exactly what you'd expect, which is the customer gets a better experience.
That really drives greater adoption of each of our best-in-class applications. The strongest position to be 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." If we're absolutely best in the world at what we do, deliver the best value equation, and we're integrated, I'm pretty sure we're going to win a lot of business. That's what we're starting to see. The net is we're seeing up-taken opportunity across our customers to buy more and more of our products.
Thank you. Before we take a question from Philip Winslow, Credit Suisse, we have one question here by email from John King, Bank of America, Merrill Lynch. Again, a question on SAP S/4HANA pricing. Maybe, Rob, you want to address this. 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, particular new modules, or net new customer?
With kind of 10 months under the belt selling S/4, I would say the move by 2,700 companies to move to S/4 meant that 2,700 actually licensed with SAP HANA 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 S/4. It's tailored to what you saw Christian Klein present. We're starting to see much more companies get a higher user base. The question to upsell, pretty much the new products that are designed on top of S/4 are being sold de facto into these bases. 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.
Even more than that, the analytics, the SAP Digital Boardroom, it's pretty much probably every one of those companies actually signed up for that as well. When it comes to new customers, I think when new customers look at this, they look at S/4 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 2000s, and gives them a real chance to compete in a digital world with a ERP.
100-person company or a company that's been around for 100 years, this is what the massive difference is. 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 where that's being used. This is clearly the only future ERP platform that will meet the digital thing. I think these numbers basically state that.
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.
We're going to put a tremendous focus on SME at the low end of the market through the cloud to radically expand that as well on HANA. 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. I think that debate has been settled. You might say, "Are they running on HANA?" 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. 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.
That's great. Two questions, one for Bernd, and then a follow-on for Bill. Bernd, obviously, you had a big release in November of 1511 into 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. You've talked about a multi-year roadmap for moving to SAP S/4HANA. That was a big release, but what are the next steps in that process that you're looking to knock down? The follow-on for Bill is, obviously, that 1511 release was a big deal. When you think about the business side of this, maybe Rob, you can touch on this, too. How far into the base does this get us? Does this address 60%, or where are we from a, think about revenue opportunity? I'll leave it there.
Want me to start?
Go ahead.
First of all, I think with that 1511 release, thanks, Rob, for explaining. 2015, 11 means November. We have delivered the entire ERP core. 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. It means you have to transfer the capabilities of SAP HANA into the applications. Does it technically run? Yes, all industry development run already today in SAP S/4HANA as we speak. 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 SAP Digital Boardroom this morning. We have to simplify the architecture across the entire industry portfolio. This is the big task for 2016.
In addition to that, I as well want to entirely change the user experience, the interaction of an end user with the system. I could share with you an example 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 15.11 release, he is still having the same tasks in the organization, but in four clicks. This is a productivity increase for that individual of two-thirds. 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. If it resonates with the end user, now it is a permanent engagement with the end users across all our 104 business roles we support in S/4.
We have in focus that we do this for the 80%, which are highly used. There are very industry-specific ones where we engage with thought leaders. You could take oil and gas. These roles does not mean that there is no potential, but they are more in the focus, 2017 and beyond. This is just a renewal of all the capabilities we have. With Internet of Things, with sensor technology, I think the whole area of product life cycle management of manufacturing will be redone. 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 at that particular place.
In future, the carrier of the information is the product itself, the request goes to the machine and saying, "I need a drill into that specific situation." Now you can imagine that the whole manufacturing process will be completely redone. Does this mean at the end you still produce products? Yes. The way you do it in a digital factory is massively different. Why do we do it? Not because we want to put in technology. No, because in the engagement with the consumer, consumers want to have a 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 S/4, a complete warehouse management, transportation management, and manufacturing capability. As Yves 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. Why go that path if you get a pre-integrated solution where the re-architecturing of solution is not just a porting, it is a complete redefinition of all these individual segments will be done. Tell you from one big automotive companies, they have today to run their service parts business, three ERP systems, not because they need it, because no traditional database is able to manage their volume. With S/4HANA, we can do it in one system. This will be a huge consolidation project, this is all work.
It does not come just with saying it runs on SAP HANA.
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. Basically, if I was to give you our strategic framework that we talked about today, that is the innovation side. The thing that we always underplay at SAP is the handshake part of that with the customer, which is our services business and our ecosystem. Everything is on fire right now.
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 two questions here. Michael Rees first, and then I think we have Kirk Materne. Let's get the microphone to the left-hand side, please.
Thank you, Stefan. Luka, you alluded to the line of business areas as still being something that's shifting to the cloud, and that's a pressure on your license business. Can you maybe give us a feel for how large that is within your licenses? Is it 10%, 20% of the total? Bill, maybe on S/4, 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? Standardization. Is S/4 generating conversations where customers are now moving off of, say, PeopleSoft or Siebel, doing sort of big shifts to SAP?
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, that's certainly HR, that's certainly the customer relationship management piece, and that's at the end of the day, also the procurement space. Those three in combination would be at between 10% and 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 example, in direct procurement, yeah, in which certainly a differentiated on-premise case may still make absolute sense. 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.
You should not see this as that whole percentage shifting completely to the cloud in, let's say, the next 12 to 24 months. That's giving you kind of the overall spectrum that we're talking about. The vast majority is really our core assets in terms of S/4HANA, 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 into what's cloud-based solutions like we have seen them with Digital Boardroom. Now to Bill.
I'll just summarize. We got, in 6 months, 2,700 customers on S/4HANA. I asked Rob the other day what the pipeline looked like. We did a forecast call with the field, I thought the number was 7,200, then he explained to me, "Bill, you're way too conservative. It's much bigger than that." We don't lose S/4HANA business, ever. Therefore, I reiterate, we have the killer application. The second thing that I've learned in these customer engagements, I spend a fair amount of time because in the end, the customer alone will determine your win rate, they'll buy based upon what's in their best interests. 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, it might have been a real big battle 2 years ago, 12 months ago. Here's what they're saying now. Of S/4HANA, 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. We're scooping up a lot of that business. On the CRM side, you said, "Do you have big Siebel replacements?" 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. I fully expect the cloud rental model to get punished on price as it relates to the narrow point solution provider. I fully expect the extension of S/4HANA into the line of business cloud to add extreme value and get extreme price compared to the rental cloud LOB alternative. We have to prove that, the early signs are good because it's growing in triple digits, we're only getting warmed up.
Thank you. Now we take Kirk's question, please.
Thanks very much. Kirk Materne with Evercore ISI. Maybe I'll start with Luka. I have two quick ones. Luka, 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, could 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 sort of left as upside. Just sort of your thought process. I'm sure Rob has some thoughts on that as well. 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 just a maturing of the field so that you can start getting pulled in even more so into broader sort of existing SAP customer engagements? Thanks.
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 some of them are a little bit different, so to say. If you compare the situation in 2015, what we saw was a very difficult macro environment in Latin America, in particular. Brazil with all of its individual problems, but also other parts that suffered as a consequence, so to say, of 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, who's coming with a lot of structure.
I think we will definitely continue to weather quite an interesting environment there, where our products will be responsive to some of what the customers will need to do to drive predictability and efficiency in this uncertain environment. It's not impossible, as we have seen in the second half, to drive growth in this market. From a pure macro perspective, we expect continued volatility there. Situation has improved for us in Russia in particular. 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. 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. There are still strategic investments that they are making. 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. 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 million companies that are there that are realistically addressable by SAP across all of our solution spectrum? There is definitely the potential for growth. China has been elevated to one of our top five markets by now.
It has come a long way, also due to a lot of strategic investments that we have made into the country. I would be actually more optimistic maybe than quite a few people around our prospects in China. 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 a macro perspective, like in Latin America. All in all, we expect that we will have surprises, sometimes positive, sometimes negative, with a higher volatility than mature markets. Overall, a very relevant solution portfolio to address the challenges that customers are facing in these markets.
I would just say simple. 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 they threw a lot at us in 2015.
The answer to your question on the penetration of the Concur product into the SAP customer base. First of all, we're actually seeing fantastic penetration of Concur into 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. Frankly, the scale of the opportunity within that is so large that it's easy to be inefficient in how you actually go after that. What we look at more so is, how do we, on a phased basis, make sure that we can be incredibly effective in reaching across the entire SAP customer base? 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're also seeing incredible growth outside of the SAP customer base. I want to go chase that. We're doing that in a very disciplined model that allows us to continue to grow the operating margin within the Concur business. If you look at it and say, Ariba and Fieldglass, and to be fair, 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, but look, across the 75% of the customers that Concur has that are not SAP customers, we're coming in and delivering incredible value.
To the question you asked earlier, if we can deliver a set of integrated services where each one is best in class, we've got a really compelling story to talk to that customer about. 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 two more questions. I see one here in the back. Ross MacMillan from RBC.
Thanks. It's a two-part question. Luka, when you think about the ambition for 2020 on cloud, call it EUR 8 billion, you think about EUR 3 billion today, what is your assumption in terms of core, so non-line of business, but core moving to cloud to get to EUR 8 billion? Related to that, what do you need to do to get there? Do you need to find more partnerships to run core in the cloud, for example, with AWS? Is it going to be your own kind of enterprise cloud? Can you just maybe talk about that road map? Thanks.
Yeah. First of all, I tried to lay it out. It's a multi-pronged opportunity for us. It not only rests on converting S/4 to the cloud, which we will do, definitely. It's also the other elements, scaling the HANA Cloud Platform, for example. We are in the HANA Enterprise Cloud only at the beginning of our infrastructure as a service offerings. And of course, we fully expect that our 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. Yes, we expect a contribution from S/4 in the cloud, which will in the later years, let's say 2018 until 2020, progressively increase. These are solutions that, as you have heard, you can sometimes in two 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. It's possible to do this very fast. What do we need in order to achieve this? We are working, of course, on broadening our partnerships in this space. I expect, especially on the transformational transactions that we do, that also SAP itself will be part of that action. We will have in our own data centers, obviously, S/4 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 for SAP, but God beware if they have maybe some non-SAP applications left to get it out of one vendor.
Both is important, we will scale our capabilities both in the ecosystem as well as in our own data centers to support this. 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 S/4 customers to the cloud. 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 has actually proven, it's possible to do this very fast.
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 S/4HANA very badly to complement their technology offerings. 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 Luka has given you the financial profile of the line of business, the core, and the network, and the margin profile of that. As you know, if you're working on that dimension, the margin profile goes way up. 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 and high security standards so they can have our offering in their cloud, our offering on their hardware, our offering around their services team. That's what I mean. When you have the killer app, everybody comes to the honey. The honeypot is S/4HANA, and they're all coming to it, and that's why this thing is going to go on a global tear.
Thank you. I'm tempted to say this honeypot is a nice segue into lunch, before we do that, the final question from Alex, please.
Thanks. Thanks, guys. Slightly hypothetical question, but if you had been charging for the S/4HANA foundation, how much of a typical S/4HANA license sale would it have represented? 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. Then just related, do you need to adjust the licensing on a per seat basis, given that the objective in S/4HANA 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 S/4HANA. There was a price of admission called HANA, even if you broke 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. All we did is carry through a very well-architected communication plan with the customer, where they get HANA, they get S/4HANA, we get money, and they get fairness. We got money every place we went. I just want you to know that. There was no free lunch.
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 suite. This was a relatively low five-digit euro number from a price list perspective, fully discountable. That's kind of the measure of comparison, if you would compare it to the free foundation promotion. It's not relevant. Customers have gotten value, and they have paid a fair price through the monetization of SAP HANA for it, and it's basically what we now, under a 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 is getting from the solution. 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 S/4 faster, quicker, with low barriers to entry. S/4 provides Bernd and his organization an opportunity to develop next-generation products that are coming to market, which no one else has. We've seen it with things like cash management, boardroom of the future. This is accelerating the growth. If 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 for the sales organization to be much more productive in explaining what customers get. I see this as a huge benefit, not only for the-