Hello, everyone, and welcome to our Financial Analyst Conference here in Orlando, Florida at Safran now 2015. Thanks for making it to us on-site here in Orlando. I would also like to welcome those who join us over the web. My name is Stephan Gruber. I'm Head of Investor Relations at SAP.
And I'd like to provide you with a quick update on our agenda for today's investor conference. And you can see we built a 90 minutes program for you. The event will be started with a presentation of our CFO, Luka Muchic, CFO and COO. And Luca will provide an update on our strategy based on the strategy we laid out at our Capital Markets Day in February this year. He will also provide a brief recap of our Q1 results.
As you remember, we had a solid start in 2015 and he will talk about how we drive efficiency and effectiveness across the business models in our organization. Then we move to next presentation, Steve Singh, CEO of Concur and a member of the Global Energy Board of SEP will talk about the highly differentiating aspect of our Strategies, our business network and I believe no company in our industry has such strong network assets. And Steve will explain and layout our strategy in that segment. And then we move on to the technology side of the house, but also the application side of the house. And I'm very pleased that I can present in this forum a new speaker, Quentin Clark.
He joined us last year November from Microsoft. He is the CTO of SAP and he will talk about HANA, S4HANA and our overall platform strategy. And at the end, you can see reserved roughly 30 minutes for Q and A with our executives. And we will also see Bill McDermott, Rob Enslin and Bernd Leukert here on stage. So far the agenda, I would also like to Say a warm welcome to my colleagues on the Investor Relations team.
We have Astrid Strommer and Michael Redford from our team in Waldorf, as well as John Duncan and Scott Smith from our team in the U. S. Here on-site in case you have any further questions later on. And then the housekeeping items, we will hold as usual an investor reception later on this evening. Note the location has changed.
It will not be at the Ritz Carlton this year, but instead at the Primo restaurant at the JW Marriott. And as usual, we provide The shuttle service from the Hilton Hotel, the shuttle buses will leave at 7:30 and 7:45 and there also will be shuttle services after the event back to the Hilton Hotel. Finally, this event is being webcast in our Investor Relations website and we will also make the slides available later on. And I would also offer to those who follow this event over the internet the opportunity to send us questions by The e mail address is the standard e mail address, it's investorsap.com. And before I hand over to Luca, the usual closing remarks from my side, these are the Safe Harbor statements.
Please note that except for certain information, matters discussed during today's conference may contain forward looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect the company's future financial results I'll discuss more fully in our most recent filings with Securities and Exchange Commission. So these were all my internal remarks and I would like to hand it over now to our CFO, Luka Marchek. Thank you.
Yes, thank you very much, Stefan. And I would like to Also keep my remarks relatively short so that we have enough time to interact and of course so that we have a punctual start of our renowned investor cocktail reception this evening. If you think about it, Bill has laid it out for those of you who were in the keynote section this morning, our broad strategic positioning in the market. And he has talked about Fact that for many years we are and have been world market leader in core enterprise applications as well as for many years have been a leader in the analytics market. But of course, SAP's desire and ambition has been to extend beyond this leadership and remain and stay ever more relevant to our customers in order to help them run an end to end perfect enterprise.
And we knew that as the world was shifting towards the need to process Ever increasing amounts of big data and rationalize them, analyze them in a predictive sense that the world was leading more and more into the cloud, into flexible consumption models, into flexible deployment options for line of business executives And that the importance of extending across the entire extended value chain of companies and connect In a meaningful automated and integrated sense, there are various constituents, suppliers and partners that we needed to act and embark on a broad extension of our solution capabilities. And this is what we have consistently executed upon. We remain the number 1 in suite applications as well as in analytics. However, we have organically developed the groundbreaking HANA technology platform, which is in essence the basis for all of our capabilities for handling big amounts of data, big data Analytics, Internet of Things scenarios, we have of course also amended our platform capabilities through acquisitions. Sybase Comes to mind, of course, analytics also business objects.
And we have extended into cloud applications through a series of bold moves and acquisitions. SuccessFactors is a good example for that. So that by now we are the number 1 in the cloud market by measure of users and the number 2 by revenues. And most importantly, we have focused as probably the only big player in the market on the growing importance of business networks and have through the acquisitions of Ariba, Concur and Fieldglass now the most all encompassing solution for customers really want to seamlessly integrate with their extended ecosystems, with their suppliers and partners in all of the main important spend categories that they are managing direct and indirect procurement, temporary workforce as well as travel and Expense Management. So with this situation, we feel actually very comfortable to now be able to fulfill for our customers The vision of a perfect integrated enterprise.
At the heart of that is S4HANA, our radically re architected suite Solution that is now natively optimized for in memory based data processing with a massive simplification that Customers can run not only for their IT operations through the simplification of data structures and IT landscapes, but more importantly for business simplification, both in the way users interact with the system from a user experience perspective, but also in the way how So the solution lends itself to changes in business structures, to changes in data mining needs through the capability to really bring together And analytical processes based on the unique flexibility that the solution architecture brings. We believe that this is a game changer across all of the core processes of an enterprise. And then through our capabilities through the HANA Cloud form, which allows customers to flexibly extend the core solution capabilities through own or partner developed extensions, as well as the capabilities that we have developed through our HANA Cloud Integration solution where we can really bring together all of the specific line of business or specific purpose applications that we have built or acquired through the years such as the business network applications, Such as SuccessFactors for the HR space such as hybrids, for example, for omni channel e commerce in a seamlessly integrated sense.
We can really now allow our customers to have that landscape, which is really based on integrity on an end to end orientation seamlessly integrated, delivered through an end to end solution provider that is SAP. And that's Solution for the 21st century, including all of its challenges, be it the engagement with customers across all The channels of interaction be it the handling of big data scenarios, industry 4.0 scenarios or be and of the extended value chain towards suppliers and partners. Now Based on this vision of the perfect enterprise, we of course need to take a look at what are we doing with it and where are the levers for SAP to increase our effectiveness and efficiency addressing the market. And we indeed, And I've talked about this in New York. I'm seeing now a number of important prioritized areas to focus on as a company.
Clearly, on the top line, S S4HANA will be a great catalyst. I personally believe that the adoption of S4HANA can drive a very Swift product cycle and product introduction cycle because the way of implementing these solutions is very non disruptive. The solution is already operating at a functional richness that you would usually never find when you introduce a new product. That's basically because most of the change is at the user experience level as well as at the architectural level underneath it. So it will drive a lot of growth for SAP both in on premise, but also through the cloud deployment option in our cloud business.
Clearly, on top of that, we have true game changers. 1 is customer engagement and commerce solutions where we continue to enjoy very high growth rates, Not only on premise, also more and more increasingly in the cloud, the discussion around salesforce.com, for example, shows us that we are on the right path Because those discussions around consolidating the past through acquisitions, potentially sales force becoming a target only show how vulnerable this entity is And that the real future oriented solution is one that enables a conversation across all of the channels of customer interaction, which is exactly the vision that we are portraying and hence also very clearly an answer to this group. No, we are absolutely not interested in acquiring the past. We are moving forward and leaning forward to the future. Another area which is very important for SAP is the industry capabilities that have always made SAP strong And we write industries with a big eye again with S4HANA, we have a unique opportunity to provide really game Changing industry specific scenarios based on the completely new flexibilities that S4HANA provides, but based on our deep industry specific insight that we have in strategic industries like public sector, like retail, but also in the traditional industries like manufacturing and automotive, where we continue to work with our partners and customers on Industry 4.0 Internet of Things scenarios.
The second one which is very important for us internally as well is that whole notion of RunSimple. If we want to show to our customers that RunSimple is a notion that they can adopt with SAP, of course, we need to transform ourselves as well. And that comes with various flavors. You may have seen in the press conference if you were present that we are opening up completely new channels to the market like the digital channel that Jonathan Becker is working about. This is a very efficient sales This channel for us for smaller nimbler product types that are digitally native and that we can go to market with through a very powerful online automated store experience that we have built.
We are working with Simple Finance with S4HANA at SAP since a while. Now we are taking these foundational works that we have done to the next If you have been on the show floor, there is, for example, a great demo of the boardroom redefined how we are implementing it at SAP, where we can have a whole new experience of how analytics at the senior and top management level can be defined in to free float a way of mining through data and visualizing it in a very, very meaningful sense. That for us is a trigger to of course rationalize a great amount of resources that today have been flowing so far into the provisioning of analytical assets all through the organization and reducing our capacity in this area. We clearly need to show the way there as well and these efforts are underway at SAP. Last but not least, of course, there is a strong focus now with This robust and broad set of cloud applications that we have in the market to focus on the TCO of operating these solutions.
There are still a lot of important levers that we can pull such as consolidating, for example, different data Center Operations that we are making sure that our solutions are optimized from a design perspective for easy to operate and a low TCO and so on and so forth. And finally, yes, we need to continue to work on our services business. We have talked about This in the context of Q1 results, the classical way of consulting businesses not only for SAP but also in the ecosystem It's clearly on the decline. So we are with work underway to combine our different services assets with a new service portfolio under the One Services notion. This will result in additional restructuring needs as we have outlined on the Q1 result through the course of this year.
But then I think we will see a nimbler Services Organization with the service portfolio that is really optimized for the new HANA world that we are moving into. And those are all initiatives that we are working on with a high effort and high focus. I think this strategy as well as our focus is starting to yield results. We have seen that while I will not over I emphasize Q1, which is historically always been our smallest quarter and that's already a secret I can share with you. It will remain our smallest quarter for SAP.
We still had a very good start here. We grew cloud revenues very healthy with 131%. It is clearly becoming now a business That is very, very significant in its own right. We had a very strong growth in new cloud bookings to 1000000, 100 and 21 percent growth there. And the business network came into a very strong start as well.
This is a business already in Q1 with a total revenue of €368,000,000 so very substantial, already operating at scale and therefore also already with a healthy positive margin profile, which we can continue to extend as we move along in further years out. And more importantly, I think it's a strategic asset that drives the stickiness of SAP with our customers, with the amount of trading volume that we have achieved by now and the amount of connected companies. We are creating value for customers that cannot simply be mirrored or replaced by other players because no one has the business network assets and the ecosystem surrounding it that we do. This paired with a continued stable core business is I think what really differentiates SAP in If you think about it, the combination of software and support revenues has grown 16% or 5% at constant currency in Q1. Again, we continue to see a very high Stability in our software support business software revenues have returned to slight positive growth, also driven by very healthy early conversations with our customers around S4HANA.
So we feel that we are on a very good road towards 2015. Of course, as I always tell my people, a nice spring does not necessarily already make a hot summer, but At least it's a very, very good starting point. And we are building on the strategic conversations that we are able to have with our customers because we are able to lay out that vision of a perfect integrated enterprise for them. And that tends to drive Strategic conversations that are not narrowly focused but can drive bigger transactions at the same time. So I feel very confident about where we are at the moment.
And I think we are also showing proof that a strong cloud business does not needs to come along with that notion of cannibalization of a core business. I believe it can augment it and can further solidify it. If we are doing it correctly, it can round it up with a great stickiness of the overall portfolio. That's where we are at. That has been driving 12% constant currency growth in cloud and software combined, 24% on a nominal currency basis.
And if you take the notion of software revenues plus cloud TCV combined, we showed double digit growth in that combined order entry FIGR as well in Q1. So we are definitely on a good track. And with that, I would like to hand over to Steve to talk about one of these key ingredients to our strategic success in the future, which is indeed the SAP Business Network and the master of the network will be yours
to explain it. Thank you. I appreciate it.
Thank you. Hello everyone. I I'm going to spend just a few minutes with you and walk you through the 3 priorities around the Business Network Group. And they really fall into the following buckets. What are we focused on today?
How do we see networks coming together? And how do we enable networks that are either owned by SAP or partner networks to actually interoperate with one another, right. So obviously, let me just make sure I understand what slides here, okay. So obviously today as you know, the SAP Business Networks Group has 3 components to it. There's Concur, Ariba and Fieldglass.
I know to some extent each of you have experienced with each of those companies prior to becoming part of SAP. And so you have some relative understanding of the scale of each of those businesses. The €368,000,000 in revenue that Luca referenced for Q1, obviously Concur is still one of the larger components of it, followed by Riva, followed by Fieldglass. But what's really important is what we saw across each of those networks is fantastic new bookings growth in the quarter. So we saw In fact, I think we mentioned this on the Q and A session of the earnings call.
We saw between 35% 45% growth in each of those areas on a year over year basis, which is fantastic. It's something that we expect to see continue in the years to come. And that's largely driven by the fact that there is great growth environments in each of those three networks. Now, the next thing that we are starting to see and I think this is really a trend for where all Enterprise computing is going to go. There is to the extent that an area of business process can be automated and will be automated.
To the extent to be connected, it has to be connected. It will be connected. And one of the things we're seeing across our customers is that customers who are embracing each of the three Components of the network group are asking for these networks to start in operating, right, and actually starting to drive an action across the network. Let me give you a really quick example of that just to help put that in perspective. So, one of our customers happens to be a very large Mining Organization.
And the things that are important to their business are examples are, well, look how I get my materials from one place to another place. And when you're thinking about something as well sounds very simple, but it's complicated as it is. One of the biggest enablers is the actual tires that are being used on the trucks and the machinery they take materials from one place to another place. These tires when they blow out replacing it, this is not your car tire, right? You're replacing something as large oftentimes as a small home.
And so when you're replacing this, what you're looking at is we're actually capturing sensor data out of that tire, storing it in things like HANA And then using that across the entire network. So within Ariba you can see, you know what, this company produces X 1,000,000 or consumes X 1,000,000 tires a year. The behavior patterns of the tires and wear patterns of the tires are the following and you can start to predict when do you need additional tires, where do they have to be delivered And who's best to deliver that material. Now in the same vein, in the same process, which you're also starting to see is that information is Flowing across the network from Ariba to Fieldglass, so that you can actually determine who's the right team of people to actually install that. That tires I realize is just one simple example.
But how do you actually install that? And then bringing the right team to the right location at the right time to make sure that those are installed. Of course, you can imagine an environment where Concur becomes integrated to that process as well. Obviously, we're new into the SAP equation still, But Concur being integrated to that process and actually looking at all that travel and managing those expense reports on behalf of that set of individuals. So, if we can do that, if we can actually enable networks to come together and actually communicate across those networks, What you're doing is you're taking a lot of mundane processes that used to largely have to be done on a manual basis and say, look, I can take actions on your behalf.
I can create value for you as a customer. There's things that you would have normally said yes to, boom, we can do this and deliver that set of services in to our customers. The next piece I'd like to just briefly touch on is, well, how do you connect these networks? Certainly, the networks that are run by SAP will certainly be connected together because we have the capacity to go in and work at each individual levels and this is how it comes together. We think It's far more important to look at how do you actually enable networks to be connected across not just all the SAP networks, How about every other network that may exist at some point, right?
There will be hundreds and hundreds of networks over time. What's really critical is how do you bring those networks together and how do you Not just across each other, but down entirely through the stack into the systems that run our company's businesses, right? I think Bill said about 70% or thereabouts of the GDP of the world runs on SAP. And so how do you bring that information and bring it all the way down into the systems that are running your businesses. So, what we've determined or what we the strategy we're taking forward is that we will expose a layer of services in HANA Cloud Platform that are available to obviously not just our own service networks, but to every other network in the world.
And it allows those networks to integrate across a core set of services that allow for not only that integration across the networks, but also deep into the systems have gone our customers' businesses. Now, here's I'm going to just give you a little bit of example of some of these services, things like identity management, Things like security or payments or messaging, right? So, you don't need 7 different identities for any one individual. For Rick, you don't need 7 different identities for him, right? You need one that is totally capable of understanding all the needs contextual for me within any particular network that I operate in.
This information by the way, That core set of network services will be available to everybody in the world and integrated deeply into the existing networks of SAP. And that's the real value of having capacity to integrate across networks is that you can make it an ideal experience for an existing customer when they pick a network that's new. So Airbnb, imagine that or an Uber, right, networks in and of themselves, but they're integrating across SAP Networks like Concur or for that matter like a Fieldglass. The next piece I want to make sure I really briefly touch upon. The next piece I briefly want to touch upon is this idea of additional networks.
The strategy we're pursuing is the following. We're going to create multiple networks within SAP, right, to solve very specific business problems for our customers, but we'll also embrace networks that exist anywhere else in the world, The way that we win for our customers, the way we solve problems for our customers is to make sure that we embrace their choice, whatever that may be. Having said that, We like every other company in the world want to be best in class in any of the networks that are being created. So just as a quick example, One of the things that we're seeing a real need for is understanding what's actually happening within the network. And you're going to hear a product announcement tomorrow that We'll help try to capture that concept.
This is the risk management services that we're going to provide to all network operators. So for example, at Concur, one of the things you may want to use that risk management service for is the following. If something Negative happens anywhere in the world and you want to be able to provide a travel recovery service for your customers. What we're going to do is take all All your flight information that you would normally see within Concur and put this in the risk management service along with literally every tweet, Every news feed, every traffic feed, every type of information you might normally see that could impact travel, including things like natural disasters and the like. And you'll be able to click on that and say, okay, show me who of the SAP employees or who of the Philip employees or wherever it may be, Show me all the folks that are impacted by this particular event.
And then help them get out of that event to a point of safety and then move forward obviously from there. Imagine that same scenario for an Ariba, for a field glass or any other network you can think about being able to manage what's happening in the ecosystem in the supply chain And then drive appropriate actions from that is only possible because we've had the capacity to actually take an environment like HANA, Store literally almost limitless amounts of data within that and then go use that and action it as appropriate. Hopefully that makes some sense to you. Folks, I'm going to stop right there and then hand the discussion over to Thank you.
Good afternoon. So, this morning we had Great keynote by Bill kicking things off here at SAPPHIRE. I appreciate the comments from Luca setting things up and from Steve talking about the network. I'm going to sort of end the monologue part, if you will, with some discussion about the application space and the platform and then we'll take Q and A, right. So, I am new to SAP.
People may not know that I have been here 5 months. I am 20 years in the career. And I joined for one very simple reason. There is no place like SAP to go and pursue the journey of modernizing every enterprise. The reality is the world around us has been changing dramatically, right.
The statistics that are behind you and the things that actually Steve talked about as well, I'll speak to that transformation. Every end user and every enterprise, every business is going to have a tremendously different experience with their company than they've ever had before as we unfold and as we see this future take hold. The advent of mobility, The availability of cloud computing, ubiquity of cloud computing, the advancement of techniques around data management, things like HANA, as well as things like Hadoop We're all speaking to a different sort of generational change in applications. And so too have user expectations also dramatically changed. There is probably not a person in this room without a smartphone.
There is probably not a person in this room that does not expect some Tweet trend that struck instantly in front of them on their mobile device. Work will work like that too, right. We will have this Modernization of every application in every scenario for every walk of life in the enterprise. And I came to SAP as the new CTO to help pursue that and help lead that in the industry. HANA of course is a huge component of this and very much actually the core of this rejuvenation in the business software space.
HANA is a different category of database. One of the things I did not understand Being outside of SAP, as I got to spend time with Hassel Platner and time with the engineering team that builds HANA In time with the applications, the teams that are building the applications in Sfour, I came to understand what HANA really is. HANA It's a transaction processing analytics engine. It is not a traditional database. It's a new carrier database.
It opens up a whole different set of capabilities. And this is an incredibly important, but little bit subtle point because yes, it speaks SQL, which is the dialect, right. The language of databases speak, but it is more than what a traditional database does. It provides the opportunity to build applications that can understand the current as well as the historical Under one data structure, under one management, in one system with one API. And that is actually unique, Right.
And by combining what has been going on with what is going on currently, it means that the entire application space We will undergo this massive transformation by embracing this modality of being built. And so HANA is that platform, right. It's not just that Platform for SAP, we believe it's a platform for the world and we are building HANA to both support our S4 journey and via platform for the broader world. By bringing together the transactional analytics, we have made new scenarios possible. Everything that Luca will talk to you about the new simple financials, what he gets to use closing a quarter To everything that goes on in the supply management space where the difference between a data warehouse that we understand inventory versus what's happening in point of sale, Those lines get erased, right, as we embrace HANA.
By having this incredible system that uses advanced compression in order to achieve This goal of unifying the analytics and transactional, we also have this tremendous cost savings, this tremendous space savings, which mostly means we can fit More of the world in the memory, which means we can provide instantaneous answers about anything that's happening in that world. By embracing a memory that It means that we have the ability to basically answer any question in real time as people think of those questions. And a lot of what you've seen today, a lot of what you'll see out on the show floor from SAP and a lot of what you'll see Sorry, Thursday and Doctor. Plotner's talk is about how to explore realizing the value of that realization They're bringing together the analytics and transactional into one structure and take advantage of the system that allows you to ask any question as you think of it. Hana's role in the journey of S4 It is obviously critical, right?
S4 is an examination of all the functionality in the suite and challenging Ourselves to think about what will we do differently, how we implement this differently if we could rely on what Hana brings to the table. If we can Write this in a way where you limit the lines between what is going on and what has just happened and we embrace the notion that I can ask questions in real time. It It started of course with HANA itself. HANA itself is its initial release in 2010. So, Davis technology within over time We started to explore the value of how to use it, right.
And if you look through the last few years With Simple Finance as the example of by building on HANA, taking advantage of HANA directly, we realized in working with our customers, we are on to something deep and meaningful. By taking advantage of HANA in the application portfolio, we're able to change what that those products were able to do. We're fundamentally changed what logistics And across every walk of functionality, whether it's finance or recruiting or travel, Embracing HANA lets us change what those applications are capable of doing and that's what the S4 journey is really all about. Bill talked about that this morning. Vern will talk about that in more detail tomorrow at his keynote.
But that journey is a journey we're making with our customers to help Let them help us explore where the new value is going to be found as we embrace HANA in SAP S4HANA. S4HANA itself is composed really of 3 axes of major transformational value, not just They're reimaging what's possible, but also in the user experience in terms of changing the experiences and simplifying. Bill talked about the removal of 4 depths of screens in order to get a certain functionality. We're going back to the foundations Of every one of our workloads, every one of our user personas and rechallenging ourselves and how it is that they want to work And rebuilding Fury interfaces on S4HANA in order to accommodate that more modern way of working. And to wipe the slate clean, so to say, and give people the right experiences that are real time, more interactive, more responsive, And more to the point of what they're looking and seeking to get done day after day, every day.
We're also simplifying the structure How extensibility and customization works. And so by building S4HANA Cloud Edition In a way that we're ensuring that the extensibility model works through HANA Cloud Platform, we're allowing the updates A VES4 HANA happened by us. They'll talk about that this morning, where across the entire landscape of VES4 HANA Cloud Edition, we will be the ones Responsive for maintaining updating and moving that forward. The way we can do that is because we're providing the extensibility model through the cloud platform. And so for our customers, they will be building the extensions and the customization of the product through that public extensibility mechanism in our cloud.
And so that allows us to loosely A couple, if you will, those extensibility mechanisms and how customers are built with the core of the application suite and S4HANA Cloud Edition. It's an important step forward in this industry. At every turn, this industry has had the challenge of how do we keep customers current, Given how customization has been done in the past by recompiling ABAP and these kinds of things, it's always been this major challenge. That challenge goes away as we embrace The development modality that we're building as for HANA Cloud Edition in, in terms of the deployment delivery in the cloud and in terms of how customers will take advantage of it and extend and customize. And so we're finally breaking free of that tug of war between our innovations and the need the customers have to maintain A constant and reliable infrastructure.
We are solving that by bringing things to the cloud. So across these three things, the HANA, the embracing of HANA, the embracing of New Year experiences and the embracing of cloud as an extensibility model, S4HANA is a transitional moment for us as a company in a significant, significant way. Layer into that, the work we're doing in excellence in line of business And in the business network and the integration that we're going to provide between those applications including S4HANA and things like Concur and things like SuccessFactors. And then tapping in the network like Ariba into the integration platform that's also part of this HANA Cloud Platform. So, SAP's cloud product, cloud platform product is the place this integration will happen.
It's how extensibility of S4HANA happens And it's how you will tie together success factors and success factors in Ariba, in the solutions or Concur and as for HANA into a solution. So HANA Cloud Platform becomes a way these things will be woven together. And that connects out to however it is we want that delivery to be expressed, whether it's to a mobile user, through a device or whether it's to a user seeing a desk in front of the screen. The platform capability and S4HANA itself are providing the extensibility and the flexibility To project those experiences wherever it is that the users may be. This all is true because of HANA Cloud Platform, Right, we talked about the benefits in terms of being accessibility platform for the application suite in a place where solutions can be built that span across line of business solutions and the core solution S4HANA.
This is also a place where IoT data comes into play. SAP is the company that is the best position to help make to make sense of the new world of IoT data Coming in and colliding with line of business information. Where else are you going to be able to go that has the wherewithal to provide solutions for building applications and for providing analytics solutions to end users, but to SAP. Every interesting big data model on the planet, Nearly every one of them inside it has SAP data. It's inescapable.
You go to all these sort of Transformational big data models that come from IoT data or come from some other social meme or something else and you inspect what that model really looks like. Look at the data sources And you see that there is data from SAP systems inside there, whether it's from the financial systems or procurement or HR systems, Almost every foundationally transformative model in this so called big data arena has an element of SAP data in it. Our analytics teams are pursuing how to make getting value from that fact turnkey. And that's not Just for the end user who wants to do exploratory BI and sort of see and understand the world differently, but it's also true for building applications. And here to where the platform enters back into the picture.
The platform, the HANA Cloud platform becomes a place where the IoT value can be explored, the analytics Operational can be leveraged and applications can be built that integrate back into the application solutions to kick forward business process to provide the right insights and agility. The platform makes that all possible. The reason that we're into this beyond the obvious needs of the extensibility Forum for S4HANA, Cloud Edition, beyond the needs to integrate across different lines of business and the business network is because our customers are asking us to. Very simply, our customers are asking us to provide them the platform where this integration can happen. We have announcements tomorrow in the IoT space where it will become crystal clear What kinds of customers and why they are asking us to do this?
It is because of that perspective that it is where the data From IoT and from the ambient world and the line of business data come together and has to be made sense of and they want us to take a strong role in helping them build those applications and solutions. The platform has to enable applications that are real time, they are contextual The platform has to be open. We've done work in HANA Cloud Platform to embrace things like OpenStack and Cloud Foundry because foundationally we believe that the developers She build a program in the language, the environments they want to and build the solutions how they want to. We build interfaces into Success Factors and into Ariba, so the developers seeing on top of the cloud platform can then access those systems and then integrate them, but again in an open way With the tools they want, the program models they want and then against the standard interfaces that we are building that are open as part of that platform. Real time and contextual, real time is about HANA.
HANA is a foundational component of our applications of our platform stack or application stack and enables that real time in our activity. We have startups. We're up to a couple of 1,000 startups in our program. I think at Sapphire, we've got a few dozen that are We're showing the kinds of things they've built directly on HANA. We have 175 startups that are in So validated minimum viable product state really leveraging deeply HANA.
And you walk across these tariffs and you realize that some of them are Doing value and capability that just wasn't possible before by taking advantage of this real time nature of HANA. There's clarity around And the analytics are in one shape and form to be leveraged. They're able to build something different and the startups are pursuing that and they're leveraging that and they're building on that. Contextual is about ensuring that the whole of the picture is brought together and accessible. The platform becomes a place where you can understand how an employee record impacts the financial statement, impacts Something in your supply chain, Steve talked about risk management.
Risk management is a very contextual activity. You have to understand The social sphere you have to understand the IoT data around your business, you have to understand the line of business data around your business and bring these together a model to help understand where risk exists and do the what if scenarios and the platform has to provide that sense of being contextual. So across all these aspects, the platform becomes a core part of our play and core part of the capabilities We're providing the customers not just so they can succeed on the modernization and embracing of S4HANA, But also so that new ecosystem can emerge around these new cloud applications. ISVs are interested, everything from the small scale to start So large ISVs and SIs all are interested in building solutions that will be discoverable in an app center marketplace As part of HANA Cloud Platform to provide solutions that users can find and take advantage of. And we see this happening across all different Woks of functionality, whether it's retail or recruiting or finance management, we see an entire new ecosystem of solutions emerging around the new generation of SAP software built on this platform, taking advantage of the situation where SAP is able to offer everything end to end from the application, the data and the sources to the app integration in terms of business process into the new emerging data feeds like IoT or social all the way into analytics and presenting data off to end users in BI.
The end to end solution is what is core to business is changing now and SAP's goal is to ensure that every enterprise Become a technology company that every enterprise is able to be the disruptor and define the new business models in their industry and not what happened by some start up somewhere else. So with that, I believe we are positioned to Take questions and continue this dialogue. Thank you.
Well, thank you, Quentin. And actually something happens. Thank you very much. Which rarely happens at these events, we are a bit ahead of the schedule and our CEO is not yet here. So I would suggest We make a short break and also prepare the stage for the final Q and A with the executives and please bear with us and don't walk too far away.
There are some drinks outside and we'll continue in roughly 10 minutes from now. Thank you. All right. So let's continue with the program. This is now the interactive part and because it's interactive, We have 3 more representatives from SAP on stage, Bill McDermott, our CEO Rob Enslin, who leads Global Customer Operations and Bernd Leuchart who leads R and D and Innovation also SAP.
I would like to invite those who are still on the web to send us also questions by email to investorsap.com. We want to make sure that we take some questions by email as well. And without further ado, I want to open it for questions here from the room in Orlando. And thanks for not just so easy because there's never a lack of questions. Start here maybe with John King.
Great, thanks. John King from Merrill Lynch. Just a question maybe for Rob and Bill if that's the right first of all. As for Hanna from the sales point of view you've been given this great new product. I think a lot of us in the room are trying to work out how quickly can that ramp into installed base.
Because obviously, we'll hear from them tomorrow about when the products will be released. But how ready is installed base? Is this something we should think of as a really kind of 2017 driver or where you think in your mind in terms of the customer readiness reduction?
So I think if you go down to the floor and you go look at the S-four hundred, there's a specific area for S-four hundred, it's packed. The area that's packed is Show me the roadmap, the deployment strategy. I just spent lunch with I didn't eat, but I spent lunch with a group of 50 customers And the whole discussion was roadmap, roadmap, roadmap, how do I deploy it. So I kind of knew coming into sapphire this would be a cornerstone event simply For the last 5 months I've been on the road meeting these customers around the world and they're here because they want to understand How they can drive that and you saw our Q1, we basically said 370 companies have actually already started. I was at Florida Crystals with Don.
They are live now. So I think our customer base is very excited with what we're doing and the innovation and you can see that on the floor. And by the way, the boardroom redefined is their lives. So I know this is I'm selling a little bit here, but I will definitely take the time to go have a look at it. It's pretty awesome.
Okay.
Thank you. This question here from Rick Sheldon, Nomura.
Thank you. Yes, I came today thinking I got to get referenceable customers for S4HANA and Simple Finance and that's what the meeting is all about. Instead, I sort of had a much greater appreciation for the HANA Cloud platform with platform as a service. And we've heard elements of that over the last couple of years, but HANA wasn't really kind of all coming together as it appears to be now. So I guess question here is, is SAP proposing now then to pursue multiple fronts, not just apps business, but to be a serious Contender in the database ecosystem outside of your own applications, holding yourself out trying to build a broader ecosystem in the cloud.
We're more about Internet of Things, but that probably would suppose that we're using more acquisitions. There's probably a lot of infrastructure things you need to add to be a serious Contenders in the ecosystem of database and platform
to service.
I can take it from a sales Yes, let's give a
couple of comments and the observation is correct, right. I mean, I think if you look at our way we talk about the pillars of the company, We talk about applications and network and platform. And we're making significant investments in the product and in go to market to pursue that opportunity in the platform space. And the transition to S4HANA gives us a natural opportunity to pursue that And we actually have real needs from our customers to truly get us there. So yes, we are serious about it and we are looking at that With a wide focus.
Maybe just to add, if you look at where Today, you need to have an answer for the renewal of the existing business, the Yain. And the answer is S4HANA. But then there is the second part, which is the new business opportunity. And you mentioned IoT as one example, E Commerce would be another example. And the HANA Cloud Platform as an enabler for the most comprehensive Platform as a service tech in the industry as it is having number 1 all the capability of HANA.
Number 2, we have Post the complete application portfolio into TET platform. Number 3, we have decomposed the technology stack And offer to consume technology as a service, you can take Fury as a service, you can take mobile as a service. And in addition with the HANA Cloud integration, so it's not just an isolated technology stack where you can build something, it allows As well if necessary to embed this into your existing business. And for partners this means If they have built integration content once they can reuse it several times. Of course, we will do the same as SAP.
And with these four elements, I think we have an asset in our hand with our HANA Cloud platform nobody else can match in the industry.
Yes, and I just lastly say, I mean we promised simple, part of simple is to make certain all these platforms are interconnected in a way that it's not Position that the customer that we take ownership for that and HANA Cloud platform will provide that level of ownership between success factors is for a rebuild the network And so on. And more importantly also the extensibility out into this massive innovation platform. So that's how we bring it all together And we make it simple
for these customers. And if I may just conclude by offering one additional anecdote, Rick, when you think about the platform and it's all about the platform, think about S4HANA as the nucleus. And that whole S4HANA platform discussion evolving into the line of business cloud, into the business network For cloud into the HANA Cloud platform itself building those lightweight apps for Apple or for Android or even for the IT departments that are constantly building their And they want something that's a lightweight capable platform, but it's also integrated back into the core. We're now having conversations in these accounts that we've not had before. I tell you I've had several meetings already today where companies are saying I cannot believe how much I'm spending on salesforce.com.
What can you do on the omni channelecommerce for me and what can you do with the HANA Cloud Platform? So I can now begin not just to talk about the SFA component of sales force, but now I can also talk about The omni channelecommerce component and I can build these lightweight applications on top of your platform Because I get all of the data I need out of your ERP system, which is now S4HANA. So I think we're at an inflection point in the industry Where certain market participants are not nearly as strategic as they once were and now they're getting moved to the side of the classroom In the best of breed segment where we've seen others come and go before. That's the world we're in today. I tell you this right now.
Okay, thank you. We have one question from the Internet before we continue in Orlando. It's a question for Mark Cooperman, 3 purchase capital. When do you think you will see meaningful revenue from private cloud deals starts to impact the P and L, I guess. Should I
maybe take this? I mean it depends on what how you define meaningful revenue. To me, all Revenue is meaningful somehow, but of course, I know where you're getting at. So first of all, I think this In this year, we are starting to see a noteworthy contribution from private cloud deals already. It will be a sizable double digit €1,000,000 figure on the revenues and the growth trajectory is relatively high.
This also means that the margin profile of this business starts to improve. Last year it was substantially negative. We are improving this as we now see that the ramp time that we need Moving this as we now see that the ramp time that we need for private cloud deals to go into the revenue which is longer than for public cloud deals starts to kick in for those that we have sold. And of course, we continue to ramp the growth here. So if You take a high double digit €1,000,000 figure as meaningful, then we will have this year.
And then of course for the future, we expect that this will continue and through that we will also see a steady increase in
the margin profile. Thank you. Continue here in the room. See one from Gerardus Foss, Barclays.
Hi, thanks for taking my question. It's Juarez from Barclays.
Just coming back on the kind of product cycle. Lucie, you mentioned earlier that you would expect Kind of swift product cycle around kind of S4. I was just wondering if you could kind of give us a bit more kind of granularity on that. You kind of what do you expect for the kind of adoption curve? And then secondly related to that we see that of course the secular shift To the cloud now you have asked for should we expect the kind of mini revival of licenses for the coming years?
Thanks.
So first of all, why do I believe that S4HANA has the potential to be subject to a swift product introduction cycle. And please all of the colleagues join me in that commentary. It's from my own experiences as an early adopter Myself, we changed our ERP system on to HANA in 2013 in 3.5 months. We introduced S4HANA and the core of its simple finance in only 2 months last year. And now we are already on the newest And it's a very non disruptive process to go through that.
Why? Because everything that is typically making new product introductions painful for the early adopter, which is functional inequality with previous product versions. If you think about the shift from R2 to R3, For example, it took a number of years before R3 was at the same level of functional richness that R2 had before. This is not the case with S4HANA. If you consume it, you have all of the rich functionality that has been there in the suite for all the time, but it's beautified with new user experiences.
And of course, it's all revolutionized under the hood, which is very non disruptive from an implementation perspective. That's why I believe we will have a very fast product introduction cycle. Now on the output of this in terms of license growth, let's be very clear. I think there are various forces at work in terms of judging different businesses that we have. There is no doubt in my mind that S4HANA across all of the deployment models, the cloud as well as on premise will be a catalyst for growth.
And clearly, we are seeing that every one of us has dozens of high level conversations with Executives at our customers in all sizes that are really eager to implement the solution and are all looking for the most Useful roadmap for them in order to do so, no doubt about that. Now having said that, of course, there are different forces at play as well. We know that in certain Peripheral areas, business is going to the cloud and very rightfully so. We have for those areas the right solutions and we are capitalizing on this a move and migration to the cloud. There is nothing bad about that.
It just means that revenue will be ratable in those Those will be HR, those will be procurement, those will be in a growing sense CRM and other areas. And that is a factor that we need to take into account as well. We believe that if we see A positive business climate and business environment that S4HANA clearly has the potential to drive growth in absolute terms. How this will then relate to those other forces that are in play is what we have tried to guess best as part of our midterm guidance. And if there is upside in that we will all be happy about that.
But let's just be clear The fact that HANA is growing and S4HANA will be growing as well tremendously does not take that factor away that on the peripherals we will continue to see a healthy transformation into the cloud, which we will own as well. And that's the nice story about all of the roundup extensions that we have made to our solution portfolio in the last few years.
Thank you. Question over there from Kirk Materne, Evercore Group.
Thanks very much. Rob, sort of the opposite way the Questions just asked, but now that people have a better idea of where you guys are going with S4 and HANA, are people more comfortable moving With you on adjacent applications, is it additive? And I guess, S-four when people are upgrading, you guys are trying to make it as simple as possible. But I guess, On the other hand, there would be some concern that as people go through this process that they might pause and not do maybe an adjacent app with you. I assume it's Potentially the opposite that you guys are seeing more sort of add on or additive sales on top of that.
So could you just talk about that conversation now because Maybe 2 years ago you'd say, look, I don't know where my core ERP with SAP is going to be in 5 years. But now that you guys have put that roadmap out, I'm just curious about The level of conversation with
some of your customers. Thanks.
Yes. So I would say if you go back 2 years ago, We were selling only in a highly competitive environment by line of business. So we had to beat solutions from a functionality point of view And the call was basically running the infrastructure that was not touched, right. Today customers see there's a roadmap for S4, they can see where it's going, they can see The path, the biggest question we get today is show us the integration or the pieces that we can take SuccessFactors, Ariba, Concur And how does that get back into the S4 system. So there is a bigger roadmap.
I do think it's going to drive what I really know, it's going to drive significant Opportunities around the edges between Steve's business and mine, you can already see how the networks are starting to coalesce. And I think if you're a customer at the end of the day integration was really big and continues to be big, but it's got to be simple. And if you can provide SIMPLE and provide a platform and what I call the best possible integration, right, because I think we have to be realistic And we need the speed and the flexibility to go with Simple as well and that's the mode of Opera that we're actually operating under and I think it's a great story. Thank you. I'm glad that I had an opportunity to sell it.
Take one question in the back from Walter Pritchard, then we would have Phil Windflow from Credit Suisse.
Thank you. So I guess I went to a couple of customer sessions and you hear a lot of customers talking through first having done BW on HANA and seeing the value and then looking at Potentially Simple Finance in S4. And I'm wondering as you think about the early adopters of S4HANA, Are they ones that have gone through that progression already? Are they ones that just happen to be in a certain vertical where the value is so immediate? Or Maybe you could help us understand where you expect to see you're at 370 right now when we get to 5,000 customers, what are those customers have
I think If you look back when we introduced R3, which was the last big announcement, history is repeating. Customers are renewing from the core, Renewing from the core, which means they see a massive opportunity to bring Finance to bring purchasing, to bring warehouse management production to a completely different level and by Our strategy to shrink the core as we technically eliminate all the waste And with that we decompose a monolithic suite and give customers the To not just decide for an integrated business process framework which is what is behind the suite which enables them to drive innovation in the area where they see the focus Of course, enhanced with the edge innovations we have in the cloud, SuccessFactors, Fieldglass, Reeba, Conker, Hi Chris, we can name all of them. It is by no means anymore that there is a one size fits all approach. We have now much more flexibility to respond directly to the needs of the customers. And if you ask me how they approach it, I see 2 segments.
One segment of customers are really using the opportunity to renew the core which is the backbone of their business and bring it to another level. While This is running stable. It is mature. I have an urgent need to innovate in the edges. And there is no right or wrong.
It's just depending on the situation the customers are in. So I see these 2 mainstream adoption paradigms. Rob?
Yes, I would just add to that. I think customers are looking for massive simplification of business processes to eradicate certain processes. And when you look at some of the very innovative companies, they basically say, look, this is what we had with the business suite. This is what we want. We want to have a much simpler business and that's I think what they're driving for Luke is an example of what can do in a finance organization.
But if you look at people like Colgate and Nestle what they are doing, I mean it's dramatic transformation and I think that's what customers will ultimately say. Plus Many of them are in simplification of data centers and moving this, this provides them a huge opportunity to actually We look at that whole segment which is slow, it's cumbersome etcetera. So the value and upside is simply phenomenal.
I would just say 2 things. 1 is the idea of the keynote this morning was about data driven and seamless. The world has woken up to the fact that it Really is a HANA world because the CEOs that want to run great companies want a single sign on database. And if they can get that for transactional information unstructured and social, they're kind of off to the races. And it was a heavy lift getting HANA where it is today.
But it is where it is and it is scaling and it is global and it is hitting every industry and it is taking the market by storm. So data driven It's key. And if you believe like the CEOs I featured today on stage in one way or another believes that that is the future then You're part of it right now in this conversation. The second part is seamless. The reason that I think these edge applications whether It's the sales applications, the human capital management application, a procurement application, a finance application.
They actually invigorate the core because it makes the S4HANA story and the data driven enterprise story so much more relevant Because now you get the data in the hands of those individuals so they can execute their mission. And that is also true on the enterprise stuff. But the seamlessness, If we can agree that it's data and its seamlessness, why would you not want to extract the real data, one version of the truth And all these seamless applications that touch your customer, your employees or your network. So one Point of relevance begets another one. And that's why I think the strategy is right.
And that's why I think HANA, S4HANA and then the extension to the cloud and the network is an unbeatable combination of strategic forces. Yesterday, I was at the Partner Summit. There was 1,000 partners there. Half the leads that have come in for S4HANA have come from the partner network. Half the deals that are S4 have been net new incremental new business deals to the company.
About 45% of the leads The leads have come from the partner ecosystem, but about a third of the deals have come from the partners ecosystem. So some people thought that the partner ecosystem would fight this massive amount of innovation and the fact that the customer would compress data and lower Service cost and crush hardware. On the contrary, they're grabbing on to it because they see it as a way to increase the volume and the number of deals that they can do and all companies need that.
Okay, thank you. The next question I think comes from Phil Winslow, Credit Suisse.
Sticking with the theme of data driven and seamless, you can also see how business networks applies to this too. Both those words apply to it. So a question for Bill and for Steve. I mean obviously one thing that's struggling that you've talked about is you're the only applications coming going down really sort of the business And so kind of 2 questions in your question, I guess. One is that what is that doing to the core because we've talked about what Hana is doing the core.
When you layer together business networks and ask for Hana, particularly business network side, what is the core saying to you about this? And then Steve, from your perspective too, as the CEO of Concur and then now you're laying out a much broader business network vision than what What are your customers saying to you? What are the new customers from SAP, Sandeep?
Well, I'll start it off. So S For HANA becomes that system of innovation in the enterprise. 25 distinctly different industries, 188 countries around the world, all Now it is true That the line of business went for the cloud, whether it was human capital management sales, finance procurement, we all know that. And it's also true That we've got solutions in all those categories. They just became even more relevant because of S4HANA than they were before, Because of the seamlessness into the people and into the consumer world, that's where the CEO and the leader of business wants to go.
Even the CIO wants Rationalized complexity, it makes a lot of sense. And therefore, it spells really bad news for Workday The salesforce.com. Bad news. Now when you go into the business network, the idea Of extending the enterprise to enter enterprise computing. Why is it bad for Workday and Salesforce?
Well, from Workday standpoint, if I've got to get A handle on recruiting, securing, training and accounting for temporary workers which represent 40% growth in the labor market globally today. There's only one company at scale in the world That can do that and combine that with human capital management in the cloud. And by the way, that's fully integrated into Sfour and HANA from an end to end standpoint, that's SAP. The second piece on the sales situation, salesforce.com did a good job with SFA and having a simple situation easy to consume, that's fine. And then with force.com you can go for some lightweight applications to reinforce email blast and SFA and all the other stuff.
But now the customer is basically saying, I can't even believe how much I'm paying for this. And this a la carte menu when I added it all up And I've looked at all the years, I'm getting a hangover. So now how can you take that data out of the core system, Not only manage my back office people stuff, forecast pipelines, but how do I extend So from social make real time more for close e commerce transaction and fulfill in an automated supply chain. That's extending the enterprise. Salesforce.com can't do that.
So if We can convince the world that it's something worth doing. We're now at the doorstep of a new era. Now as it relates to Concur, the day I met Steve, I'm going out to Seattle. I'm traveling with a millennial generation person. This is after a few high trust dinners.
We can't make this stuff up. We met in a law office in Seattle And we're looking at a demo of the product. You go through these moments like should we, shouldn't we, what are you thinking. So I asked this guy, he's traveling with me Mike, what's the worst part of your job? He goes, the worst part of my job is filling out an expense report.
In fact, I will forego any merit increase Our annual inflation based raise if I never have to fill one out again. I go in there, we had that little laugh together, saw the demo, I'm like This is going to revolutionize the way work is done. Then when you think about the ground, the air, the hotel, think about hotels today, how much they 4, into advertising on the Internet, 1,000,000 and in some cases 1,000,000,000 and they don't control the odds. In the network they can. And then the food and the entertainment and the network effect and then having a seamlessly integrated ERP, so the CFO can sleep Good night, but also the employee doesn't have a lousy expense report to deal with.
It was just like a huge idea. But here's the better idea. We take all those assets From Fieldglass to Ariba for direct and indirect and of course Concur and you create real time trading networks. And then you extend that to transportation and logistics and other things under the leadership of the foremost authority in business networks in the world, Steve Singh. That's what we did.
That's a lot of activity. So, let me just add maybe 3 things to those comments. 1st and foremost, we're in this very fortunate position Across each of those networks, they have very early market adoption. So even leading edge customers are saying, it would be fantastic if I could take Concur, Ariba, Fieldglass Individually, it will drive massive benefit across my business just in those three functional areas or those three networks. But what we're finding across Some of the more cutting edge customers, right?
Because we're still early in this migration towards this concept of business networks. What we're finding in the cutting edge customers is they're saying, Look, there's literally millions of data points that I get every single day, lots and lots of decisions that I have to make every single day. Why can't my network start to make some of these decisions for me? And then across these networks, why can't they actually start communicating and driving decisions that should be integrated and intelligent in one process. So those are the 2 big trends we're seeing within the Networks Group that is going to define the way software is consumed and what people expect of software 5 years, 10 years down the road.
The idea that I have to make every one of these decisions as a manager, as an employee is ridiculous. 90% of these decisions should be made for me Because machine learning, all the people say, look, I can understand this and then exactly predict what you're going to do and do it for you. That's where I think the world is headed.
So we have one minute left. I would say we take one final question here. And there's one hand down there, Michael Breese from UBS.
Great. Thanks for getting me in. 2 if I may. So Steve, firstly, that vision you've just laid out, How long do you think it takes to become a reality in terms of product integration go to market? And then secondly, on the S4HANA adoption, think Bill you said 400 plus customers this morning.
Have you got a profile of those between on premise and cloud? And then I maybe misheard something on the floor, but You still going to have a separate public and managed cloud version of S4, Hannah? Thanks.
So I'm going to hit the question for me real quickly. So we're already starting to see not only that demand across our customer base, we've already started to do that work of integrating these networks. And you're going to see the first real instances of that integration over the course of the next 12 months. So this is not 5 years down the road. This is in measured in Number of quarters before you start to see that being delivered in product.
And tomorrow, I'll walk you through our first HANA Cloud platformHANA application that takes all three of those networks and says here's a set of services that can be delivered that can be consumed by any of the SAP networks well as any partner network.
So Michael, 400 plus customers, you could roughly say fifty-fifty Continue with some on premise piece and the majority are moving to the cloud. I think it will shift more to the cloud in the next couple of months rapidly.
Okay. Thanks very much. This closes our Financial Analyst Conference for today and we look forward to seeing you tonight at the Investor Reception at the JW Marriott starting at 8. Thank you very much and enjoy Saphyr. Thank you.