Ladies and gentlemen, thank you for standing by. This is your host operator. Welcome to SAP 2014 second quarter earnings results conference call. Throughout today's recorded presentation, all participants will be in a listen-only mode. This presentation will be followed by a question and answer session. If any participant has difficulty hearing the conference, please press the star key followed by zero on your telephone for operator assistance. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. I now hand over to Stefan Gruber. Please go ahead, sir.
Yeah, thank you. Good morning or good afternoon. This is Stefan Gruber, SAP Investor Relations. Thank you all for joining us to discuss SAP's results for the second quarter 2014. I'm joined here in Walldorf by CEO Bill McDermott and Luka Mucic, our CFO, who will both make opening remarks on the call today. Also, executive board members, Rob Enslin, who leads global customer operations, and Bernd Leukert, who leads development and delivery of all products across SAP's product portfolio, are on the call today and will join us for the Q&A. Before they get started, I want to say a few words about forward-looking statements. Any statements made during this call that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995.
Words such as anticipate, believe, estimate, expect, forecast, intent, may, plan, project, predict, should, outlook, and will, and similar expressions, as they relate to SAP, are intended to identify such forward-looking statements. SAP undertakes no obligation to publicly update or revise any forward-looking statements. While forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect SAP's future financial results are discussed more fully in SAP's filings with the U.S. Securities and Exchange Commission, the SEC, including SAP's annual report on Form 20-F for 2013, filed at the SEC on March 21st, 2014. Participants of this call are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates.
Please keep in mind that unless otherwise noted, all numbers referred to on this conference call are non-IFRS, and growth rates are non-IFRS on a constant currency basis. With that, I'd like to turn the call over to Bill McDermott.
Thank you, Stefan, and thanks to everyone on the call for your time today. I really appreciate it. Before I begin, I'd like to congratulate SAP Ambassador Oliver Bierhoff and the German national football team on their thrilling march to the 2014 World Cup. I'm proud this is not only a winning team, but they co-innovated with SAP, and they served as a showcase for SAP Match Insights powered by SAP HANA. Instead of giving you my take, I thought it would be better to give you Oliver's own words. Before the tournament, Oliver was quoted a few times. Once was in the media in Brazil, where he said, "Imagine this. In just 10 minutes, 10 players with three balls can produce over 7 million data points.
With SAP HANA, our team can analyze this huge amount of data to customize training and prepare for the next match." Bierhoff went on to tell ESPN this week, "The same techniques were used to study opponents. Jérôme Boateng asked to look at the way Cristiano Ronaldo moves in the box, to use another example. Before the game against France, we saw that the French were very concentrated in the middle, but left spaces on the flanks because their full-backs didn't push up properly. We targeted those areas." When you think about what they accomplished with their smart use of big data, it amounts to making a complex game look simple. Now we know that simple helps win the World Cup. I'd like to offer congratulations again to the Deutscher Fußball-Bund.
Earlier in this year, we launched a new strategy to become the cloud company powered by SAP HANA, and the focus of this strategy is to make our customers Run Simple. This means providing our customers with simple and easy-to-consume solutions so that they can run every aspect of their business, well, simple. Our cloud solutions and all of our applications combined with the unifying real-time power of HANA enable simple. That's why we launched SAP Simple Finance at SAP Sapphire, which makes complex finance processes easy. In the spirit of keeping the complex simple, I'll keep today's remarks as brief as possible so we can get to your questions. After Q1, we reported that SAP was successfully transitioning into the cloud company powered by SAP HANA. Today, I'm pleased that our Q2 performance furthers that success.
We're winning in the market because we're more focused than ever on helping our customers succeed and grow. With the unique combination of the SAP cloud powered by HANA, the largest business network, and our omni-channel e-commerce platform, our customers across 25 distinctly different industries and over 180 countries, can defeat complexity and do highly sophisticated things, well, simple. In Q2, we saw the Run Simple strategy resonating with customers. We delivered very strong growth of 39% in cloud subscription and support revenue, with calculated billings increasing 37%. At the same time, we saw solid performance in the core, with second quarter software and software-related services increasing 8% at the upper end of our annual guidance range. We continue to successfully navigate our broad shift to the cloud while improving our operating profit. I'd like to touch briefly on each of the key drivers of this growth story.
First, let's take a closer look at the cloud. We have the most enterprise cloud users in the world now, more than 38 million, and our cloud run rate is approaching €1.2 billion, or in US dollar terms, $1.6 billion. We're growing our cloud one and a half times faster than our closest competitor, and faster than most all of the SaaS peer group. We are the fastest-growing enterprise cloud company at scale. We have the breadth and depth of functionality that allows companies to run their entire business in the cloud, and no other competitor can do this. For example, with the addition of Fieldglass, we're the only company that offers total workforce management in the cloud, enabling our customers to manage their permanent employees and flexible workforce employees in one place. Because of our depth and global reach, companies are selecting SAP Cloud over pure-play cloud vendors.
Telefónica, a leading international telecommunications company with more than 120,000 employees, selected the SAP SuccessFactors Enterprise Suite, including Employee Central over Workday. Bombardier Recreational Products, a global leader in the power sports vehicles and propulsion system, selected SAP SuccessFactors, including Employee Central over Workday, to optimize their HR solutions and delivery. Weir Minerals, a mining machinery manufacturer and division of Weir Group, chose SAP Cloud for Sales over salesforce.com. At Sapphire, we announced that we are bringing our over 40 years of unrivaled expertise across 25 industries to the cloud. We are running industry-specific mission-critical processes in the cloud, which other cloud vendors simply can't do. Companies like eBay and BSH Bosch and Siemens are choosing our industry solutions. BSH, the largest manufacturer of home appliances in Europe, purchased and went live with industry solutions powered by SAP HANA on the HANA Enterprise Cloud.
The migration to SAP HANA provides the foundation for extremely fast calculations, real-time reporting, and breakthrough innovations. We also recognize the increasing opportunity for small and medium businesses to Run Simple in the cloud. I'm very pleased to report to you today that we have named Dean Mansfield, a strong leader and former president at NetSuite, to lead SAP's SMB solutions group. This division will focus solely on the needs of small and medium-sized businesses, an area in which we foresee considerable long-term growth for SAP. Whether it's our existing global infrastructure or next-generation industry cloud solutions, it's clear that customers of all sizes are accelerating their moves to Run Simple in the SAP Cloud, powered by SAP HANA. Another piece of the Run Simple growth strategy is redefining enterprise value chain collaboration. The next big opportunity in enterprise applications is the enormous potential of the network economy.
Driven by the connectivity of people, machines, and business processes, the network will drive unparalleled collaboration both inside a company and between companies. Companies will transact real-time frictionless commerce and nurture new trading relationships to drive sustainable growth. SAP is at the core of this network economy. We have the world's largest business network connecting approximately one and a half million businesses and driving an annualized transaction volume of EUR 540 billion. This is two times the size of Amazon and eBay combined. If it were a country unto itself, the Ariba network would be in the top 25 by measure of GDP. General Electric, an existing SAP SuccessFactors and Fieldglass customer, selected the Ariba network to replace manual time-consuming error-prone processes. With Ariba, GE's water and process division expects to streamline its business interactions with suppliers and simplify the buying processes for its customers.
The addition of Fieldglass further expands our network capabilities and increases our addressable market to cover materials, services, and flexible workforce. The network is a highly attractive business model for SAP due to the network effects. Every additional customer has the potential to bring in hundreds of trading partners and the related commerce to the network. This means that we can scale revenues at a lower cost compared to a traditional cloud application model. Speaking of customers, the essence of Run Simple is delivering true customer engagement that goes beyond the sales force automation nature of traditional commodity CRM. The future of customer engagement shapes the customer journey in real time, from customer insight, to targeted marketing, to sales promotion, to commerce and service, all with focus on simplifying the customer experience.
With our Hybris omnichannel e-commerce platform and SAP Cloud for Sales, we are redefining customer engagement and creating a new category of software, which is seeing explosive triple-digit growth. For example, Samsung Electronics is rolling out Hybris. When you make a purchase on Samsung's e-store, in the future, you are using SAP. Each and every one of these growth drivers revolves around a single platform. HANA is at the core of Run Simple and integrates all SAP solutions on one business platform in the cloud. Customers are broadly adopting the HANA platform to give them real-time insight and simplification they need to gain an edge. We now have over 1,200 customers on SAP Business Suite powered by SAP HANA, exceeding our internal expectations for a product launch just over one year ago. Shell, a longstanding SAP customer, is accelerating its transition to SAP HANA in the cloud.
Shell recognizes the value in co-innovation with suppliers to help them maintain competitive advantage and, specific to SAP, to leverage technologies like HANA and cloud. HANA also embraces an open and vibrant ecosystem. 1,500 startups are now building on HANA, and in Q2, we added new strategic partnerships around HANA with HP and VMware. Let me share a few details with you about our regional performance in Q2, starting with a strong performance in EMEA. Despite continued uncertainty due to the Ukraine crisis, we achieved 51% growth in cloud subscription and support revenue in the EMEA region, as well as strong double-digit software license growth in countries like the U.K. and France, to name a few. Customers like Carlsberg and ePlus have chosen SAP this past quarter.
Giorgio Armani, the Italian high fashion house, went live with SAP IS Retail powered by SAP HANA, replacing Oracle, and now plans to roll out SAP Fashion Management solutions globally. Co-innovating with SAP, Armani aims at increasing speed and flexibility in the ultra-competitive retail space with a unique solution for its vertically integrated fashion processes from product to storefront. Americas continued the fast transition to the cloud, with strong double-digit growth in cloud subscription and support revenue. Canadian software license revenue was particularly strong. We continue to expand and deepen our large customer base in North America with Cirque du Soleil, U.S. Army, New York Life, to name a few. We continue to see strong demand with tremendous growth opportunities in Latin America with customers like Central Bank of Costa Rica and Antofagasta Minerals, and others.
APJ also saw solid performance, with 48% growth in cloud subscription and support revenue. Australia and Malaysia were highlights with triple-digit software license growth. China continued to perform strongly with double-digit software and software-related services growth. Customers like Singapore Health, Cathay Pacific, and Tat Hong chose SAP innovations this quarter. To summarize it all, we are delivering on our Run Simple strategy with strong growth in cloud, HANA, and the network. As we head into the second half of the year, we are really confident in our overall 2014 outlook for software and software-related services revenue and profitability. As Luka Mucic will detail in a moment, we are raising the outlook for cloud revenue for the year. As the cloud company powered by SAP HANA, we strongly believe our momentum will continue, and we are on the right path to achieve our 2017 midterm ambitions.
As always, I'd like to thank our 67,600 women and men of SAP for the hard work they put into achieving this success. None of this would have been possible without their diligence, hard work, creativity, and commitment to this company. I'd like to thank you all. Now I'll turn it over to our CFO, Luka Mucic, also my good friend. Luka, over to you.
Thank you very much, Bill. As you just heard, Bill spoke about our strong second quarter results with excellent growth in the cloud and a very solid performance in our core business. Before I get into further details on those, let me address a couple of technical topics up front. First, on currency. We saw, again, a strong currency effect on the top line in the second quarter. Our cloud subscriptions and support revenue was negatively impacted by seven percentage points, and our SSRS revenue was negatively impacted by four percentage points. We recognized the provision of EUR 289 million for the Versata litigation in Q2. To ensure that our non-IFRS numbers are comparable over time, we changed the definition of our non-IFRS numbers to exclude the effects from the Versata litigation.
Before I go into the quarter's results, on a semi-personal note, I wanted to say a few words about SAP's implementation of Simple Finance that Bill mentioned before. SAP deployed this revolutionary solution powered by SAP HANA in just 10 weeks, from February to end of April, without any disruption to our business. We cut more than 420 hours from our financial close processes. We reduced the data footprint from 7 TB before HANA to under 2 TB . SAP now has one common platform for both regulatory and managerial accounting. With further real-time processing, most importantly, unlimited reporting capabilities across all dimensions, a significant potential to optimize our processes. What I'm particularly proud of is that Simple Finance was developed in close cooperation between our stellar development organization and our internal finance organization. In a nutshell, it's Simple Finance from finance for finance.
It reflects our Run Simple approach. Our close process was optimized. We are among the fastest DAX companies to publish our quarterly results. Now to those results for the second quarter. We continue to have a stable and growing core, with solid single-digit growth in software and support revenue. 9% growth in support revenue was certainly again a highlight, as it has been for a number of quarters now. Our support contracts renewal rate is consistently in the high 90% range. Growth in Enterprise Support and Premium Support again, was especially strong. Once again, our Enterprise Support offering had an adoption rate in the mid 90% range and continues to be the de facto standard.
The combination of support revenue and cloud subscriptions and support revenue as a share of total revenue, increased again by three percentage points year-over-year in Q2 to 61%, improving our overall predictability of our business performance for the future. In the second quarter, we saw fast growth in the cloud, with cloud subscriptions and support revenue up 39% year-over-year, as Bill mentioned. Calculated cloud billings increased 37% year-over-year. Deferred cloud subscriptions and support revenue was EUR 448 million as of June 30th, a year-over-year increase of 29%. As you know, transitioning to the cloud profitably is a top priority for SAP. Bill has alluded to that. Indeed, in the second quarter, our operating margin increased 60 basis points to 29.5% on the back of an operating income growth of 7%. Looking to IFRS now.
The IFRS operating margin was down 7.5 percentage points to 16.8%. This was due to a one-time effect that resulted in a significant provision recognized for the Versata litigation. Our SSRS margin was down by 100 basis points to 82.4%. This decrease was primarily driven by the strong investment into cloud delivery and our efforts to meet increasing customer demand for our Premium Support offerings. Our cloud subscriptions and support margin was down 8.8 percentage points to 63.9%. As expected, as we shared during our Q1 call, our cost of cloud subscription and support increased significantly year-over-year in the second quarter as we continue to ramp up our cloud infrastructure delivery and expand our HANA Enterprise Cloud data center footprint.
Ladies and gentlemen, please hold the line. We will continue.
Okay. Excuse me. We were cut out for a moment. I think I left it at talking about the cloud subscription and support margin. As expected, our cost of cloud subscription and support increased significantly year-over-year in the second quarter as we continue to ramp up our cloud infrastructure delivery and expand our HANA Enterprise Cloud data center footprint from 14 to 20 locations by year-end. We expect this margin to improve in the second half of the year compared to the first half. The professional services margin decreased by 4.3 percentage points year-over-year to 17%. As mentioned in the previous quarter, there is an ongoing structural change in the demand for consulting services. We have been, and will continue to adapt to this changing market environment.
We still expect this transformation to take some time, and as such, still expect the services profitability to be negatively impacted throughout the rest of the year. As a result, our overall gross margin was 71.8%, a decrease of 30 basis points year-over-year. The IFRS tax rate in the second quarter was 22.6%, down 2.2 percentage points year-on-year. The non-IFRS tax rate in the second quarter was 25.4%, down 1.4 percentage points year-over-year. We are maintaining our effective tax rate outlook for the full year. In the second quarter, our non-IFRS EPS was EUR 0.79, up from EUR 0.71 per share compared to the prior year, resulting in 10% growth. Let's cover cash flow and liquidity. Operating cash flow for the first six months of the year was EUR 2.58 billion. This is an increase of 4% year-over-year.
Net liquidity at the end of the quarter was a net debt of EUR 1.06 billion, an improvement of more than EUR 400 million compared to the end of 2013. This is a strong result given the dividend payout that we had in Q2 and cash payouts for acquisitions of around EUR 730 million. As Bill has said, we are updating our full year guidance for cloud subscription and support revenue, where we now expect to be in a range of between EUR 1 billion-EUR 1.05 billion at constant currencies. Previously, this range was indicated between EUR 950 million-EUR 1 billion at constant currencies. We continue to expect non-IFRS software and software-related service revenue to increase by 6%-8% at constant currencies, as well as non-IFRS operating profit to be in a range of between EUR 5.8 billion-EUR 6 billion at constant currencies.
Before I finish, let me make a few ending comments about currency, which should help you to more accurately model SAP for the remainder of the year. If exchange rates remained at the June 2014 level for the rest of the year, we would expect non-IFRS software and software-related service revenue and non-IFRS operating profit growth rates at actual currency to experience a negative currency impact of approximately two percentage points and two percentage points respectively for the third quarter of 2014, and of approximately two percentage points and two percentage points likewise for the full year 2014. Thank you. Bill and I, as well as my colleagues on the board, will now be happy to take your questions.
Thank you, Luka. I want to hand it back to the operator. We can now start the Q&A session.
Thank you, ladies and gentlemen. At this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. The first question is from the line of Walter Pritchard of Citi. Please go ahead.
Thanks. You talked about Simple Finance on the call here in your prepared remarks, I'm wondering if you could give us an update on early customer traction there and what you're seeing in terms of sales cycles on that product. It does sound like SAP itself got some significant benefits. Is that something customers are seeing pretty quickly, or is that something that you envision the sales cycles will be fairly long, given it's at the core of the customer's operations?
Walter, this is Rob Enslin. No, I think what we'll see with SAP Simple Finance is that the sales cycles will be shorter and generally, for net new customers, clearly a quick win, and for existing customers, you will see them take advantage, as Luka said. You'll see smaller and shorter sales cycles.
Thank you very much. Let's move to the next question, please.
Next question from the line of Adam Wood of Morgan Stanley. Please go ahead.
Hi. Thanks very much for taking the question. Just two if I could. First of all, on the SMB hire, that sounds like a pretty good move and obviously a big opportunity for you. Could you maybe just help us on the product side of things? There was a cloud initiative with SAP Business ByDesign there that's been de-emphasized. What will be the main product focus on that SMB opportunity in terms of go-to-market? Secondly, on the investments around SAP HANA Enterprise Cloud, I think there's a lot of debate in the market on multi-tenant SaaS versus quasi-hosted SaaS. Obviously some of the deals there will be more hosted than multi-tenant. Could you maybe just, on two things, do clients, do you think, care about the difference on that?
Secondly, from your cost point of view, does it make a big difference to you, and can you be profitable delivering that service as you're going to? Thank you.
Hi, this is Bill McDermott. Adam, how are you? With regard to Dean Mansfield, we wanted a proven operator to go into that space, a guy that knows it well. ByDesign is still part of our product portfolio, and we now have ByDesign on SAP HANA, which is absolutely a game changer because everything is faster and better on HANA, as you know. We also believe strongly that B.one has been going through an indirect channel now and has proven itself to be a very successful, high-growth, double-digit business with good margins, so we'll continue that. We also put B.one up on HANA in the cloud, and we go global. We think that can be a very serious category killer once it gets into the marketplace and people see what it can do on HANA.
We'll continue to innovate in that space now with a defined agenda underneath Dean Mansfield. It's a combination of things we're going to go after the market with. Related to the HANA Enterprise Cloud and the multi-tenant debate, the bottom line is, the HANA Enterprise Cloud and each customer wants their solutions. They want them beautiful. They want them to work. Yes, we can make money on it because HANA is the great simplifier. When you radically simplify the IT stack, SAP used to run on 8 TB of data. Now it's closer to 1.5 TB . You dramatically lower your cost of operation and improve the speed of everything in the operation. It's perfect for Run Simple. It doesn't matter whether it's single or multi-tenant.
What matters is the customer gets what they want at the price point and the performance and the user experience they're looking for, and that's precisely what we intend to give them. Incidentally, the one thing I would tell you on the SMB market, when we looked at it, we sized this for the
Sort of the SME customer that's in the 300K size. We're going after a smaller customer and lots of names because we think we can really scale out that part of the pyramid that we haven't spent a lot of time in, and even not spending time there, we're doing pretty well. Can you imagine we put our mind to it?
That's great. Thanks so much, Bill.
Thank you very much, Adam.
Okay. Thank you very much. Let's go to the next question, please.
Next question is from the line of Michael Briest of UBS. Please go ahead.
Great. Thank you. Good afternoon. We've obviously heard a lot of detail there, and I appreciate the extra disclosure you gave around the cloud business. Could you maybe give us some more numbers around the active user base you have on products like Employee Central, Cloud for Customer? One of your competitors is now giving a lot more granularity on that, it would be helpful. Secondly, in terms of the simplification strategy, I think it has a lot of resonance. Can you maybe talk about pricing for the on-premise suite and to what extent you'd be willing to offer subscription for an on-premise product just to break down some of the complexities of the price list? Thank you.
First things first, Michael, how are you? We could tell you that we have 38 million users in the cloud. We can tell you that we're operating all the things around integrated human capital management for Employee Central in the cloud in 28 distinctly different countries with payroll included, et cetera, where Workday is in two. We can tell you that we've grown Employee Central from 30 to 390 customers, and it's on a roll. We can also tell you that we're beating the pants off the competition with Cloud for Customer because, as Gartner said, it's a visionary product with a much more beautiful user experience. When you combine it with omni-channel e-commerce, it really does get you beyond the commodity nature of salesforce.com and gets you into a totally different conversation. We can tell you all those things.
As it relates to pricing on the software on-premise, we'd be most happy to rent it. Actually, we already do. In fact, the interesting thing that we've learned is our customers want to buy it, even though we've gone out of our way to keep reminding them that we're only too glad to rent it because we understand the NPV of that model as good as the other guy, and we think it's a great model. They view SAP as a strategic asset, and they, for now at least, have behaved in a way that indicates purchase is their preferred option. The rental is on the table, and we look forward to more and more customers renting our software.
Maybe just one more comment. Nevertheless, we took significant steps this year to simplify our pricing, even in the known structures. We are now bundling more solutions to value-added packages that really address the different buying centers in a cohesive need. By that, we have significantly reduced the number of SKUs in our pricing.
What's interesting, to Luka's point, in terms of Run Simple, we have actually reduced our price list by 70%, seven, zero. The whole company, SAP, is not only marketing Run Simple because we know with the great simplify HANA and the cloud, we can, but we're also behaving very differently within the company, and the clock speed has radically picked up, especially in the last 60 days.
Thank you very much.
Thank you, Michael.
Thank you. Let's move to the next question, please.
Next question is from the line of John King of Bank of America. Please go ahead.
Great. Thanks very much for taking the question. I just had two, if that's okay. First of all, on the deal sizes, I thought one of the notable things in the quarter was that you saw a big pickup in deals of over EUR 5 million, which seemed to be up about 50%. That's the first time in some time. Is that a function, do you think, of just an easing comparison year-over-year? Or would it be fair to link some of that to the maturity of the suite on HANA, and that's reaching a better level of maturity and allowing you to sign bigger deals? The second one was just for Luka. On the tax guidance, you've not changed the guidance, obviously, but you've beaten, I think, again, the expectations a couple of times.
Could you just comment as to what you expect for the second half and whether there's any one-offs which would mean you'd be in the middle of the range or whether towards the bottom end of the tax guidance would be more likely? Thanks.
Hey, John, I'll start off on the deal size. This is Bill. Just to give you a flavor for it. It is true that the EUR 5 million and above deals increased by about seven percentage points on a year-over-year basis, which is really encouraging. Yes, the suite on HANA now is hitting scale. As you know, we have about 1,200 customers now purchasing the suite on HANA to complement the 3,600 customers that have made an investment in HANA and the 1,500 startups that run their whole future on HANA. HANA is becoming a standard. I am telling you, since Sapphire, there is a real tailwind going on here. The Run Simple concept, the vision of it, has hit home.
I think approaching the cloud from the business network and the lines of business, as well as the suite on HANA in the cloud, has given the customer great confidence that we have the platform, we have the cloud solutions, and we even have the network, and that complements the on-premise very nicely. You tend to, when the strategy is in the right place for the customer, increase the bill of materials because the customer wants more of a single vendor approach to their enterprise, and we're seeing more of that. I'll also tell you that the larger deals are going up because we're going into areas we didn't used to be. The omni-channel e-commerce business is up 158% year-over-year. Cloud for Customer is up even higher than that. These are businesses that weren't ringing the cash register, and now they are in a major way.
I feel fantastic about coming out of Sapphire and what's happened to the overall pipeline, including large deals.
Maybe to cover your question on the tax rates. You're absolutely correct. In the first half year, we clearly stayed below our stated guidance. That's due mainly to two effects. On the one hand, we had some special effects from prior year taxes that were rolling into this first half year favorably. The second point is that the distribution of our revenues developed more favorably than our base plan, so to say, as far as the tax rate effects are concerned. Are these all effects that we can bank on for the second half year? Not necessarily. It's true, we are on a good way. You also know that in the second half at SAP, tax rates always tend to trade a little bit higher. Of course, we have a huge second half still ahead, where the revenue distribution can make a difference.
So far, we are on a good track and let's see where we stand after Q3. Then I will be in a better position to give you a more definitive view on where we will land within or below the guidance.
Perfect. Thanks very much.
Thanks.
Thank you. Next question, please.
Next question is from the line of Stacy Pollard of JPMorgan.
Hi, just a quick question on HANA. You said it was ahead of schedule on the number of customers, you've talked about that. Would you say the same about revenue generation? I know it's hard to separate, but if there's any sort of gut feel. Also just when you think about the maintenance revenues, can you talk about what portion is price increases, and then what portion is kind of maintenance contracts or separate it out?
Yeah, sure.
A new maintenance contract, sorry.
Stacy, thanks for the question. I'll start it off, and I know Luka will comment on the maintenance piece of it. We also have Rob Enslin, our head of global customer operations, and Bernd Leukert, the head of innovation, who's doing a fantastic job. Both of these guys are unbelievable. In terms of HANA, the fascinating thing is HANA is growing very swiftly. We are in a company that has everything attached to HANA. If it's a cloud solution and it's 38 million users, that means we'll soon have 38 million users running HANA. Can you imagine the opportunity for that hockey stick? Everything is HANA. There was no point in breaking it out other than the number of accounts, the suite on HANA, and what we're doing with startups, et cetera.
Having said that, you should feel very confident that HANA is embedding itself as a standard in the marketplace. Yesterday, I was with one of the largest chemical companies in the world. On the fly, we're inventing new business models for transportation, logistics, and things that actually get stored in the containers so they can be viewed in a control center in real time. They couldn't believe that all you have to do is feed data into HANA, and bam, you have new business models. A large manufacturer met with me yesterday in Germany. We're doing machine-to-machine and preventative maintenance, and they're reinventing the services business model. What you see here is the ultimate simplification of IT with HANA, but also brand-new business models being simulated on the fly, where companies can see a whole new way to run their business. HANA has now taken hold.
We don't have to prove that it works. Everyone knows it works. They're now in the stage of how do I do it? It's really taking off very nicely. Yes, it's ahead of our internal goals.
Yep. Now, a few words on the maintenance. The strong performance in maintenance is a function of two primary drivers. The one being that we have virtually no churn in maintenance. We have renewal rates that are between the 97%-98% ranges. With every new license that we sell, we add typically 22% Enterprise Support on top of that. It just is a self-enforcing mechanism there. The second one is that our offerings are performing extremely strongly in terms of adoption. Premium Support has very nice double-digit growth rates. SAP MaxAttention, SAP ActiveEmbedded offerings, they're extremely strong. Secondly, among the established Standard Support models, Enterprise Support is more and more dominating as the de facto standard. Price increases have really only a very minor role to play because we said that for Enterprise Support, we keep the prices at 22% until 2016 for any new licenses sold.
For existing licenses increases for Standard Support and Enterprise Support are kept at CPI indexes. In many countries, these actually don't result in an increase or only a minor, tiny increase, because typically, the consumer price indexes have remained relatively stable. It's really a function of virtually nonexistent churn, as well as growth in Premium Support and high adoption rates for Enterprise Support. Okay, thank you very much. Let's move to the next question, please.
Next question is from Rick Sherlund of Nomura. Please go ahead.
Yep. Thank you. I wonder if I can get some clarification on Simple. Seems ironic I'm confused by Simple, but we've got Run Simple
Which I presume is right now mostly running the SAP Business Suite on HANA, then you've got SAP Simple Finance to be followed by SAP Simple HCM, SAP Simple ERP. I'm kind of excited about the opportunity for the Simple suite of products because it's simpler, it's got a nicer interface, it's hosted by you guys on HANA. I'm not hearing much about that. I'm hearing more about Run Simple, which I think is more a SAP Business Suite on HANA. Is there kind of reluctance to talk too much about it until it's fully out? Because it could disrupt the current SAP Business Suite on HANA?
No.
Just maybe some clarification how I should be thinking about this.
Yeah, Rick, first of all, it's Bill. That's an excellent question. Let me clarify it. First of all, Run Simple is an absolute movement within our company to simplify our company. It also happens to be the new identity for the SAP brand. Therefore, when I speak of Run Simple, I'm speaking as the architect of Run Simple for a corporation to abide by in every single way, whether it's our brand and how it impacts our customers, or how we run our company and streamline everything so we can do anything for our customers. That is a movement, it's an identity, and there'll be lots of things that you'll be seeing on that in the days and weeks ahead.
In terms of Simple financials and other products that might take on the Simple moniker, they're doing so on the basis of brand, and that is a building block, and there'll be more of them. That's pretty much it in a nutshell. Bernd, did you want to add anything?
Yes. Maybe just from the product side. While, as Bill outlined, it's a strategy for the company. It has significant impact on how we develop, what is the architecture of product, then that resonates how we can deliver innovations to the market. Of course, the fact that we deliver the innovations to the cloud first is significantly accelerating the adoption of the value by our customers, and that is great to see that resonates as well in the financial numbers. Number 2, it addresses as well a need from our customers to consolidate a very fragmented heterogeneous landscape into a homogeneous landscape where the platform is the key enabler. That is coming back to a previous question before, that behind this success is a strong platform with capabilities, not just a traditional relational database has, with capabilities that outperform any competitor offering in any dimension.
Very good. Thanks a lot. Let's move to the next question, please.
Next question is from the line of Knut Woller of Baader Bank. Please go ahead.
Thank you for taking my questions. It's basically two. First one, on the margin expansion. We have seen a 10 basis point margin expansion in the first quarter at constant currency, and now an acceleration by 260 basis points in the second quarter. When we look at your full year targets, should we think about an ongoing margin expansion at the same extent as we have seen in the second quarter, or will that moderate somehow? Simply, on Fieldglass, we have seen historical growth rates as far as I remember, you mentioned 30%-40%. Now it's in the group, you've got a much broader scale of sales force. How should we think about the growth of Fieldglass going forward after you've integrated it? Will growth rates likely accelerate, or compared to historical rates, or what's your expectation here? Thank you.
First of all, on the margin, as I said, after the Q1 results, of course, it is always our ambition to increase our margin. You should not extrapolate from an acceleration from 10 to 60 basis points that after Q3 we will be at 110 basis points and after Q4 at 160 basis points. I think we have a guidance out there to land between the EUR 5.8 billion-EUR 6 billion operating income corridor. That's what we are still committed to and what will then drive whatever we'll achieve on the margin side. In terms of the Fieldglass acceleration, and please, colleagues, chime in there. We have a guidance out there. We have just increased it, and any acceleration of Fieldglass, as part of the SAP group for 2014, is in that guidance. Any further acceleration will be in next year's guidance.
Perfect. Thank you.
The one thing I will tell you about Fieldglass is the focus that we have on the business network and the ability of SAP to scale things on an international and global level is not trivial. We didn't buy it to maintain its existing growth rate. Whenever we buy an asset, it's the best in the business, and we do something special with it to accelerate growth, and we expect that to happen with Fieldglass.
That's very clear. Thank you.
Thank you.
Thank you. We have time for one final question, please.
The next question is from the line of Philip Winslow. Please go ahead.
Hi. Thanks, guys, for taking my questions, and congrats on a good quarter.
Bill-
Bill, a question for you. Just digging through the numbers here and just looking across the geographies, it looks like you guys had a solid pickup in EMEA, and also APJ. I wonder if you give us some color of just sort of what you're seeing across regions, sort of what trends you're seeing. As you kind of look into the second half, just what are your thoughts, based on sort of the first half and then the pipeline for the second half? Thanks.
Sure. Well, thank you very much for the question, Phil. We're really proud of what's going on in EMEA. I think the team is doing a fantastic job under the leadership of Rob Enslin. The same is also true for APJ. Whether you look at mature markets like Australia just doing unbelievable things, or you look at markets like China, which we've declared as a second home, taking off. We're just solid. In the Americas, the transition to the cloud, particularly in the United States, accelerates, and that's the number one focus for the United States, is really to bear down with everything we've got on the cloud. In Latin America, we think there's a lot of opportunity for all lines of business, especially in places like Brazil, Mexico, Colombia, and others. We see a new tailwind here, Phil.
I think that it would be safe to say that we're starting to see SAP cylinders rearing the fire on multiple dimensions now. As opposed to a six-cylinder car hitting on three, we're now revving it up, and we can see all of the cylinders starting to move in the right direction, and that bodes well for our second half and full year confidence, not to mention our midterm 2017 and beyond strategy.
Thank you very much.
Got it. Thanks, guys.
Thank you. This was the last question. Thank you.
This concludes our financial analyst call for today. Thank you all for joining, and goodbye.