Ladies and gentlemen, thank you for standing by. This is your call's operator. Welcome to the SAP 2014 first quarter earnings results conference call. Throughout today's recorded presentation, all participants will be in a listen-only mode. The 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. I hand now over to Stefan Gruber. Please go ahead, sir.
Yeah, thank you very much. Good morning or good afternoon. This is Stefan Gruber, SAP Investor Relations. Thank you for joining us to discuss SAP's results for the first quarter 2014. I am joined by Co-CEO Bill McDermott and Luka Mucic, Head of Finance and incoming CFO, who will both make opening remarks on the call today. Also, Co-CEO Jim Hagemann Snabe, CFO Werner Brandt, Executive Board Member Vishal Sikka, and Global Managing Board Member Rob Enslin are on the call 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, intend, 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, and all 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 with 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. Finally, before we start, I would like to point out that we'll be holding SAPPHIRE NOW from June 3rd to 5th in Orlando, Florida, with a financial analyst program and an evening reception on Tuesday, June 3rd. We look forward to seeing you there. Now 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. In January, recognizing complexity as the intractable CEO challenge of our time, we outlined our strategy to be the cloud company powered by SAP HANA and to simplify everything for our customers. I'm pleased to report we have made tremendous progress in execution of this strategy while delivering on our commitment to solid growth through 2014. Software and software-related services revenue increased 9%, exceeding our annual guidance range of 6%-8% SSRS growth. We saw strong growth in cloud subscription revenue of 38%, which is also tracking above our annual guidance range, and our cloud run rate is now approaching EUR 1.1 billion, or for those of you calculating US dollars, that would be $1.5 billion.
We're not only growing cloud one and a half times faster than our closest competitor, but faster than most of the SaaS peer group, and we remain the fastest-growing mega cap IT company in the cloud. We're also leading the industry transition to in-memory computing with the broad adoption of SAP HANA as the real-time business platform. We now have more than 3,200 SAP HANA customers since market launch in 2011, and we have close to 1,000 customers for SAP Business Suite on HANA, which was launched just one year ago. We are the only large enterprise software company that is innovating in the core while transitioning to the cloud and doing both profitably. We're bringing the simplicity of the cloud to our customers by offering the broadest cloud portfolio in the market.
Today, we have over 36 million users in the cloud, easily the most successful enterprise cloud company in the world from a user adoption perspective. Unlike our cloud competition, we offer the breadth and depth of functionality that allows companies to run their entire business. We're running industry-specific mission-critical processes in the cloud, which our competitors just don't do. For example, we help retailers with omni-channel. We help banks with corporate-to-bank connectivity. We help insurance companies with international regulatory compliance. We help professional services companies manage business process outsourcing. We do all of this in the cloud, which our cloud competitors simply cannot do. Significantly, we are the first to do all of this in real time in the SAP HANA Cloud. In Q1, approximately 60 customers, including Nestlé, have made the strategic decision to run core business processes on the SAP HANA Cloud platform.
Our new SAP HANA Cloud subscription allows companies to do all of this without any upfront CapEx. Today, SAP provides the most comprehensive end-to-end HR cloud solution. For example, our payroll solutions run globally, while our main pure-play cloud competitor only provides payroll for two countries. Customers recognize this advantage. With companies like RS Components choosing SAP HR Cloud solutions over Workday as an example. In addition, a global services company specializing in certification selected SAP SuccessFactors solution over Workday to address HR synergies for over 60,000 employees in 140 countries. With SAP SuccessFactors, they will streamline and align talent and core HR processes in order to increase focus on strategic objectives to support their company's growth. With the successful closing of Fieldglass, a very important acquisition, we will also lead the fast-growing market for flexible workforce management. Today, more companies need to manage a diverse workforce, including contractors, part-time, and temporary workers.
Fieldglass will significantly enhance our business network strategy and enable our customers to collaboratively manage all of their business needs, permanent employees, flexible workforce, and goods and services, all in the SAP cloud. Let me comment on the future of customer relationship management. CRM is no longer just about sales force automation. That's commodity. It is about managing your customers and their customers across every single touch point or omnichannel. We call this next generation customer engagement. Our hybris omnichannel e-commerce platform, in combination with Cloud for Sales, is seeing triple-digit growth as companies unlock cross-sell and upsell opportunities in real-time, in fact, like never before. Companies as diverse as Max Mara Fashion and Boeing are turning to hybris to deliver state-of-the-art B2B commerce and maximizing conversion and revenue rates. Boeing, the world's largest aerospace company, will use hybris to provide the flexibility to accommodate a complex buying process.
With hybris, Boeing expects to develop the future commercial and military commerce platform that will potentially drive revenue lift across all of their lines of business. Companies like Hallmark Cards, the largest manufacturer of greeting cards in the U.S., are turning to SAP Cloud for Sales. Hallmark plans to shift its retail solution to the cloud. They expect to provide 1,500 supervisors with the ability to manage territories with more dynamic enhancement management and support while realizing cloud-based savings. We continue to scale the world's largest business network. We now have 1.5 million connected companies, an approximate 40% year-on-year increase, and more than $0.5 trillion transacting in spend on this network takes place. SAP is proud of that. Last week, Accenture announced that they will use the network to power their procurement business process outsourcing practice forward.
This will significantly drive connected companies and transaction volume and further establish SAP as the de facto e-commerce standard in the market. We're also bringing together Ariba and HANA. Ariba's spend visibility solution is now running on HANA in a switchover performed for 5 million users instantaneously with zero downtime. Companies on the network can now analyze vast amounts of spend data in fractions of a second. SAP not only offers customers the choice of public cloud or enterprise cloud, but also the choice of where their data resides. As you know, data localization is becoming more and more relevant for all customers. They want to know where their data is located, and they expect the highest security standards for data management in the cloud, and we can accommodate their needs on a global basis.
We are expanding our worldwide HANA Enterprise Cloud data center footprint from 14 to 20 locations by year-end. These include China, Australia, Russia, Canada, Mexico, India, and Brazil. Because we are committed to helping the world run better, we are powering our data centers with 100% renewable energy. Let me talk about how HANA is changing business. As already mentioned, we're seeing broad adoption of HANA as the real-time business platform. We have achieved significant success in moving our product portfolio to the HANA platform. Both hybris and our Cloud for Customer solutions now run on HANA. With HANA, customers can radically simplify the IT stack and reduce their TCO. The HANA platform enables customers to benefit from the value of integration, be it in an enterprise cloud, in the public cloud, or on-premise.
HANA is also fundamentally changing our industry solutions, enabling customers to run complex mission-critical processes in real time. HANA adoption is especially strong in telco, utilities, financial services, and in particular, retail and CPG, with customers like L'Oréal USA and Mercedes-AMG turning to SAP HANA innovation. Another great example is a large food retailer in Germany. They chose SAP Business Suite on HANA and hybris in order to capture new growth opportunities in the highly competitive European retail market. They aim to streamline their business and increase service and quality in all customer channels. Another way we're driving pervasive adoption of HANA in cloud is through our vibrant ecosystem. HANA is creating a fast-growing development ecosystem. Today, more than 1,200 startups from 57 countries are building applications on HANA. In fact, more than 60 startups have commercially available products on the market already.
We're creating an entirely new ecosystem strategy for the cloud, where different partner types, such as VAR and OEM, play a critical role. In fact, we already have over 900 partners in our cloud ecosystem. In addition to Accenture's commitment to run Ariba, we have also formed the Accenture & SAP Business Solutions Group. This includes dedicated experts from both companies to jointly develop integrated industry-specific solutions powered by HANA and delivered via the cloud. Another truly groundbreaking example is the combination of Adobe Marketing Cloud with the SAP hybris Commerce Suite and the SAP HANA platform. We will deliver real-time customer engagement with relevant contextual experiences across all marketing channels and customer touchpoints. This will redefine customer engagement and retention in the fast-changing and highly competitive consumer world. As I mentioned, cloud and HANA are driving simplification for SAP customers.
We're also making strong progress in offering users an intuitive user interface. We continue to expand our mobile-first development strategy with SAP Fiori. This brings a consumer-grade user experience to customers without disruption. Customers as diverse as Colgate-Palmolive, Norfolk Southern, Saudi Arabian Airlines, and Kenya Power have turned to our more than 230 SAP applications that now run on the Fiori user interface. Our ambition is to run all SAP applications with this new intuitive and beautiful UI, with 150 additional apps scheduled to be released this year. Okay. I'd like to talk now about our regional performance. In EMEA, 39% growth in cloud subscription revenue and a robust core business drove the solid regional performance. This was despite uncertainties in CIS due to the Crimea crisis. Southern Europe is rebounding strongly, and Iberia and Africa posted a record quarter.
In Americas, we saw a continued fast transition to the cloud with 37% growth in cloud subscription revenue. Canadian software revenue also came in real strong. We continue to see strong demand in Latin America with tremendous growth opportunities going forward. APJ was mixed. While Japan was below expectations, our overall APJ cloud subscription performance with 43% year-on-year growth was excellent, and China was a particular highlight, which obviously is very different than other big companies that have reported. Our long-term commitment and growth strategy in China are paying off, as shown by strong double-digit growth rate in software. We're clearly outperforming the competition, as SAP is the trusted partner in China. Customers like China Grand Auto, China's biggest auto dealer and the world's second-largest auto dealer, selected SAP solutions over Oracle to support its growing business.
With SAP, China Grand Auto expects to promote business innovation, which could lead to EUR 100 billion of annual operational revenue for the customer. In summary, I continue to believe that the farther back you look, the farther forward you will see. In the Y2K era, customers dealt with widespread integration challenges stemming from best-of-breed point solution providers. The dynamic then has become the opportunity now. To have the best of breed at the line of business level integrated into a common process and data model is the way. With the SAP Business Suite and the SAP Cloud powered by SAP HANA, I've never felt more confident in our future as CEOs look to simplify their IT landscape to focus on scaling new business models in the networked global economy. None of this success, however, would be possible without the 66,750 SAP employees who go above and beyond to achieve this success.
I would like to thank them wholeheartedly. I would also like to invite you all to SAPPHIRE NOW, which will take place June 3rd through June 5th in Orlando, Florida. As always, we are excited about the opportunity to share our latest innovations and connect with our customers and analysts at this event. With the broadest cloud portfolio and technology like real-time SAP HANA business platform, and by the way, a strong pipeline, we stand firmly behind our 2014 outlook. We are confident that our momentum will continue each quarter this year, and we are very well-positioned to achieve our 2017 ambitions. I'd like to thank you and turn the call over to Luka Mucic. Luka, over to you.
Thank you very much, Bill, and welcome from my side as well to this call. Bill gave you an overview of a very strong first quarter, which demonstrates our successful transition to the cloud while managing a growing profitable core business. Before getting deeper into the Q1 results, let me address a couple of technical topics up front. First, we saw a significant currency effect in the first quarter. Our SSRS and operating profit growth rates, as reported, were negatively impacted by 5 percentage points each. Secondly, we have now fully integrated our on-premise and cloud go-to markets, support, and R&D organizations. As a result, we now only have one operating segment. We will, however, continue with our transparency in the cloud by providing cloud subscriptions and support revenue, the total cloud revenue run rate, and the calculated cloud billings.
In addition to that, we will now provide cost of cloud subscriptions and support revenue to give some more insight into the cloud subscriptions and support gross margins. Also, we will report our cloud-related professional services and other service revenue separately. For more details on these cloud-related KPIs, please see our quarterly report, which was published earlier today. Now back to the results for the first quarter. Bill already talked about our SSRS and cloud subscriptions and support results for the quarter. I'll now go into some more detail on our results for the quarter. We saw solid growth in our core business, with software and support revenue growing by 7%. This was led by our consistent high single-digit growing support business, which renews in the high 90% range. We had particularly strong growth rates in both enterprise support and premium support offerings.
Our enterprise support offering had, again, an adoption rate of 96% with new customers, thus continues to be the de facto standard. In the first quarter, we saw very fast, rapid growth in the cloud, with cloud subscriptions and support revenue up 38% year-over-year. Calculated cloud billings increased 36% year-over-year. Deferred cloud subscriptions and support revenue was €454 million as of March 31st, a year-over-year increase of 29%. One final remark on our cloud revenue and support revenue results. The combination of support revenue and cloud subscriptions and support revenue as a share of SAP's total revenue increased by three percentage points year-over-year to 66% in the first quarter of 2014. Let me come to some comments on our gross margins for the quarter. Our SSRS margin was down by 130 basis points to 81.5%.
This decrease was primarily driven by the strong investment into cloud delivery and our investment in additional capacity to meet the increasing customer demand for our premium support offerings that I've been just talking about. Our cloud subscriptions and support margin was down 200 basis points to 70.5%. This decrease was primarily due to the ramp-up of cloud infrastructure delivery capacities to reflect our increasing customer demand. As Bill had previously mentioned, these investments include expanding our SAP HANA Enterprise Cloud data center footprint from 14 to 20 locations by year-end. Professional services margin decreased by 5.3 percentage points year-over-year to 12%. There is a significant structural change in the demand for consulting services that we are experiencing. We have been, and will continue to be adapting to this changing market environment.
We expect this transformation to take some time, as such, expect the services profitability to be negatively impacted throughout the rest of the year. As a result, the overall gross margin was 69.4%, a decrease of 70 basis points year-over-year. Looking at the expense side of the P&L, you can see that total operating expenses in the first quarter increased by 6% year-over-year. Operating profit consequently was up 7%. IFRS operating profit was up 12% as reported. This is obviously a higher increase than non-IFRS operating profit as reported and at constant currencies, which is due mainly to a lower impact from acquisition-related expenses such as deferred revenue write-downs and acquisition-related charges compared to 2013. Our operating margin in the quarter increased slightly while we were accelerating our cloud business.
Additionally, we had a negative effect from acquisitions of approximately 20 basis points, our organic margin expansion was 30 basis points. The IFRS tax rate in the first quarter of 2014 was 24.1%, which was up 7.8 percentage points year-on-year. The non-IFRS tax rate in the first quarter of 2014 was 25.9%, which was up 4.5 percentage points year-over-year. The comparably higher effective tax rate for the first quarter 2014 mainly resulted from changes in the regional allocation of income and an increase of taxes for prior years. As you may recall, the first quarter of 2013 was extraordinarily low in this respect. We are maintaining our effective tax rate outlook for the full year. To cash flow and liquidity. Operating cash flow for the first three months was strong at €2.35 billion, which means an increase by 9% year-over-year.
This strong cash flow result enabled us to return to positive liquidity in a very short period of time after having done some major acquisitions. Actually, net liquidity at the end of the quarter improved to EUR 750 million positive from a negative EUR 1.47 billion just three months ago. As Bill had already commented, we are maintaining our full-year guidance for 2014. In summary, we expect full-year 2014 non-IFRS software and software-related service revenue to increase by 6%-8% at constant currencies. Non-IFRS cloud subscriptions and support revenue to be in a range of between EUR 950 million and EUR 1 billion at constant currencies. And our non-IFRS operating profit to be in a range of between EUR 5.8 billion and EUR 6 billion at constant currencies.
Before I finish, let me come back to where I started and make a few further comments about currency, which should help you to more accurately model SAP for the remainder of the year. If exchange rates remained at the end of March 2014 level for the rest of the year, the company expects 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 6 percentage points and 8 percentage points respectively, the latter being for operating income for the second quarter of 2014, and of approximately 4 percentage points and 5 percentage points respectively for the full year of 2014. With this, I would like to thank you, and we will now be happy to take your questions. Over to you, Stefan.
Thank you, Luka. I would like to hand it back to the operator.
Please 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 their touch-tone 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 selection. The first question comes from the line of Gerardus Vos of Barclays. Please go ahead.
Hi, thanks for taking my question. Two FMA. First of all, on the Fieldglass acquisition. I calculated this should roughly generate around EUR 300 million in revenues by 2017 if you just extrapolate the kind of current growth rates. I think in the past, management indicated that if a deal would have been done over EUR 1 billion, there would be an update to the guidance for 2017. I was wondering, given that we see now one of the deals perhaps a little bit below EUR 1 billion, would the next deal trigger that kind of update to the guidance? Secondly, just on Asia and Japan, it looks that there was a bit of misexecution. We've seen it also, particularly from a license perspective, in the first half of 2013. Perhaps you could elaborate a bit on that, what exactly is happening and how you guys are dealing with that.
Thank you.
Gerardus, let me cover the first one because that will be a quick one. The Fieldglass acquisition will hopefully be closed in Q2. Let's come to that bridge and get to that bridge and over that bridge when we really close the acquisition.
Excellent. Rob, if you'd like to make any comments on Japan, you're most welcome to do so. Robert Enslin, who runs our worldwide sales force.
Yeah. Thank you, Bill. I think the two topics in Japan, clearly, we've seen some changes to the Japanese economy, which has had some impact to the business. We also see a significant shift in some of the Japanese business moving to more cloud-type-oriented software. We've reacted by positioning data centers in both Osaka and in Tokyo and continue to build our cloud presence in Japan. I think towards the latter half of the year, you'll see a strong rebound in our Japanese business.
Okay. Thank you.
Thank you very much. Let's take the next question, please.
The next question is from the line of Chandra Sriraman of MainFirst Bank.
Hi there. This is Chandra Sriraman from MainFirst Bank. Just a quick question on the gross margins of your services business. I was just wondering, has it got to do with the adoption of HANA Enterprise Cloud, given that it's a private cloud with a lot of customizations? I was just wondering if this impact is related to this. Also as a follow-up, should we expect more restructuring allocated to your services division, or is it already incorporated into your current guidance?
Yeah. I can cover both questions. First of all, on the margin performance, no. We are seeing a shift in the consumption model of software. That's why we are growing strongly in the cloud. With this shift in consumption comes the need to change also the paradigm and change the portfolio of services within our services organization. We are busy doing this. In a cloud-based consumption model, you need to work on fast and swift onboarding services. You can work on process consulting. Of course, the, let's say, usual bread and butter, huge ERP implementation services are a concept of the past, and we need to adapt both the composition of the workforce as well as the size of the organization to really be reshifted towards those areas that we can really further grow on. That's innovative services around big data management, HANA, mobility, and the cloud.
This takes a while, and that's what's driving the short-term impact. It has nothing to do with the private cloud offerings. Secondly, of course, as we are reiterating the guidance for the full year, you can expect that what we have seen in Q1 is part of our plan. Actually, we are very satisfied overall with our business performance in Q1 and are well on track to achieve our full-year targets. Thank you very much. Let's move to the next question, please.
The next question is from the line of Brad Zelnick of Macquarie. Please go ahead.
Thanks very much. My question is about HANA. I think at this point, we appreciate what it means to leverage the HANA and as an enabling cloud platform. I'm trying to understand how much of the opportunity is in doing things you've always done faster, cheaper, better. These apps themselves to be able to leverage real-time data. How much of this is certifying Business Suite on HANA and integrating the portfolio versus evolving the application functionality to be more data aware. If you just think about the base of HANA customers today, what does that mix look like, and where is it going to?
Vishal Sikka, who heads up SAP development, will be happy to answer that. Vishal?
The benefit of HANA is twofold. One is the dramatic simplification and improvement in the Business Suite and our traditional applications and our cloud applications. The other one is in enabling completely new kinds of applications that were not possible before. If we look at the simplification that we can enable in mission-critical applications, we are off the bat already running, for example, within SAP itself, our Business Suite on HANA, our ERP system on HANA, seven to eight times smaller than it used to be on a traditional RDBMS. With the further simplification that we are doing by getting rid of artifacts of inefficiencies from the past, like aggregates and indices inside the applications, we can in fact achieve a dramatic, not only simplification in the landscape of these systems, but a completely dynamic and flexible behavior in the application.
We really bring a benefit of a disruptive technology to these mission-critical applications. To complement that disruptive innovation, we then enable completely new kinds of user experiences with the Fiori program. That combination, then we deliver non-disruptively to the business because the business processes can continue to be as they were while bringing dramatic benefits of simplification and dynamic behavior and real-time reporting across the board. We think that there is an opportunity for us to completely renew our entire install base and our entire portfolio of existing applications towards this. This applies not only to the Business Suite, but also to the cloud applications. As Bill said, we just launched the first wave of customers of Ariba on HANA, and we see a 100 times performance improvement in operational reporting.
As a result of that, we see a 5 to 10 times increase in the usage of these systems. Actually, we also saw a 12 times better compression compared to Oracle. The other dimension of that we see, is in a complete enabling of new kinds of applications in all kinds of industries. Applications that were not possible before, like predictive maintenance on massive machinery, like new kinds of healthcare solutions, geostatistical and seismic data analysis in oil and gas industry, new ways of doing risk calculations in banks, areas where software and real-time software is making its way for the very first time. We believe that both of these dimensions of opportunities are massive, and that is why the HANA platform is the underpinning of everything that we are doing.
That's very helpful. Thanks, Vishal, because we too are hearing it's much more than just a big data analytics platform, but it is driving a wave of business transformation for customers, both of SAP and new customers as well. Thank you very much.
Exactly.
Well, thank you very much. Let's move to the next question, please.
Next question is from the line of Adam Wood of Morgan Stanley. Please go ahead.
Hi. Thanks very much for taking the question. Two quick ones if I could. First of all, coming back to the services gross margins. When we think about changes in the services business, that can often be headcount related. Could we understand, are there restructuring charges in there this year, which is what's impacting the margins through this year that kind of fall out next year? Or are there other expenses in there that are impacting the margins? Secondly, just thinking about the cloud growth, obviously another very strong quarter there. Maybe you could just give us a little bit more detail on that. The conversations we have suggest SuccessFactors is growing extremely quickly and maybe Ariba coming into SAP a few quarters later is maybe a couple of quarters behind SuccessFactors' acceleration. Is that the right way to think about it?
Maybe as we look to Europe as a big greenfield opportunity for Ariba, you could talk a little bit about what you're doing with sales capacity there to push that opportunity. Thank you.
Absolutely. Let me take the first part, and maybe my colleagues can handle the go-to-market part. We are not planning restructuring charges on a single line of business level. We have certain expectations that we have laid out in our non-IFRS measures. As you have seen from today's update, we continue to think they are appropriate. In a business as large as ours, you will have constantly, during the year, shifts in priorities, organizational changes that may result in the need to think through restructuring charges. We think the range that we have outlined is appropriate for this year and would include anything that would apply to the services business.
Colleagues, want to take over?
Maybe I'll just start out and then give Rob a chance, if he wants to add anything, by all means, do so. In terms of the cloud growth, SuccessFactors and Ariba are both performing exceptionally well. It's not SuccessFactors is really going good and Ariba is sort of catching up. On the contrary, Ariba is right there with SuccessFactors. What's interesting about Ariba, especially with the move that we made with Fieldglass, you see the business network playing a more critical role. You also now see Ariba cornering the indirect materials conversation.
Now that you have the contingent labor force, and you can manage that both in the network, you see the design of our strategy coming to life with both SuccessFactors and Ariba, and some of the moves that we made around them to make sure that we are the de facto standard in HCM in the cloud. Because now you've got the whole integrated HCM cloud, plus you got the contingent workforce, plus you got the network working for you. There's really no reason to go anywhere else. I would also like to comment on Sales OnDemand. We have totally under-publicized this. Our Sales OnDemand business is rocking, and it's on a small base, so I'm not going to impress you with four-digit numbers. I'm just going to tell you it's growing really fast.
When you combine that with hybris omnichannel commerce, and you tell a next-generation CRM story to a retail customer, you see their eyes light up. We're about to disrupt the CRM business. Why not? I mean, the ones that are in the cloud now haven't made any money at it. I think we can do both make money and be the leader in the cloud. Then finally, you should know in every geo, our cloud business is growing very fast. Every one. It's almost at the same percentage. The adoption of the cloud is really universal, and we're going to cloud by industry.
I think this Accenture move might have missed your radar a little bit, Accenture's lining up all their industry expertise with SAP to go to market with an industry cloud, which obviously only SAP can do because we've been at it for 42 years. It's nice to know that the leading consulting firm out there thinks that's the way to go for their future. Rob, anything you'd like to add?
I would like to just add, I think the network is a gem, and we continue to add network nodes every quarter, and we see really good growth as we expand it. As you said, Fieldglass is just going to take that over the top. I think a big play that's also missed on this call is we added Mike Ettling to run our people business globally, who comes as the ex-CEO of NorthgateArinso. We believe that we continue to make tremendous progress in the HR space. We are growing our cloud business pretty much everywhere, and we see that to continue.
Great. Thank you very much.
Thank you, Rob.
Thank you very much. Let's move to the next question, please.
Next question is from the line of Ross MacMillan of Jefferies. Please go ahead.
Thanks a lot. Two questions from me. Luka, just a comment on the operating margins. I think if I look at your SSRS constant currency growth rate for the year, it's about 7% at the midpoint. Your non-IFRS operating income growth, also 7% at the midpoint. It implies about a flat margin. As we think about this year, should we expect it to be flattish, if you will, year-over-year as we progress through the year, or I guess, how much variability could we see there? My second question may be for Bill. You made some positive comments on the SAP HANA Cloud. You talked about 60 customers. I'm trying to gauge whether you think, on a go-forward basis, that's going to be the route that more customers choose.
Therefore, are we going to see basically acceleration of that contributing to cloud, and conversely, HANA being less of an incremental contributor to license growth? Thanks.
Yeah. Let me address the first one clearly. First of all, in Q1, as I said, we had a margin expansion of 10 basis points organically, 30 basis points. You also know that Q1, obviously, from a revenue performance perspective, is our smallest quarter. The impact of some of the investments that we have made to front load our capacity in order to be able to deliver on the growth that we are able to drive in the cloud, but also in premium support, of course, should level out through the year. We have given you a guidance range for operating profit, behind which we clearly stand very firmly. This is also then intrinsically covering the expansion potential that we see on the operating margin side. Clearly, we would also, for this year, not look at keeping our margin flat but at growing it. Yeah.
Thank you. What I'd like to add, first, let's start off with HANA. HANA is SAP. HANA is the bedrock of our brand, of our soul. It's built into everything we do in the cloud, everything we do on-premise. Yes, it will also stand on its own in the database market, and we like our chances against anybody. If we get our story out there, we win. That's HANA, and the essence of SAP is a tremendous growth trajectory for HANA, and it will continue to come through as the year goes on. In the SAP HANA Cloud and the idea of this adoption factor, we now have 1,000 Suite on HANA customers.
If you think about the benefit of that and the proof case that the Suite on HANA is so relevant, I, for the life of me, can't understand why many hundreds and hundreds, if not thousands of customers wouldn't want to move to the cloud company powered by HANA. Put the whole Suite on HANA in the SAP Cloud. I think it's a great way for the users to adopt the technology, to get faster time to value, to deal with this consulting business model transformation that's going on. Most importantly, we have made a bold move. We went to the marketplace, and we told them, "If you're tight on CapEx and you want to rent the software, you can rent the Suite on HANA in the SAP Cloud." That's something that we recently announced.
As the market digests that opportunity, I expect that hockey stick to build as the year goes on.
Thank you.
Thank you. We have time for two more questions, please.
The next question is on the line of Rick Sherlund of Nomura. Please go ahead.
Thanks for taking my question. I'd like to just focus a little more, if I could, on the SAP HANA Enterprise Cloud. I understand that's not the portion that is your SaaS business, but it would be SAP Business Suite on HANA, for example, hosted. If you've got 1,000 customers SAP Business Suite on HANA, how many of them are using SAP to host in the cloud? If you can kind of give us a sense, are these customers that are buying SAP Business Suite on HANA, are they existing customers, or is it new customers? To the degree that design wins come first and then the revenues generate, will these simplified financials and other simplified apps reduce some of the friction in this market? Just one more.
With the platform as a service, it sounds like you've got a lot of companies building apps on top of the platform, and no doubt that takes time to see any revenue benefit. Should we think of this as a bigger opportunity as you get more and more apps written on SAP HANA that you're going to host in the SAP HANA Enterprise Cloud?
Yep. Rick, this is Vishal. As we see, we have several dozen systems on the HANA Enterprise Cloud or SAP Cloud powered by HANA already productive. These are mission-critical systems from major companies in the world like McLaren and Florida Crystals and others. As we see the evolution of this, as Bill said, more and more customers will adopt SAP Business Suite running on the HANA Enterprise Cloud. We expect that will continue to grow significantly. Obviously, there are many customers who still continue to run the Business Suite on HANA in their own data centers. In terms of the split, Rob can answer this better. We are seeing a roughly equal amount of new as well as existing customers embracing Suite on HANA.
The applications, the further simplification that we are enabling with HANA, this is a massive opportunity for not for us, but especially for our customers. Simplified Financials is the first example of this. The opportunity to dramatically simplify the footprint of a mission-critical ERP system by getting rid of aggregates. I mean, in financials, for example, there are aggregates for everything. For daily totals, weekly totals, monthly totals. We can do all of these on the fly. That has two effects. That means that you can simplify the application, at the same time, you make it completely dynamic because you can aggregate on anything, in any dimension, in any way that you can imagine.
That opportunity to dramatically simplify the application, lower the footprint, lower the complexity, at the same time, make it completely dynamic, changes not only, I mean, for example, the statutory and legal reporting and compliance aspects of the applications, but also the management and the way we manage businesses. These can become completely dynamic and frankly limited by only our imagination. We see this benefit first coming in Simplified Financials as an incremental improvement to the Business Suite. Obviously for customers who run this on the cloud, they see a dramatic benefit of that with the ease of delivery, the ease of consumption, and integration that the cloud enables. We see that coming into financials, into logistics, into CRM, into every aspect of the Business Suite over time, and bringing the benefits of that also to other parts of our products.
To the last part of your question about new kinds of applications, we're incredibly excited about it. Traditional partners like Adobe and others, as well as Capgemini, Accenture, Deloitte, are all building amazing new applications on HANA. With Accenture, we have announced work in major industries like oil and gas and in marketing. Of course, marketing with Adobe, with Capgemini in retail and banking, and others. As well as a completely new category of companies that are building really unprecedented applications. There's 1,300 startup companies who are completely betting on HANA to deliver completely new kinds of applications in healthcare, in manufacturing, in marketing, and basically all walks of life. That gives us an opportunity to grow a new dimension of a new kind of an ecosystem, and that makes the platform opportunity that much more exciting.
Rick, finally, this is Luka. I just wanted to come back also on the revenue model for the SAP HANA Enterprise Cloud, as I heard a statement that this is a Suite on HANA revenue, and just wanted to make sure that we don't have any misunderstanding here. If you look at our SAP HANA Enterprise Cloud model, it falls into different components. On the one-hand side, you have clearly the managed services and hosting component, and the fees for that are booked under cloud subscription revenue. Then on the licenses for the Suite on HANA and the SAP HANA database, you have two different options. On the one-hand side, you have indeed a bring your own license model. This, of course, would then reside in software license revenue. We also offer, since this quarter, the subscription option.
A customer can also get a rental license, basically, for a certain time period, typically three years, for the same products. Those revenues would also be shown under cloud subscription and support revenue. Just that we are clear also for modeling purposes.
Rick, just on the go-to-market side, what you see there is the customer base is split 50/50 between new customers and existing customers that are bringing SAP BW existing suite applications onto the SAP HANA Enterprise Cloud. You see a significant amount of customers starting the adoption of SAP HANA based on project-based SAP HANA Enterprise Cloud, where they can actually convert at a later stage into production. As we see us open up data centers around the world, you automatically see an expansion of the pipeline in those marketplaces. That's what we've seen with the SAP HANA Enterprise Cloud.
Thank you very much. We have time for one final question, please.
The question comes from John King of Bank of America. Please go ahead.
Great. Thanks for taking the questions. I've got two as well. Just lastly, on the M&A policy after your Fieldglass deal, just as it relates to your medium-term targets, you've got a EUR 20 billion target out there for 2015. The consensus is still a little bit below that number. I guess I'm wondering, how strictly do you need to adhere to that target? Do you feel the need to be doing an acquisition to get there, or is EUR 20 billion a deliberately round number? The second one would perhaps be for Rob on the sales reorganization that you talked about in February, merging the on-premise and the cloud sales teams. Could you just talk about any early impact that's had, whether you're seeing more of the on-premise salespeople selling the cloud products? Any data points you had around that would be great. Thank you.
John, maybe I'll start. This is Bill. We had updated the EUR 20 billion by 2015 to EUR 22 billion by 2017. Keep in mind, when Jim and I, as co-CEOs, announced EUR 20 billion by 2015 in 2010, we were obviously on a course that needed to be renewed by the time we got to 2014. We did that in early 2014 in New York City. It's EUR 22 billion by 2017. That's the number you should be working with. We also said EUR 3 billion to EUR 3.5 billion in the cloud and the 35% operating margin by then. That was the statement that we made earlier in this year. Rob?
Yeah, I would just say, I think the transition of SAP as SAP, the complete cloud company powered by HANA, has aligned with our go-to-market field. I think everybody at SAP now is driving cloud sales across the HANA Enterprise Cloud, across the public cloud, whether it be People, Ariba, the network. What you're starting to see is the uptick in leveraging the scale and size of the SAP sales organization, the geographical coverage we have, and the strength we have across the regions, whether it's emerging markets or in the mature markets. As we build and drive more data centers, either our own or our colos with our partners, you'll continue to see the benefits of having an integrated go-to-market and development organization around all of our cloud products. I think we've made the transition. It's been extremely strong.
As a result of the Q1 results, you can see that. We continue to see that strength evolving through the rest of the year.
John, just to make sure that Rob and his sales force, and for that matter, almost 67,000 employees around the world have clarity of purpose, we have made it clear that we are the cloud company powered by HANA. There are no debates. Secondly, we also agreed as a company to simplify everything we do around that imperative. We're going to put our assets and our alignment throughout the company on a global level around that customer centricity to ensure we achieve that objective. More and more, you'll see us move in one formation in that direction. There won't be any confusion, not in the company, not in the financial community, and definitely not on the minds and in the hearts of our competitors.
Very clear. Thank you.
Thank you very much. I realize we have still three minutes to go for the full hour. There's still questions in the queue. We take one additional question before we close. Operator?
The question comes from Philip Winslow of Credit Suisse. Please go ahead.
Thanks, guys, for taking my question. Bill, just got a quick question for you. Obviously, you made some comments upon Japan, but we've seen varying growth rates across the geographies for the past few quarters. Just wondering if you give us more detail about what you're seeing in these geographies and just as you guys think about your full-year guidance, sort of how you're thinking about sort of the geographic representation there.
Thank you, Phil. First of all, on Japan, the good news is Rob has had a lot of experience and actually lived and ran Japan as the president of Japan. I don't worry too much about the leadership and the insurance that the pipeline and the numbers will come through. Even when you have an off quarter, he's got a way of fixing those things. The good thing is, it was more than offset by the unbelievable success that we continue to have in China, which really has become our second home. I think China regards SAP as truly the trusted innovator there. We believe strongly in markets like Brazil and Mexico and obviously India. The Middle East continues to be exciting. Africa is just having an unbelievable run.
We'd like very much to see a de-escalation scenario with what's going on in Ukraine take place as quickly as possible. That's a serious market for us. We have 1,000 employees there, 1,700 customers, we naturally want to see a win-win scenario reached by the political power because it's important for our people, our customers, and also the global economy. Not that SAP can't withstand a slowdown there. We obviously just did. Our quarter would've been a lot stronger, even though it was a good quarter, if we hadn't slowed down there, because we expect a lot out of that. Europe looks really strong. You saw that in Q1. It's not just the cloud, but also the core. Americas is showing some real power in the cloud now, and the core is absolutely performing, as evidenced by 10% SSRS growth overall.
We really feel very good about our company. We did an extremely deep dive in every territory, in every industry, in every market segment, with every manager in the company post the quarter to understand, hey, based on the facts, where are we here? With SAP HANA, in real time, we can see it on the iPad, but there's nothing like managing people by looking them in the eye. We walked away from that very confident.
Great. Thanks, guys.
Thank you very much. This concludes the financial analyst earnings call for today, and thank you all for joining, and goodbye.