Ladies and gentlemen, thank you for standing by. Welcome to the SAP 2013 third quarter earnings 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 would now like to turn the conference over to Mr. Stefan Gruber. Please go ahead, sir.
Thank you. Good morning or good afternoon. This is Stefan Gruber, SAP Investor Relations. Thank you for joining us to discuss SAP's results for the third quarter of 2013. I am joined by our Co-CEOs, Bill McDermott and Jim Hagemann Snabe, our CFO, Werner Brandt, and Executive Board member, Vishal Sikka. Bill and Jim will begin the call with remarks on this quarter's performance. Werner will review the financial highlights, followed by brief remarks by Vishal. We have time for Q&A. Before they get started, as usual, 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 anticipated, 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. All forward-looking statements are subject to various risks and uncertainties that could cause our 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, including SAP's annual report on Form 20-F for 2012, filed with the SEC on March 22nd, 2013. 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. Regional software and cloud subscription numbers represent the combination of software revenue based on the location of negotiation and cloud subscription and support revenue based on customer location. With these remarks, I would now like to turn the call over to Bill McDermott.
Thank you very much, Stefan, and thanks, everyone, for joining the call today. We are in the middle of a fundamental transformation of the IT industry. Enterprises and business consumers today are connected through mobile, and they are networked through the cloud, and they have unlimited instant access to information and commerce. CEOs are realizing the unlimited opportunities arising from big data-driven growth strategies. Over the past three years, SAP has transformed the industry with innovations in the cloud, mobile, and SAP HANA, which is now the industry standard for in-memory technology. You can see from our quarterly results, again, the shift to the cloud and in-memory is accelerating, and we are leading this transformation. Despite a mixed macro environment, SAP had a strong quarter, with Q3 software and cloud subscription revenue increasing 13% to EUR 1.17 billion, which is a record in a third quarter for SAP.
We are gaining market share with software and subscription growth that is two times faster than our closest competitor. Software and Software-Related Service revenue grew 12% to EUR 3.36 billion. This is also our 13th consecutive quarter of double-digit Software and Software-Related Services growth at constant currency. The cloud. SAP is leading the rapid market transition to the cloud with triple-digit growth of 162% in cloud subscription and support revenue in Q3. We now have a cloud revenue run rate of over EUR 1 billion, and we have the largest subscriber base with approximately 33 million cloud users. In fact, in Q3, we overtook Oracle as the second-largest enterprise cloud company with cloud subscription and support revenue of nearly EUR 200 million. SAP is winning in the cloud because we offer customers a suite of best-of-breed cloud solutions that will be tightly integrated with each other and with our on-premise solutions.
We give customers choice on how best to consume our software, whether it's in the public, the private, or any combination of cloud and on-premise solutions. Our best-in-class integration contrasts sharply with our competition that is stitching together marketing partnerships and calling that prepackaged integration. We believe our approach delivers the right flexibility, maximizing existing customer investments so the customer wins, so they get the best return. We're also seeing accelerated synergies from Ariba, with new and upsell application billings growth in high double digits. We're expanding the world's largest business network with 1.2 million connected companies and approximately $1.5 trillion transacted on the Ariba Business Network. If the Ariba Network were a country, ladies and gentlemen, it would now be in the top 25 based on GDP. Customers recognize the power and breadth of our SAP Cloud solutions.
EMC, for example, a U.S.-based Fortune 500 cloud computing company, selected our cross-cloud solutions. With SAP Cloud, EMC expects to better attract, retain, and reward talent, as well as achieve better visibility and collaboration with its suppliers. HANA. The SAP HANA platform continues to be the industry standard for in-memory technology. With 90% growth in Q3, HANA remains one of the fastest-growing products in the enterprise software industry, and we are well on our way to reach a EUR 1 billion rate in HANA software revenue since market launch. We're on track also to meet our full year HANA guidance of between EUR 650 million and EUR 700 million. While our competition is making a lot of noise as they try to catch up, we believe that this simply validates our leadership position, and no, we do not expect any of those announcements to significantly impact our market lead. We're stepping on the accelerator.
HANA is clearly becoming the real-time business platform for the future of enterprise computing. SAP Business Suite on HANA is the most modern business suite in the industry. With approximately 450 customers now, the demand for Business Suite on HANA has exceeded even our own high expectations. This is testament to HANA's enterprise readiness and its reliability. ArcelorMittal, a global steel and mining company headquartered in Luxembourg, selected SAP Business Suite powered by SAP HANA. With SAP, ArcelorMittal expects to drive operational efficiency and benefit from real-time actionable insights. We believe Suite on HANA is a tremendous multi-year growth opportunity that will reinvigorate our applications business. We already have more than 77 industry applications and analytics solutions powered by HANA, built either by SAP or by our partners. Our ecosystem of partners innovating on our industry-leading in-memory platform is expanding every day.
We now have over 650 startup companies building high-performance applications on HANA. With the HANA Enterprise Cloud, customers can now consume HANA-powered business applications in the cloud. Merck, for example, a German-based chemical and pharmaceutical company, selected SAP HANA Enterprise Cloud to build a global SAP solution architecture. With SAP, Merck now expects to reduce complexity and TCO of its entire IT landscape. We're taking a significant and innovative step forward by putting all of our cloud offerings, all of them, on the SAP HANA platform. Moving forward, SAP HANA will be the single unified platform that enables businesses of all sizes, across all industries, and all lines of business to run their entire business in the cloud more efficiently and effectively than ever before.
SAP Business ByDesign will become part of the SAP HANA Cloud and will continue to be supported and actively promoted in its current functionality and scope through our extensive partner ecosystem. Optimizing SAP's cloud portfolio on our HANA platform means a dramatic price performance improvement with all the benefits of simplicity in the cloud for all of our customers. Let's talk core applications and analytics. The transformational nature of SAP HANA, combined with our deep industry expertise, is driving the innovation of our core business applications. With Suite on HANA, we offer compelling real-time business scenarios with partners across 25 distinct industries, including retail, utilities, and financial services. The combination of our Hybris e-commerce solution, CRM, and HANA-based customer analytics also enhances our core business.
This gives SAP a unique edge in enabling our customers to build intimate digital relationship with their consumers across every single channel, and they do it in real time. For example, Eldorado, the largest consumer electronics and domestic appliances retailer in Russia, selected SAP CRM on HANA, SAP 360 Customer, SAP Retail Planning, and Hybris Omni-Commerce for Retail to improve customer service and achieve faster results. With SAP and Hybris, Eldorado expects to track and combine consumer information across channels in real time so they can run their business and achieve full intimacy with their consumers. Another key growth enabler is our mobile offerings, which are ranked best in class by Gartner and are integral to our core business applications and analytics solutions. Additionally, we continue to drive growth through our enterprise-class mobile applications in areas like enterprise asset management and field service management.
As you can see, the business value offered by the innovations in SAP's broad product portfolio is more significant today than ever. This quarter is the latest demonstration that our focus is where it belongs, on the business challenges and opportunities of our 251,000 customers around the world. With that, I'd like to hand it over to my partner and co-CEO, Jim Hagemann Snabe. Jim, over to you.
Thank you very much, Bill. As you heard, Bill outlined our winning strategy and how we are transforming the industry with innovations in cloud, mobile, and in-memory. With the SAP Business Suite on HANA gaining significant traction and strong interest in the HANA Enterprise Cloud, we are delivering on our vision of a new era in business in real time. As a result, we are more relevant to our customers than ever before. Customers are selecting SAP as more than a software provider. Customers are selecting SAP as their strategic partner to reinvent their business to run in real time in a world that is increasingly unpredictable and fast-moving. They're looking for us for solutions to some of their most complex business problems, delivered with simplification through cloud and in-memory. This is driving our results across industries and across regions. Let's take a look at our regional performance this quarter.
Americas delivered another strong quarter, with 17% growth in software and cloud subscription revenue. In North America, we continue to benefit from the shift to the cloud. Cloud now contributed close to 30% of our total software and cloud subscription revenue this quarter. We saw an increasing amount of competitive wins in the U.S., including wins with SuccessFactors, in procurement with Ariba, and naturally in CRM, where we are replacing best-of-breed players at strategic customers. For example, Nationstar Mortgage, a net new customer in the United States, selected the SuccessFactors suite over Workday and Oracle's Taleo. With SuccessFactors, Nationstar Mortgage expects to have the ability to attract and hire the very best talents, provide a seamless onboarding process, and increase focus on the goals that impact and drive business results. In Latin America, we continue to deliver strong software revenue, despite challenging economic conditions, particularly in Brazil.
Supergasbras, a Brazilian distributor of natural gas, selected a variety of SAP solutions over competition, including SAP HANA and mobile solutions, to support sustainable growth of their business. With SAP, Supergasbras expects to increase real-time data visibility and analysis, simplification, risk and cost reductions, as well as automation and technical innovation to improve relationships with its 40,000 commercial and industrial customers. EMEA saw very strong growth with 14% software and cloud subscription revenue growth, despite a mixed market environment. In comparison, our primary competitor suffered a 5% decline in their last reported quarter in EMEA. The U.K., the Netherlands, and Switzerland are delivering strong double-digit growth in software revenue. South Europe, which was hard hit by the financial crisis, returned to growth this quarter. Our home market, Germany, delivered yet another solid performance, particularly in utilities and retail industries.
Peek & Cloppenburg, a large German department store chain, selected SAP HANA, SAP mobile solutions, and BusinessObjects for SAP Retail to migrate from IBM mainframe directly to run on SAP HANA. With SAP, Peek & Cloppenburg expects to enable business growth as part of their smarter commerce strategy. Asia-Pacific Japan returned to growth with solid single-digit growth in software and cloud subscription revenue this quarter. China recovered strongly, driven by innovations, in particular by SAP HANA. We saw an increase in large transactions and strong strategic partnerships, such as our partnerships with Huawei to deepen R&D efforts in the support of SAP HANA, as well as telecommunications, cloud, and mobile. Customer wins in China include Shanghai Aoshideng, a large apparel company in China, who selected SAP Business Warehouse on SAP HANA over Oracle to support the multi-brand operation of the entire group.
With SAP, Aoshideng expects to seamlessly integrate its supply chain and finance processes, and to transform from a wholesale company to a retailing company. Let's talk about the guidance briefly. Despite the mixed market macroeconomic environment, we remain committed to a double-digit growth company with at least 10% growth in full-year non-IFRS Software and Software-Related Service revenue at constant currency. Furthermore, today we reaffirm our full year non-IFRS operating profit outlook. Werner will talk more about our guidance for the full year in a minute. Let me summarize. As Bill mentioned, the IT industry is at an inflection point, and SAP is leading the transformation. Data is moving from slow disks into fast memory. Data centers are moving into trusted enterprise clouds, and users are on the move with mobile devices. We saw exactly these three trends early, actually back in 2010, and invested in innovations.
SAP is now unique in offering the most comprehensive end-to-end solutions, from the great user experience on a mobile device to the real-time data in main memory for 25 different industries. As a result, our customer relationships are deeper and more strategic than ever. As evidence, we have today delivered another strong quarter and continue to gain market share and outperform competition in all regions. With that, I'd like to turn over to Werner.
Thank you, Jim. I will now give more insight in our Q3 results. There was a significant currency effect in the third quarter. To the top line, our non-IFRS software, SSRS, and total revenue growth rates were all negatively impacted by seven percentage points. To the bottom line, growth in non-IFRS operating profit was negatively impacted by 10 percentage points, which resulted in a negative impact of 100 basis points on our non-IFRS operating margin. Bill and Jim already talked about our SSRS and software and cloud subscription results for the quarter. Let me talk about recurring revenues. Non-IFRS support revenue increased at constant currencies by 11% year-over-year, in line with expectations. Once again, we saw strong adoption of our enterprise support offering, standing at 97%.
We saw a strong performance in our cloud business with non-IFRS cloud subscription and support revenue increasing to EUR 197 million in the quarter, up 162% year-over-year at constant currency. Non-IFRS deferred cloud subscription and support revenue was actually EUR 382 million at the end of the quarter, which was an increase of 79% year-over-year. These strong results show the accelerated sales synergies we see between SAP, SuccessFactors, and Ariba. Before I talk about gross margins, I want to make a comment on our cloud division profitability. With a €32 million segment profit in Q3 compared to minus €22 million in the prior year, our cloud division was profitable for the fourth quarter now in a row. Some comments to our gross margin for the quarter. Our non-IFRS SSRS margin was up 40 basis points to 83.8%.
The professional service margin decreased by 6.3 percentage points year-over-year to 17.8%. The margin decline in services was mainly caused by a weak development of our consulting business in our on-premise segment, especially in North America, where we experienced a low services booking level. For the full year, we expect our professional service revenue to decline both at constant currencies and at actual currencies. The overall gross margin was 72.5%, an increase of 40 basis points year-over-year. Looking at the expense side of the P&L, you can see that non-IFRS total operating expenses in the third quarter increased by 6% year-over-year at constant currencies. From this, an increase of four percentage points came from the acquisitions of Ariba and Hybris. In addition, our workforce grew by about 1,600 FTEs year-to-date, thereof approximately 600 FTEs organically.
In Q1 through Q3, we saw a strong increase in our non-IFRS operating margin. Our non-IFRS operating margin at constant currencies in Q3 increased by 180 basis points to 33%, despite the negative impact of 50 basis points from Ariba and Hybris. The quarter's exceptional bottom-line results shows our ability to streamline our operating expenses to safeguard our financial performance. We will continue to carefully monitor our expenses for the rest of 2013. The IFRS tax rate in the third quarter of 2013 was 26.4%, which was up 160 basis points year-on-year. The non-IFRS tax rate in the third quarter of 2013 was 27.6%, which was up 90 basis points year-over-year. This year-over-year increase is mainly resulted from tax effects related to intercompany financing. We are maintaining our effective tax rate outlook for the full year. To cash flow and liquidity.
Operating cash flow for the first nine months was €3.04 billion, remaining stable year-over-year. Net liquidity at the end of the quarter improved by approximately €470 million compared to the end of 2012. We are maintaining our full year guidance for 2013. We expect full year 2013 non-IFRS software and software-related service revenue to increase by at least 10% at constant currency. The full year non-IFRS cloud subscription revenue contributing to this growth is expected to be around 750 million euros, and again, this is a constant currency number. We still expect the full year 2013 non-IFRS operating profit to be in a range of 5.85 billion to 5.95 billion euros at constant currency. Before I finish, let me make a few comments about currency, which should help you to more accurately model SAP for the remainder of the year.
In the first nine months, our non-IFRS numbers at actual currency had a significant negative currency impact. SSRS revenue was impacted by EUR 384 million, or 5% lower than the respective constant currency number. Total revenues were impacted by EUR 458 million, or 4% lower than the respective constant currency number. The operating profit was impacted by EUR 229 million, or 7% lower than the respective constant currency numbers. The operating margin was negatively impacted by 80 basis points for the first nine months of 2013. If exchange rates remain at the September 2013 level for the rest of the year, our fourth quarter and full year non-IFRS, SSRS, and total revenue growth rate will be negatively impacted by approximately five percentage points. Our fourth quarter and full year 2013 non-IFRS operating profit will be negatively impacted by approximately seven percentage points.
Our non-IFRS operating margin at actual currencies will be approximately 100 basis points lower than the respective constant currency margin. I now hand it over to Vishal.
Thank you, Werner. Thank you, Jim and Bill. I want to take a moment to address some of the important product and development-related moves that we have made in the last 100 days. As Bill said, we are moving our entire product portfolio to the SAP HANA platform in the cloud. We are doubling down on HANA and the cloud. Since HANA's launch in June 2011, just as competitors begin to imitate what we were doing years ago, we are moving HANA beyond a database to a full platform for all of our products. For all of our customers, businesses in all industries, all company sizes, and our entire ecosystem, and for all of our products, from Business Suite in the cloud to Business One, Business ByDesign, and from SuccessFactors to Sales OnDemand, to Ariba and Hybris.
Also, for the game-changing new applications that we see as we co-innovate with our customers for industry-specific extreme applications in key growth industries like retail, healthcare, oil and gas, banking, transportation, and others. Optimizing SAP's product portfolio on HANA in the cloud means a dramatic price-performance improvement and a massive benefit of simplicity in the cloud for all of our customers. We see a really exciting future in front of us with HANA as the foundation and the platform for all of our products, and this enables us tremendous opportunities in the cloud for all of our customers. Thank you.
Thank you very much, Vishal. I would like to hand it back to the operator, and we can start the Q&A session now.
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 your handset before making your selections. I repeat, if you'd like to ask a question, please press star followed by one. The first question is from Chandan Sirvankar of MainFirst Bank.
Hi, good afternoon. Congrats on a good set of results. I just have a couple of questions. You seem to have grown SSRS revenues by 12% in the first nine months of the year, but you still have a guidance of just 10-plus % growth. Is this just conservatism? I ask this question particularly because of your guidance cut in Q2. Number 2 is, can you give us some sense of the contribution from Business Suite on HANA in your HANA numbers in Q3? Also, can you compare the uptake of Business Suite on HANA to Business Suite 7 and R/3? Thanks.
This is Bill. Maybe I'll answer the first piece. We reiterated our full year guidance today, coming off of a very strong Q3. One has to always remember, when we model our business, we're very cognizant of the fact that upwards of 40% of our full year number happens in Q4. It's a very large funnel of business that we have to bring through, and therefore it's completely appropriate to have reiterated the guidance at the double-digit rate that we did. Jim, do you want to cover the second half?
Let me do that. It was related to the Business Suite on HANA. Bill mentioned it, that we've seen year-to-date now 450 customers sign up for this. This is actually a mix of approximately 50% new customers and 50% existing customers. This exceeds our very high ambitions for the product. Don't forget, it only went generally available in May, and we believe that this is a multi-year growth opportunity in 2 categories. It'll be a growth opportunity for HANA, because customers who choose Suite on HANA will get the HANA database license, and it will be for net new customers and expansion at existing customers, a growth opportunity for applications as they choose the best suite in the market. Some will consume this on-premise, others in the HANA Enterprise Cloud. It is pretty significant.
It's still low revenue numbers compared to the big numbers, it's becoming the default choice of customers.
Thank you. Let's take the next question, please.
Next question is from Phil Winslow of Credit Suisse.
Hi, thanks guys, and congrats on a good quarter. Bill, just hoping for some more details on the momentum that you all are seeing in the cloud. Maybe some details, obviously you gave some on Ariba. Maybe on SuccessFactors, Business ByDesign, then obviously, Hybris is sort of a hybrid model. If you could kind of just walk through those, particularly sort of an update on Employee Central and then Business ByDesign would be great. Thanks.
Well, thank you very much, Phil. One of the things I think is super important for everybody to understand is fundamentally, SAP is committed to becoming the cloud company. As we provide our customers choice with the on-premise, as Jim said, we move the Business Suite on HANA to the cloud, and we leverage the multi-tenant public cloud with assets like SuccessFactors, Ariba, including the Business Network, Sales OnDemand, and other innovations that SAP is bringing to the market. We want you to understand that we are going to be the number 1 business software company in the cloud in the world. It's just a question of which year we take it. That's where we're going.
Now, as it relates to SuccessFactors specifically, what we learned is we have the number 1 talent management asset in the world, but we also knew that learning and core human capital management was going to be very key for customers and also key for us to beat Workday, which we're doing quite handily lately. We have a fully integrated human capital management suite in the cloud. The growth rates of SuccessFactors are fantastic, and that continues to be a rallying point for SAP as the cloud company. On Ariba, the growth rates for Ariba are better now than they've ever been, and we're really excited about leveraging the Business Network. This network has 1.2 million companies participating in it now. Some companies are using it as a front-end CRM system to sell into the Fortune 500, and in all cases, we can help customers buy more efficiently.
Of course, we get a piece of the action, the more money that flows through that network. When you're dealing with a half a trillion, that's a lot. When I think about the fact that it's a $12 trillion addressable market, I feel like we're only getting started. Growth rates up everywhere, and of any company of size and consequence in the enterprise space, Phil, we're growing faster than them.
May I add one point?
Sure.
This also relates to the first question here. If you make the comparison and look into Q4, please keep in mind that Q4 of 2012, already on the SAP side, includes Ariba.
Great. Thanks, guys.
Okay. Thank you very much. Let's move to the next question, please.
Next question is from the line of Michael Briest of UBS.
Great, good afternoon. In terms of the business model, you've talked about an inflection in the industry, a number of your peers in the software industry have done some interesting things around subscription. I'm wondering, can you talk a little bit about whether there's any more innovative pricing models you can bring to the on-premise market next year? Related to that, Werner, you highlighted the 100 basis point drag from FX this year. You've got a 35% margin goal in 2015. Is there anything you can see in the marketplace or in your go-to-market around perhaps subscription, which might impact on the achievability of that target? Thanks.
Yeah, Michael, this is Bill McDermott. I'll gladly start out on this. First of all, we are entirely committed to becoming the cloud company, as evidenced by now becoming the second largest in revenues, the largest in users with 33 million, the march has only just begun with the Suite on HANA in the cloud. We're just getting warmed up. We're going to give the customer choice. The choice that they have, obviously, is perpetual as one option for the on-premise. Many of our customers want to have our software as a capital asset of their company. Some of them will even bring their own capital asset, meaning that perpetual license, into the HANA Enterprise Cloud, whether it's SAP's cloud or one of our partners, that's fine. If that's what our customers want, they should have that.
Obviously, the public multi-tenant cloud is a rental model, that has very nice renewal rates and low cost of sale on the renewal. As you scale out with more users, the profitability of that business looks better and better. If you're getting at will we consider other models in terms of being more aggressive on rental with our core, the answer is going to be more defined in the future as we see how this unfolds. I think that's really the important thing. What I think is unique about SAP, and I hope you guys give us some credit for it, other companies that have made a similar transition to the cloud get a lot of credit for being down 35% or 40% in their core in a quarter as they're making the transition to the cloud.
We've maintained growth in the core as we've had extreme growth in the cloud. I think we can balance those two things, and we plan on doing that going forward. Werner, did you want to add anything?
Nope.
Okay. Thank you very much. Let's take the next question, please.
Next question is from Gerardus Vos of Barclays.
Hi, good afternoon. Thanks for taking my question. Just want to come back to the question for Michael on flexible kind of licensing. You initiated some kind of flexible licensing agreements into the quarter, I think one around kind of shelfware and one around kind of subscription. Would it be possible to give us some kind of indication if that might have some ramifications for the maintenance run rate, particularly around the kind of shelfware? And then secondly, also around the kind of move to the cloud, you've got a very large ecosystem dependent on-premise integration kind of deals. The integrators like an Accenture and an IBM. What do you do for them to kind of make it worthwhile to be part of that kind of ecosystem?
I noticed during the quarter that there were a couple of deals signed, I think with Accenture, I believe with IBM, at a kind of development kind of license agreement. Is that something you try to push forward so that the integrators will start developing on the HANA platform? Thank you.
Maybe I could just start out and colleagues would jump in. First of all, when HANA has been termed by Vishal, Jim, Werner, myself as the standard for in-memory platform computing in the enterprise, we're also saying that it can't be a standard if SAP is the only one that uses it. We're completely open to Accenture and IBM and many other partners that are now innovating on the HANA platform. Vishal's got 650 startups innovating on the HANA platform, and Silicon Valley is one example. They are absolutely entitled to have the HANA platform. We call this the HANA Plus One strategy, and we'll have a very expansive ecosystem standardizing on HANA, and they will run the Suite on HANA in their cloud as an example.
As it relates to could a customer trade their existing perpetual licenses in for software that could be cloud-based software for SAP, the answer is yes. The economics on that will be attractive to shareholder value. It doesn't diminish shareholder value as we've done all the business modeling on that. If it helps the customer, it increases our overall revenue growth. It can make everybody happy. We have obviously made that one of the offerings that we will give our customers. In every case, SAP and SAP shareholders have benefited from that.
Let me add two points. First of all, we haven't had any offerings with regard or what you call, Gerard, flexible licensing agreements. What Bill referred to are these conversions from an on-premise line of business solution to a cloud line of business solution. Here, as Bill said, it's very attractive for shareholders because if you look to the maintenance stream we have today, it is much more we get than as cloud subscription and support tomorrow when the customer have converted into a cloud application.
Since you mentioned Accenture, it might be worth noting that they have doubled their workforce on the SAP Cloud specifically. They have doubled the number of feet on the street. They are a broad adopter of the HANA Plus One strategy, as well as our public multi-tenant cloud applications and solutions. They build solution centers with us all over the world. That's one example of how we intend to expand the ecosystem in the cloud as we become the cloud company.
Okay. Thank you very much.
You asked one question, which was about the integration work of system integrators.
Yeah.
We have no interest in protecting the manual integration between pieces of software that were never designed to fit together. We actually believe that we have a suite of solutions that fit together by design. As a consequence, we will save this money for the customer. What does that mean to system integrators? They need to move into more value-adding activities than doing manual work that comes out of the box. For instance, innovating high-performance applications on HANA that change the game for companies in any industry. That's what these partners that you mentioned are investing in. That's the future.
Okay. Thank you very much.
Thank you. Let's move to the next question, please.
Next question is from Richard Sherlund of Nomura.
Thanks. For Vishal. Vishal, can you address Oracle's recent announcements about in-memory? I think we probably have announcements next year from IBM and Microsoft on their databases as well, and what effect this might be having in the market. Is it increasing interest in memory? Is it lengthening sales cycle? What are you hearing?
Well, thanks, Rick. What we heard at their conference last month reminded me of Bill Clinton's statement back in 1992 when he used to say, "It's the economy, stupid." We thought about it, we looked at what they have said, and it completely misses the point of an in-memory database, in our opinion. What they have proposed is an architecture that involves two different stores inside the database, a row store, and then the row store has a columnar attached where the information is redundantly stored in the column store. This means not only that the information is stored twice in the row store and the column store, but in fact, the point of the single column store as the architecture for all kinds of applications and for all kinds of workloads is completely lost.
The customers will see that having the information be there in two different places inside there, fundamentally does not simplify the landscape. If you look at the underlying technology of this, row stores are typically at a minimum five times larger in size, because they don't have the benefits of compression that column stores can get. You can expect that a mixed row and column architecture, like what they are proposing, would be six times or even more bigger than a pure HANA-based architecture, which affords us dramatic simplification of the landscape of applications, and also the opportunity to do massively parallel processing of data from a single new one store in memory. That point, so far, has been lost on all the database approaches that we see coming from the big database vendors.
Back in 2011, if you had asked me, "Will you see in-memory databases?" I would have said by now, I mean, we are in the fall of 2013, we would have seen every major vendor launch an in-memory database to compete with HANA. We are starting to see that, but basically, it is not enough, and it's quite late. We'll see many of these products come out only next year. In the meantime, we have moved HANA, as I said earlier, from an in-memory database to a full platform. Bill was alluding to this earlier. We have all kinds of platform abilities that we have already built inside HANA. HANA is now serving analytical applications, data warehouses, enterprise-scale data warehouses, as well as enterprise-scale mission-critical OLTP applications. SAP itself, we are now running entirely on HANA. We just closed our quarter on HANA for 65,000-plus employees.
Every employee of SAP is a user of our ERP system, which now runs completely on HANA. Our CIO and our IT leaders, like Helen, said tremendous things about the benefits that they see of our ERP on HANA. While others are starting to get to partial in-memory database approaches, which they have to because this is a disruptive architecture for their core business, we have moved HANA from strictly a database to an enterprise application platform on which not only legacy applications can run, but also completely new applications on which the on-premise applications can run in the HANA Enterprise Cloud to the native cloud-based applications, and on which not only SAP, but an entire ecosystem, including hundreds of startup companies, can build totally new kinds of transformative applications.
We think that that is the point of in-memory technology, is to evolve it from strictly a faster database to a platform on which we can run game-changing applications at a dramatically improved and simplified footprint for enterprises. When you open up a Tesla, you notice that the car is totally empty because all the moving parts, all the engines, and all the belts and all these things are gone. It's the same way with an in-memory database, which is columnar in nature and natively designed from the ground up for all kinds of workloads. The landscape is dramatically simpler, and the applications run in real-time. That's what we are focused on. Our reaction to the competition is so far we fully expected that, but so far it's somewhat too little and a little bit late.
Thank you, Vishal.
Okay. Thank you. Let's move to the next question, please.
The next question is from Adam Wood of Morgan Stanley. Please go ahead.
Hi. Thanks for taking my question. Just two, if I could. First of all, on SAP Business Suite on HANA, obviously, you've seen very strong adoption numbers since the general availability. Could you give us a little bit of a feel between new customers versus existing customers migrating database? Also, I assume one of the keys here is bringing business value through new applications. Could you maybe give a little feel as to which applications people are finding most interesting, and then a roadmap for the future development there? Secondly, on Ariba, it looks there as if billings are growing dramatically ahead of subscriptions in that business. Do you now feel we've reached the inflection point there where you've got the synergies coming through from the integration, and those subscriptions start to follow what's been happening on billings over the next few quarters? Thank you.
Hi, Adam. Jim here. I'll take the Suite on HANA. 450 customers signed up. Of that, 50% new customers, 50% existing customers moving to HANA as their preferred database, similar to what SAP did. We see a tendency that customers start moving their SAP Business Warehouse to HANA, then they move their CRM, then they move their core ERP. It's often in those three steps. Some, and many have a plan, a roadmap to be all in-memory. It's only a matter of executing that in steps. We did exactly those steps ourselves and have tremendous improvements for the business, as well as significant IT savings because of the simplicity that the pure column store, everything in-memory architecture offers. Bill, you want to comment on the Ariba?
Well, I think you said it very well, Jim. On Ariba, I think the big idea here is the synergies between the sales and marketing reach of SAP along with Ariba. I think if you were to ask Bob Calderoni what he's most happy about, he would say the integration of the two companies and the fact that he can scale in ways that he never dreamed possible with a global sales force, with this level of competency and execution. I think we all agree that the business network may be the biggest idea we have in the cloud, a massive net new revenue opportunity in the cloud that, frankly, is just awesome in its size and its potential. We're just now scratching the surface of what can be had there. It's really exciting time.
May I just conclude on one final thought for you, Adam? Please keep in mind Hybris, because I gave one example of Eldorado in Russia. The big idea, again, having been at The Business Council on Friday in Palo Alto, is the idea of the big data challenge that these companies all have. What they're really trying to do is they're trying to get to their business consumer. That consumer obviously is mobile and on the move, and they're going to have to deal with them in any channel, in any touch point to make them real-time relevant offers so they know more about their customer than their competition. I'm unaware of any company in the industry that has the SAP Sales OnDemand, the overall 360 CRM, and now the omni commerce capability of SAP.
I think Hybris, as Jerry Maguire once said, "You complete us." I think they've completed us on the CRM side in a way that is really compelling, I think you'll be hearing a lot about that in the coming weeks and months. We've got our eyes set on the CRM prize in a big way. I'm sure that the California folks have figured that out by now.
That's great. Thanks very much.
Thank you. Let's take the next question, please.
The next question is from Knut Woller of Baader Bank.
Hello. Thanks for taking my question. It's basically just a brief one on the Americas region. We have seen now at constant currency, two quarters of license declines. You have seen the good cloud adoption, and we also had tough comparables from last year. I'm just trying to get a better feeling on this process, how you ramp out your product portfolio, how we should think about the Americas from the traditional on-premise business going forward. Is it always something where you expect it's going to be declining also in the coming quarters, or is it something where you expect then after we have digested the tough comps last year, where we'll see from the traditional perpetual license model, something like a return to growth? What's your view on that? Thanks.
Knut, I just want to underscore something that Jim said earlier in terms of EMEA and the double-digit growth in EMEA. Clearly EMEA is not growing as fast in the cloud, although it's growing fast, as the U.S. as an example. We know that the core business still has lots of gas in the tank to grow. Having said that, there's no market that's adopted to the cloud faster than the U.S. specifically. We are leading that push to the cloud, which is why 30% of our revenues in the Americas is now coming from cloud. Keep in mind, we weren't getting any of our revenues in 2009 from the cloud. Now, a third is coming from the cloud in the U.S. It would be downright silly not to go with the trend of the market.
We're going to go with the trend in the market, and I think what really will propel our core and reinvigorate our core growth in a big way in the U.S. is the Suite on HANA in the cloud. Not only what SAP runs, but also HANA Plus one through our partner network. Let's face it, the ease of consumption in the cloud for large companies has now been realized by 450 of them, but there's thousands of them that should be doing it. When they find out how easy it is to consume, the fact that it's on the HANA platform, which is the best platform on Earth, it just opens up a whole new wellspring of potential for the core. That's where I think the core is going to really take off. It's going to take off in the cloud.
Thank you.
Thank you very much. This concludes the financial analyst earnings call for today. Thank you all for joining. Goodbye.