So hello, everyone, and welcome to SAP's 4th quarter Analyst meeting here in Frankfurt. Thank you for joining us. My name is Stefan Gruber. I'm Head of Investor Relations with SAP. I would like to give you a brief overview on the agenda for today.
First of all, our CFO, Werner Brandt, will walk you through the financial results of 2010 and our outlook for 2011. Then Bill McDermott, Co CEO of SAP, will provide you with an update on our regional performance, the market environment, key growth drivers for SAP and our focus on customers. Then we have a presentation from Jim Hage Mansenabe, Co CEO of SAP, to provide you with an update on our innovation strategy and how this drives SAP's profitable growth going forward. As usual, I have a couple of technical comments at the beginning. You know that this conference is being webcast, and I would like to remind all of the participants here in the room in Frankfurt later on for the Q and A session to use one of the roaming microphones.
For those of you who are on the web, please send us questions by e mail. The e mail address is investorsep.com, and we'll make sure that we take some questions by e mail as well later on during the Q and A session. And finally, the usual closing remark for me is the Safe Harbor language. This is a long version. I will read the short one.
Please note that except for certain information, matters discussed during today's conference may contain forward looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect the company's future financial results are discussed more fully in our most recent filings with the SEC. And with that, I would like to turn it over to Werner Brand.
Yes. Thank you, Stefan. Welcome, ladies and gentlemen. This is now the 40th quarter in a row for me, and I'm very pleased to report on such a strong year with such strong operational performance. And do you see this you could see this if I would have access to slides.
This one here. You can see this here where we report on the SSAS side, 13% growth on at constant currencies, supported by a 10% growth from an SAP perspective, 3 percentage points coming from Sybase. You see also our sorry, our previous guidance for SAP in a range of 6% to 8%. On the operating side, on the operating margin side, we achieved a non IFRS margin of 31.5 percent. And at constant currency, it's 30.5%, and that's in the middle of the range we provided at the beginning of the year.
Then you see the effective tax rate much lower than we guided for. I will come to the reason in a minute. Here you see IFRS versus non IFRS. And you know that we eliminate the financial impact from financial from discontinued activities, deferred maintenance write down as well as acquisition related charges. And if you look to the non IFRS performance, you see, number 1, strong SSIS growth 13%.
I mentioned before, 10% is SAP, excluding Sybase. Total revenue is 11%, also supported by a growth of 2% related to professional services. This is in line with our own expectations. I will come back to this in a minute. We see clear leverage.
Total operating expenses included increased by 6%. So the leverage on the operating income side here with a strong growth of 23% on a constant currency basis. Now if we look to the IFRS results, then I would like to start with and looking to the difference, I would like to start with SSIS. Here you see the deferred maintenance write down. And in the line total operating expense, you see the impact, including tomorrow now, the implications financial implications from this litigation.
And you see on the next slide here that we have included in total operating expenses an amount of €980,000,000. Based on the verdict of the jury, we have €12,000,000 included on the finance income side and, of course, the reduction in our tax expenses by €377,000,000 due to the fact that this amount is fully tax deductible in the United States as this is an accrual which has been set up in the books of tomorrow now. Now if you look to the way how we described it also in the press release, of course, we think that the amount awarded by the jury is disproportionate. After the court has entered final judgment, SAP intends to file post trial motion in the coming weeks asking the court to reduce the amount of damages awarded or to order a new trial. And depending on the outcome of the post trial motion process, SAP may consider an appeal.
Because the motions have not been filed and the outcome of the motions remains uncertain, the amount by which the jury award would be reduced cannot be reliably measured at this point in time. And therefore, we have basic provision on the jury award. We will consider all new information and developments emerging over the coming weeks to determine the appropriate provision amount for SAP's final full year 20 10 financial results. Therefore, SAP cannot exclude the possibility that the final provision differs from the preliminary amounts presented in this earnings release. And you see that the net impact on our financials amounts to €615,000,000 Now if you come back to the slide, income statement overview, you see then that even considering this financial impact coming from the Tomorrow Now litigation, we have increased our profit after tax under IFRS by 4% to more than €1,800,000,000 This is also the basis for the decision from the Executive Board to increase the dividend to be paid for 20 10 from $0.50 to $0.60 that's a proposal we will provide to the Supervisory Board.
And then based on the decision of the supervisor, we will jointly present it then to the annual to the shareholders in the Annual Shareholder meeting. If you look to the non IFRS profit after tax, which is nearly €2,700,000,000 that's actually the highest profit after tax SAP ever achieved. If you now look to the revenue components in 2010, 1st of all, software revenue increased year over year by 16% at constant currencies, 10% is SAP, 6% provided by the Sybiz acquisition. I think this 10% is achieved across all industries, across all products within SAP, across all market segments, large enterprise and mid market. And very important, 25% of our order entry in the 4th quarter is based on larger transaction with the size of more than €5,000,000 And this is a clear indication that customers invest in software and are willing to enter into upfront deals again.
If you look to the support side of the house, there I think we saw a clear traction of enterprise support. If you look to new customers, more than 70% adopt for enterprise support right away. If you look to enterprise support in the context of the software revenue generated in 2010, more than 75% is coming from Enterprise Support, including the special offering we have for our largest customers called PSLE. So that's a very attractive story from a support perspective. And finally, the last comment regarding support.
Premium support is really ticking up and grew last year by 25%. So our enterprise and premium offering support is well perceived in the market. If you look to the subscription line of the business, we see a strong growth here with 25% and this growth is based on the global enterprise agreements and flexible license agreements we entered into in 2,009. And we saw the benefit here from these contracts in 2010. Going forward, we assume that customers, as they decided for more up front investments when purchasing software, that we will not see many additional GAs, flexible license agreements.
And the question will be how customers will decide when GEAs are for renewal, whether they continue or whether they will go and invest in software again upfront. If you look to the service side, consulting revenue is flat year over year, and this is in line with our own expectation. You know this lagering effect. If you have software revenue growth, then consulting follows over time. We see good traction for consulting going forward, but it hadn't an impact then on our growth for 2010.
Training revenue also was quite stable. The increase here on other service revenue is coming from the messaging business of Sybase, which accounted for roughly €65,000,000 in 2010. If you look to the Sybase contribution, I think we have a very strong story to tell here. The Sybase contribution for respectively, 3 percentage points. The Sybase contribution on the SSIS side, EUR 329,000,000.
That's considering that it's the 1st year of an acquisition, an unbelievable result. The business of Sybiz continues to grow and is very healthy. You see here also an indication on what Sybase contributed to the operating income of SAP. It's more than €150,000,000 contribution coming from Sybase. If you look to the margin evolution, you see here our expansion to 31.5%, which actually will be then the basis for next year.
I will come to this in some minutes. And overall, top line growth and well executed cost management came and resulted into this margin expansion. And I will now go into a bit more detail with regard to Service and Professional, SSIS and Professional Service margin and also our cost rates on R and D, Sales and Marketing and G and A. But let's start with the SSIS margin, which increased by 150 basis points here, mainly due to the fact that we have an under proportional increase in our cost of support, which only grew 10% and our cost of purchase license, which grew by 9%. And you know that the underlying revenue increased by 20%.
So we have an increase in our margin. On the Professional Service side, we see a decrease in margin. We anticipate that with the demand for consulting services picking up again that this margin will come back to the levels from prior years, and we are quite confident with all the projects we see in the pipeline that this will happen. Due to the mix, the overall gross margin increased by 100 and 60 basis points. If you look to the cost ratios, R and D as a percentage of total revenue decreased.
This is in line with our own expectations. And besides the fact that the implementation of the lean methodology led to accelerate innovation in SAP. It also contributed from an efficiency perspective, which allowed us to see a decrease here in the R and D ratio to total revenue. If you look to Sales and Marketing, here beginning of the year, a year ago, we clearly said that we would invest in Sales and Marketing. We want to expand the number of salespeople we have around the globe.
And I think by doing so, we did the right thing because we could capture this tremendous increase in software revenue in the last year, especially in the Q4. In addition, we also invested in programs, especially in our Run Better campaign, and I think this also paid off. This campaign is very good and perceived very well in the marketplace. G and A, here we see a slight decrease. That's going in the right direction.
And here, I think the continuous focus on shared services helped to bring down the G and A ratio. Now if we come to the balance sheet, some points worth to be mentioned. If you look to the structure, very healthy balance sheet. To be mentioned, goodwill increased by the sideways acquisition. Now we have goodwill related to sideways in our financial statements, in our balance sheet at an amount of €3,200,000,000 Business Object stands at €3,500,000,000 We have also acquisition driven the increase in intangible assets.
On the other side, you see that we had to finance the acquisition of Sybase. You see an increase in financial liabilities. You see an increase in provisions where we had the provision for the Tumoron, our litigation included. And if you look to the deferred income line, the increase there is solely driven by standard maintenance and is in line with what you could expect if you have an increasing business as we saw it in 2010. The financial position of SAP, if you look to it first from a cash flow perspective, is developed very positively.
We have the DSO reduced by 14 days down to 65 days. We have a very strong equity ratio. Our operational cash flow is close to the level of the one we reported for 2,009. And the reason is simply being that we had a very strong revenue contribution in the 4th quarter, resulting in an increase of accounts receivable. And this, of course, led to the fact that we did not see a stronger increase in our operating cash flow as you might have expected looking to the overall results for 2010.
So that's due to the fact that a big chunk of our revenue came in, in the Q4, but that's natural. If you look to the last years, our seasonality is more or less the same year over year. Capital expenditure increased. We had investments in IT, infrastructure and also we acquired IP throughout the year of 2010. And I think we are with this €300,000,000 roughly €30,000,000 back to the level we had in 1,008.
So there is no surprise in it. It's coming back to normality. And from that perspective, we are also pleased with the performance on the cash flow side. If you look to the group liquidity, here you see the bridge between the group liquidity beginning of the year and end of the year 2010. And biggest chunk, of course, is the cash outflow related to acquisitions, the proceeds from borrowings and the repayment of debt, and that's the repayment of the original business objects loan we acquired back in 2,008.
And we did, as we promised, bring it down to 0 beginning 10. 2 corporate bonds, 1 U. S. Private placement and the Sybiz Acquisition term loan. I think we accomplished this at very good rates for SAP without any rating.
We, on top, renewed our syndicated loan facility by the end of last year so that we, as of today, have gross liquidity of more than €3,500,000,000 We have this €1,500,000,000 credit facility available. So from that end, we I think we are well positioned. It is our clear objective to bring to convert the net debt position today with roughly 8 €50,000,000 in the net cash position again by the end of this year. Finally, I would like to come to the outlook. First of all, we decided to extend the elements we eliminate in our bridging from IFRS to non IFRS.
As you know and I said it in the beginning, we eliminate discontinued activities, we eliminate deferred maintenance write down, and we eliminate acquisition related charges. And going forward, we will additionally eliminate stock based compensation expenses and restructuring charges to derive at a new non IFRS profit measure. We do this for two reasons. The first one is that other software companies are also excluding these items I just referred to, and we want to make ourselves really comparable to what other software companies are doing. And secondly, we want to align this with the way how we internally look to our business and we do it in a way that we look to our segments and we exclude stock based compensation expenses as well as restructuring charges.
Finally, the outlook. From a top line perspective, we expect full year 2011 non IFRS software and software related service revenue to increase in a range of 10% to 14% at constant currency. If you look to the second element of our guidance, then it's related to the non IFRS operating profit, we guided to be in a range between €4,450,000,000 €4,650,000,000 at constant currencies, resulting in a 2011 non IFRS operating margin increase of 50 to 100 basis points. And the basis is the operating non IFRS operating margin we achieved in 2010, also excluding stock based compensation expenses and the basis then would be 31.9%. And we also provide guidance with regard to our effective tax rate from an IFRS perspective to be in a range of 27% to 28% and non IFRS basis to be in the range of 27.5% to 28.5%.
Having said that, I would like to hand over to Bill, who will continue.
Thank you, Werner. What I'd like to begin with is just a quick snapshot of our Q4, give you a little context by region and then talk about the momentum of the company going forward. 1st and foremost, SAP is a growth company, and we are stronger than ever, stronger than ever. If you look at the software revenue throughout the year, we stated that we'd be a double digit growth company, and we kept our promise. And in Q4, we delivered the largest Q4 in the history of SAP AG with €1,500,000,000 in software sales.
Incidentally, if you were to translate that to dollars, I think it'd be about $2,000,000,000 And if you were interested in benchmarking like I am, you'd find that the number 2 also had a good Q4. And in their Q4, they did $855,000,000 which is €620,000,000 which is exactly €100,000,000 less than EMEA did for SAP. Software and software related services also grew well, and we're particularly encouraged by the number of deals. The deal volume in this company has increased nearly 40% year over year, and we're leveraging all channels, not just direct channel, but also inside sales and our open ecosystem and channel partners. They're all embracing SAP.
When Jim, myself and the Executive Board came up with the vision for the new SAP and we said we'd make the world run better, we also focused a strategy on doubling the addressable market. And we did that in on demand, as you know, and business by design in the cloud is now selling and scaling. We did that on business analytics and the whole platform around business analytics, including HANA, which customers are really valuing so they can become real, real time enterprises, information at the speed of thought. And then, of course, we acquired Sybase with the idea of unwiring the enterprise in a secure way, in a way that connected business processes on an end to end basis. All of these innovations are driving our strategy, which is to essentially innovate the future versus consolidate the past.
And I stress the openness of this ecosystem is really driving big increase in the number of deals and continued operating margin expansion. Customers like it. They like openness. They like choice. They don't want to be wrapped and trapped.
Now if you look at the regions and what's going on, EMEA is up 20% in Q4 in SSRS. This is particularly important because EMEA strongly rebounded and is showing very good growth, including in Germany, where we have excellent leadership, and Germany deserves a lot of credit for SAP's business results. Also, fast moving markets like Turkey, Middle East, Africa, etcetera, are contributing to this. In Asia Pacific, Japan, 38% up on SSRS. You're seeing very good competitive replacements, particularly in banking and public sector.
In the Americas, they're leading in the consumption of new innovations, including the business analytics, the in memory and the unwired platform. And sometimes, the innovation is driving the suite, where it will actually pull through the suite. In other scenarios, the suite is pulling in the innovation. It works both ways. And in the BRIC, where choice is even more important because the BRIC economies need to grow, they need to be global, and they can because they haven't made heavy investments in a lot of cases, They can step functions skip a lot of steps.
They're going right to the unwired platform. They're going to the in memory. They're going to the business analytics. And we're growing at a rate 2 to 3 times faster in the BRIC than we are the more mature market. So it's very, very exciting.
And in particular, Brazil, we actually had one agreement with a customer in Brazil where they standardized their entire company on SAP by consolidating all their legacy applications, which incidentally were acquired by 1 company, and this resulted in a very, very fast growth rate in Brazil. And we'll see lots more of that going forward. We have momentum. Momentum is an amazing force. I think you know very much the power of momentum.
But our core business, ladies and gentlemen, is back. The core SAP, ERP and Suite, the components of that, whether it's supply chain CRM, are all selling very well and they're targeted to the line of business. We told you we would do that and it's working. Business Analytics. Jim will talk about some figures in a moment, but we're on a roll with Business Analytics in terms of the number of competitive replacements, but also in terms of the power of business analytics in combination with our suite and our in memory HANA.
And of course, this mobility with Sybase is just phenomenal. I mean, you look at an economy like China where they have 750,000,000 mobile workers, there's only 550,000,000 PCs in the brick. So this movement to the mobile and to unwiring these enterprises is fantastic. We had the best, best quarter ever for Business by Design. Jim will give you some stats on that in a minute, but we see huge scale coming with Business by Design.
This is a category killer. This will change the software as a service game in 2011. And obviously, in memory, you'll get to see a demo today, and it's just amazing what this is doing for companies around the world. This open ecosystem, if you read Gartner, you read Forrester, they're talking a lot about customers' reaction to the stack. And wrap and trap is not something customer wants.
Customer wants choice. We're really, really going for choice. The big companies with R and D budgets, even larger than SAP, are embracing our application platform, either on premise or even in the cloud. And this is a force multiplier. Also, as we put the SDK out there, software development kit for breakthroughs like business by design, entrepreneurial firms are building on top of SAP to bring local functionalities and local value to the customer.
And finally, we really leverage the brand. This Run Better campaign, you saw it at SAPPHIRE for those of you that participated. It galvanized a lot of partners, a lot of customers and definitely all the employees of SAP. We're on a roll. So I thought I'd just summarize a few key things here with customers.
You see the wins. I won't read them to you. But what's going on here? Why are customers viewing SAP as the leader? Why are we gaining so much momentum?
Why are the results getting so strong and as Werner said, the outlook so bullish? Well, I think customers, first of all, appreciate SAP's thought leadership because our strategy and our IT road map, along with our ecosystem, enables customers to achieve business outcome, and that's what they're investing in. So they're buying that strategy and the execution of the strategy, and they're coalescing their thoughts around the SAP platform on premise, on demand, on device, and they're orchestrating between these environments to get data, process and security from SAP. Innovation. We are going to talk a lot about innovation because our strategy is built on innovation.
We're going for it. And you'll see that in Jim's conversation in a moment Werner touched on the new exciting products that we have in the company. We are an innovation driven company, hard stop. Value delivery. Werner talked a lot about enterprise support and the high value services offerings and the broad adoption on the part of our customers.
Because after the CEO makes the decision to go SAP, they also want a beautiful implementation, great customer support and a virtuous cycle around value delivery. And we do that better than anybody in the business. This idea of choice, every customer we talk to in some way is heterogeneous in terms of their environment. So the more you can be open and have the best platform but also partner with the best, the more value the customer gets. They see through the stack attack, and they really like the innovation.
They like the business value, and they like to know the control is in their hands. And finally, trust. Trust is back at SAP. It's in our brand. It's in our people.
And one of the things I want to make clear, Werner talked about Tomorrow Now, we've done some provisioning for Tomorrow Now as good company, quality company would, and he talked about the course of action and the choice that we have. Please note that in the midst of the media and all the headlines in Q4, not one customer backed off this brand or their trust in SAP, and the results speak for themselves. I'd like to turn it over now to my co CEO and partner, Jim Snabe. Jim?
Thank you, Bill. Thank you, Werner. You've seen the numbers. We have strong momentum. We, in fact, been seeing increasing momentum during 2010.
And you have to ask yourself why is this happening, and this is a one off event. The journey started almost 12 months ago with a new board coming together. Any change like that gives you an opportunity to rethink why are we here, what is the purpose of SAP and what is our strategy. And we took that opportunity. And the first thing we did was actually focus in on our purpose as a company.
Now we say in marketing terms, SAP makes the world run better. But this is not about marketing. This is about looking at a world where there's an increasing population, more demands than ever from this increasing population and less resources than ever before. And who else in SAP can optimize resources in a broad sense, not in the traditional sense of just materials and money and people, but what about broadening the scope of SAP to manage resources like scarce energy, scarce water or too much CO2? That was the purpose we took on as a company, not just to be ecological and green, we would have colored our logo differently, but because that this world's growth opportunity depend heavily on our ability to manage resources as a world, and we think we have an important role to play.
We did that, and we did it in 2 ways. First of all, we said SAP will be an exemplar. We set very strong targets on our own carbon emission, as one example, fifty percent reduction. And you see we are now 24% lower than 2,007, which was our peak. We are committed to this in spite of high growth.
And I'm we're inspired by the amount of people in SAP who take on voluntary tasks and help us deliver on this bigger purpose than just software. But it is also a matter of software. In fact, the only way to manage the scarcity of resource in this world is, 1st of all, to create the necessary transparency and then to optimize based on scarce resource. And we have exactly the software for that. We're in all the categories.
We're in all value chains from raw material to end consumer and all infrastructure industries as well like transportation management, etcetera. So we, like no one else, has a chance to make an impact and make this world run better. In fact, onesix of manmade carbon impact is from SAP customers. So if we can help them do that better, we actually have a big impact. That was an important part of reshaping SAP to have a purpose which is bigger than just selling some software.
It's about having a course which goes beyond the software, but at the same time, gives us an opportunity to broaden the scope of what SAP does and innovate on that path. We have done that. Now if you look at that innovation strategy, and we already have seen the first elements of that, It is very important to understand that while we talk a lot about new technologies, in fact, what we are seeing in Q4 and in 2010 is that the traditional core business of SAP is back on growth. And this is very, very important. And it happens because companies everywhere need still to increase their efficiencies.
They need to drive profitable growth, and they need to become more global. And people say that this market is mature. It is far from mature. There is lots of opportunities for improvements everywhere, even at the most loyal customers in Germany that have been with SAP for 30 5, 38 years. That's where we still can make improvements.
Now on top of that, we have these new technologies that add actually not just opportunities for innovation, but double the addressable market of SAP. This is the on device, so the mobile technology, where we already said we want to be the business mobile company. We believe that mobile will be the preferred front end for applications, not just for toys. And we will be that company providing the necessary security platform and infrastructure to make that happen. We said it's on demand, which is delivering software as a service, not by installing it at the customer, but allowing the customer consume it over the Internet.
We're bringing our 38 years of business process experience to customers without having installing any software at the customer. And finally, it's the memory computing. In a world where the amount of information is exploding. We have the technology that allows very large volumes of data to be analyzed in sub seconds, and with that, enable companies to optimize their business. These are the 3 new generators of opportunity and innovation that we have taken on.
But we do this in a very different way than most competition. We have some unique capabilities in the way we deliver our innovations. First of all, we believe in choice. We saw that with enterprise support, where when it was no choice, customers hated it, and we made it a choice, they all went for it. So customers fundamentally want choice in IT, in particular when they're very dependent on the IT.
And that's why we have an open ecosystem approach. We work with all, including our most competitive companies out there because we want to offer customers choice. Secondly, we're committed to co innovate. It's not just what comes from SAP. You've seen what it does to Apple with 10,000,000,000 downloads on the App Store, 300,000 apps in the App Store, I guess 20 made by Apple.
That is, ladies and gentlemen, the power of co innovation. It needs a consistent, well functioning platform. It needs infrastructure, and then you can co innovate rapidly. And we deliver, and this is very important, breakthrough innovation, some of these new technologies that are completely new to the installed base of SAP without asking them to change what they have. That's what we call innovation without disruption.
Why is that important? Because it drives adoption much faster if the customer doesn't have to change everything he already has. He can just add on mobile. He can add on in memory computing or he can add on some on demand services and still have an end to end integrated consistent landscape. That is why we are unique.
And then what we learned in 2010 is about speed. We are faster. We innovate with less effort, better products for our customers because we team up early with them, we iterate and learn, and you've seen that already in 2010. That's the path we will continue on. That's why we are very confident that we have a double digit growth opportunity based on innovation and organic growth because we have a very healthy pipeline of innovation.
Let me walk you through what is that pipeline of innovation. Well, first of all, and very important that we don't lose focus on the traditional business of SAP, this is where it all starts. If you don't have consistent infrastructure in ERP, it doesn't help you to analyze data rapidly because the data will not be consistent and your answers will not make sense. So it starts with consistency in the core. We have the most consistent collection of applications to run a business end to end with the business suite.
We see huge growth. We delivered Innovations 2010 in December, and we will continue to invest in this category. On top of that, we have the analytics, and we actually saw the largest category of growth in our innovation pipeline around Analytics in 2010. We were the leaders when we entered 20 10 in Analytics through the acquisition of Business Objects. And when we exit 20 10, we have taken a bigger distance to our second competitor.
Why is this so important? Because the combination of analytics consistent with the transactional system is what makes companies react faster to changes in the market in an uncertain world. We believe that this category will be a huge growth opportunity also in the future, and we had some significant replacements in 2010, over 1500 in total, which speaks its language on its own. We also see growth opportunities. So this is not a one off event.
We actually see new geographies going after the ERP, standardizing on their businesses. We are seeing new opportunities in industries. We've been after the banking, the retail, and we're going health care as well. These are industries with very high growth rates for standard software adoption, and we are winning. And finally, we see new categories of line of business solutions like energy management, which works well, by the way, with the sustainability story.
How can you save money by saving energy and at the same time be more carbon relevant? You reduce the carbon. We have customers who are saving $100,000,000 a year by installing our energy management solution because they simply consume less energy. So these are the categories for growth. We believe in strong growth opportunity in the core business of SAP, and the pipeline is very healthy.
On top of that, we have the 3 new categories: On Demand, the idea you can consume software through the Internet. This is not a new idea. We entered this market after years of investment with Business by Design as the flagship infrastructure. We delivered Business by Design version 2.5 in July on target, on plan. And this is, ladies and gentlemen, the most modern infrastructure for on demand in the industry today.
It does not just solve a very thin functional scope like a sales force automation tool or an expense management, it runs the entire business of a company on demand. This is a category killer. Bill mentioned that. Why? Because it's complete new and modern infrastructure.
It is in memory based, it is mobile, and it is the lowest TCO in the industry. With that combined with an SDK where partners can extend the solution, we can get scale. And I am happy to be able to say that the momentum we have is very high. We have, in Q4, broken our own expectations on customer adoption. We have more than 2 50 customers already by now signed up for Business by Design.
We are confident that we will reach more than 1,000 in 2011. And maybe as a curious comparison, this is a growth rate that is outpacing the most successful product we had in our history, R3, that came to market also in July 1992, and by design is pacing at a significantly higher rate in the market. By design will also be used for line of business solutions, extensions for large enterprises. And with this, we have a very, very strong category, a new business for SAP. It opens up new markets, and it adds a new business model, and we are very proud of that.
The second new dimension is on device. We entered the on device market through the acquisition of Sybase. We realized that putting business software in mobile devices takes a little bit more than if you put toys and games in mobile devices. You need security, you need scalability, you need robust infrastructure, and Sybase is the leader in business mobile infrastructure. The combination of that infrastructure for mobility with SAP's back end information systems, our business suite as well as the analytics brings SAP to relevance to billions of people.
That is the opportunity. We've always already seen the benefits of that in Q4 alone. Many, many SAP customers went to SAP and Sybase for the Sybase Unwired platform. And we have a strong intent to deliver a Sybase Unwired platform in May at SAPPHIRE that is pre integrated with the SAP applications and will allow with the SAP applications and will allow customers to build their own mobile experiences in parallel to the ones that we will build and our ecosystem will build. This is a huge opportunity to make our software relevant to a 1,000,000,000 people.
And then finally, we have the category of in memory computing. This is probably the most disruptive technology that we've had in our hands. SAP has taken the lead. We invented this idea. Our competition still has data stored on disks or in some hybrid models where disks play a major role.
We think that is the wrong approach. This will change not just how data is stored, it will change how applications are built, and it will change completely the stack. SAP took the lead by delivering HANA in a record time, conceptualized in March, talked about at Sapphire in May and delivered in November as planned. This has gone out to around 50 customers. We're getting feedback where the most used word is unbelievable in terms of speed.
We have customers that did high advanced analytics in the past in hours that now take seconds. And we have business conclusions of businesses, which are unique and interesting because they now realize how the business is running, where they make the profits, which products are selling and which are not, and they can make much faster conclusions. This is not just about making things run faster. This is about changing the game. Imagine a retailer and you combine these technologies, a retailer who with mobile devices can reach out not just the category manager in the store, but actually to the consumer, know who the consumer is and create loyalty through the mobile phone.
A retailer that can get data from consumption or behaviors of the mobile phones and the consumers into in memory computing and bring that into behavioral analysis so you can predict where is the demand going to be, link that to the back end where you actually can now steer your supply chain within your company and with your relationship to your consumer product supplier, so that you bring the right products in the right markets at the right moment in time. This is the combination of all these categories: on premise, mobile, on demand and in memory. You bring them all together, it changes the game for many industries. In retail, it changes margins. That's why it's relevant.
So you bring these things together, you see that not only do we have a very, very solid innovation pipeline, we have proven in 2010 that innovation can drive growth. Now comes the new products to market, some of them in Q4 last year, many of them in 2011. And it's not just any combination of portfolio. It is a portfolio that is relevant for customers right now where technologies are enabling game changing moves. They want to consume best practices at lower cost and a higher speed.
That's why on demand is relevant. They want to reach out to their mobile workforces or even their consumers. That's why the device is very interesting. They want to predict market trends and behaviors and react fast. That's why in memory computing is right, and you combine them all and link it to a consistent back end, you have a combination that will change the game.
That is why we are confident that not only do we have a double digit growth opportunity organically based on innovation, but we also have a competitive, very strong pipeline of innovation that is more relevant than anyone else. So with this, I would hand over to Bill and ask for the conclusion on where does that bring SAP in the future.
Thank you, Jim. And to net it out, where do we go from here? So in summary, where we go from here is double digit revenue growth, 10% to 14% on SSRS, as Werner said, and we will do this profitably while we continue to expand our margins. We stated today 50 to 100 basis points. We continue profitable revenue growth.
The drive is on. The passion is market. Jim talked about on demand and what that means to our company, new market, whole new audience, huge potential. On device with Sybase, the unwired secure platform and the connection of an end to end business process, Again, this stimulates the core, sometimes the core extends. And of course, business analytics and HANA, the high speed in memory technology, is mind jamming to the average CEO that wants to query information from the transactional systems in real time to run the business better.
We're investing in fast growing segments. We know we're the standard in BRIC.
We know that we are the preferred platform of choice. And where we see opportunity in the BRIC, Turkey, Middle East,
and we'll do so while expanding our margins at the same time. Again, we choose to do things at scale, so we can move resources, lift and shift to go after growth where we know we have a market that's waiting for us. We're leveraging the ecosystem. I am telling you here today, there is not a large high-tech company in the world that has a brand that you would not know, that has not chosen SAP to partner with in some capacity because they believe we are the standard in the platform and they believe in the innovations and they want to build around us and with us so they can strengthen their customer relationships. This will be very clear front and center at SAPPHIRE.
We're going to take that up a notch. We have a very energized management team. In case you haven't noticed, we're having fun, energized, we want to win. And we got a lot of people around us that want to win, too. So when we're done here today, we're going to go fire up a whole bunch of people at an old company meeting target that Werner guided for the company today is something we believe in.
It's something we want, and we're going for it. And we have a lot of people that believe. We just had field kickoff meetings all over the world. Jim, myself, members of the executive board traveled. Our people are on fire.
I mean, they are excited. I have not seen this level of enthusiasm in the company, and I've been here about 9 years now. And this continuous margin expansion, please know that it's not just about double digit SSRS growth. We also intend to expand the margin. And yes, we stand by the midterm margin of the 35%.
We haven't forgotten you, and we're very much looking forward now to taking your questions.
Thank you. Well, thank you, Bill. We now have time for Q and A. And again, a reminder for those of you here in Frankfurt, please use one of the roaming microphones and please also introduce yourself and the firm you represent. At the same time, I want to remind everybody on the phone or on the web, please do send us questions by e mail to SAP sorry, investor.
Sap.com. And I see one first question here from Johnny Tseng from Bank of America Merrill Lynch. And then we go to the next question from the web.
Johnny Tseng from Bank of America Merrill Lynch here. Just two questions. 1 on Business by Design. I think there's been a kind of shift in the messaging for being just an SME solution to when you can sell to the branch of sort of large enterprise. Can you talk about the opportunity there?
And I guess in your 1,000 new customers this year, what percent do you think come from larger companies rather than smaller companies? The second question just on the good performance in Q4, what comfort can you give us that wasn't just a one off? What are you seeing in terms of deal metrics? You mentioned 25% large deals to say that we're back to normal conditions and we won't see a slowdown next quarter? Thanks.
So why don't I try and give you an answer on the BYD. By design, we'll be leveraged for 2 purposes. One is a whole suite where you can run your whole business from the cloud, and the other one is a line of business focus where you do sales automation or expense management or travel management or talent management from the web. We believe that there is a tendency that large companies want to control their own processes and IT and tend to want to have that, therefore, installed on premise, at least for the areas that really give them competitive edge. And maybe they would outsource to a cloud less critical processes like sales, automation, like expense management or like talent management.
There, we have an approach. That is, by the way, the current on demand market. It's only these very narrow extensions to an ERP. And we believe that there is a tendency that small companies who don't master technology and processes would like to consume everything through the cloud. So that means that a by design for a suite could not play for a large company.
There's technically no limitation. It scales like crazy. But most companies of a certain size want hybrid. They want something on premise where they control it and something where they can consume it differently. And we are open to all.
We actually have a hybrid strategy. We were the first ones to come out with this idea that it's a hybrid. And we believe the strength is in having both and offering both to customers so they can choose. Something that's nonstrategic today goes in the cloud. Maybe one day it becomes strategic, you bring it back to the on premise world.
We are consistent between the 2. And the 1,000 customers, I think most of them will be small and medium sized companies for the by design goal.
And in terms of the business, let me give you a little bit of a feel for what's going on. As you saw in 2010, steadily, each every quarter, the results got better. The shift to volume, so we're not just a big deal culture anymore, we also have volume. That's why we added 15,000 new names to SAP. Lots of our business is coming in from net new names.
In fact, some regions are actually hitting 40% of their business from net new names to our company. So we have a very, very strong culture in the company toward growth. And that is also backed up by a very strong leadership team. I'm a firm believer in leadership, and I know my colleagues are as well. If you look at the leaders that we have running our business out in the field organization today, they're international, they're young and ambitious, and they are truly, truly highly skilled SAP professionals that know the product, know the customer, know the ecosystem and know the way we like to operate, and they know it cold.
Now in addition, we absolutely run our company as a best run business. So all of the information that moves in the field organization, whether it's in the direct channel, the inside sales, the indirect, the partner ecosystem. We manage using cloud technology and HANA. So we have real time insight on what's happening with the pipeline, what's going on by geo, what's going on by industry, what's going on by market segment, who's helping us, who isn't. And this is studied on a day to day basis in real time.
In fact, we both keep a list of the top 200 accounts and what's happening in each one of those where a board member or an executive sponsor, somebody of influence may be important in development to help the customer out. So we know what the pipeline looks like, and the pipeline multiples are as good as I've ever seen. And the confidence that the customers have in us and the ecosystem has in us is truly inspiring all of us to go for it. So we have metrics, we have leadership, and we have execution. And I think this idea of innovation for the future versus consolidation of the past, given customer choice and absolutely expanding the ecosystem at every turn is really helping us.
Thank you, Bill. We now have 2 questions from the web. It's more on the product side. And the first one is from Adam Wood, Morgan Stanley. It's on HANA.
And you alluded to that already. HANA seems to have seen good take up and response from customers. Can you help us understand the opportunity here? And can you comment on average selling price for the software component where it could go? And how large of a business could this be?
And then there's a second question of particularly relating to the delivery of new mobile apps and the timing of support of the Sybase database in the business suite?
It looks like a few questions for me. Let's talk about HANA. HANA is by far the biggest disruption opportunity we have, and it's the biggest immediate revenue opportunity as well. Why? Because it is non disruptive to the installed base.
It means we have 36,000 ERP customers who could take immediate value from HANA. So what are we doing? We are trying to get to market to value and volume as fast as possible, and we do that with a new approach that we have seen very successful. Iterative, we go to 50 customers, we learn from them, we bring the experience back, we get a next version, we go to a broader audience. We believe that HANA would give us an opportunity for a 6 digit revenue number this year, but we need to see and learn.
And what is the average price? It's too early to say. I can say it in the following way: the average value is extreme. We're talking about a price performance improvement on analytics alone in somewhere around 200x, which means the infrastructure is only 10% of a disk based system and the performance is 20 times better. I have not seen in my 20 years in this industry technology that gave you 200 times price performance improvement.
The jumps we've seen so far are double, 5 times better, maybe 10 times, but then you're really exaggerating, 200 times is big. That's why we have confidence that this is a big opportunity for growth. And we will not just leverage in memory computing in HANA, we will bring it to all our products and leverage it. And by design, just as a reminder, is already today leveraging in memory computing inside the platform. So that's HANA, big opportunity for immediate revenue and growth.
On the other one, what is the road map for Sybase? It's 2 road maps, 1 for mobile. I had SAPPHIRE in May this year. Sybase on wire platform will be SAP connected, which means it can consume the business objects and the information in a business suite and our analytical tools. That gives you the opportunity to bring consistent data to the mobile phone.
They will also have an SDK, so you can build mobile apps experiences very rapidly, and that will be delivered in May, along with at least 20 mobile apps to prove how it's done. And then we unleash this platform inside of SAP with 10,000 developers with our partner and ecosystem as well as our customers. And then you'll see an explosion of mobile consumption on top of SAP. That's the mobile road map. And the second one, the ASE, the database of Sybase, we have committed to make that a choice for Business Suite customers.
We believe we will be ready in Q2 this year with a version that can run under the Business Suite. And with that, we have yet another option for customers who want to choose a database and run their Business Suite on top of a Sybase database as well.
And just one minor modification. I saw some questions on the 6 digit, 9 digit, and it's just a question of what number is on there, right?
Okay. Thank you for that clarification. We've taken 2 questions here in the room, Gunnar Plage and Raimo Lenschow.
Yes. Hello, Gunnar Plakge from Nomura. My first question would be on your comment, Bill, from last quarter and Werner repeated this quarter the return to upfront business models. To what extent is that a tentative sign? Do you see that across the board?
And I know that you don't guide generally on SSIS, but does that actually mean that we should, going forward, look to a more synchronized SSIS revenue development? Yes.
Couple of things. One is Werner is absolutely right that this is now pervasive in the market. As you know, when we were in the eye of the crisis, if you will, the FLA and the GEA was at that time an attractive alternative to customers that did not have CapEx dollars and still had an interest in software, so they treat it as an OpEx expense. They do have CapEx money now, and they are choosing to invest upfront. And that is pervasive.
That's everywhere, every industry. It's global. So you're going to see a lot less FLA and GEA in this new market environment for sure. And the one thing I would say on the SSRS, you're going to see an underlying software growth that is higher than the SSRS. That is our expectation.
So you got 10% to 14% on the SSRS. We think the software will grow faster than the SSRS. Werner,
anything to add?
No. I think what we just received another question, which right term is linked to the question Gunnar Blage just asked. This question is from Phil Winslow, Credit Suisse and the same question came also from Laura Lederman, William Blair. I just want to put this in the sequence right now. Clearly, you had strong momentum in large deals during the quarter.
Could you characterize if these deals came from projects delayed since late 2008? Or are we starting to see some net new large transactions close and heading into 2011? Do you think that Q4 is the beginning of a trend toward the return of larger ERP deals? What is driving the change?
Yes, I don't think that this is just pent up demand from what didn't happen in 2,008. I do think that we are on a trend now where I think Jim, Werner and myself are all consistent in saying that the core is growing. The core includes the ERP. It includes the business suite. It also includes the intelligent way we begin to market it by line of business, so you can take it in pieces, but ultimately coalesce a company strategy around an SAP platform.
All of these components has actually changed the perception. Now we did see, I think it was 36 deals in Q4 that were greater than €5,000,000 So there is a return to the larger deal. I do think that this is a trend. Do I think every quarter you'll have that many? No, but the trend is back where people are investing.
Companies do have CapEx. They do have to grow again. They do have to innovate, and we'll be at the heart of it. I'll give you one example. I had a very good meeting with a CEO and founder of a really, really cool apparel company.
And he basically said to me, he's now a couple of 1,000,000,000, He hit the wall. He's got a lot of legacy, a lot of disparate pieces. He needs a stable core platform to run his end to end business processes. He needs that because he wants to be an exemplar in retail as an example, and that is his business model. He has to grow.
So we basically took care of that issue. He then said, My board's asking me a lot of questions. I don't want to stay up all night figuring out what the next question is going to be. I want to be able to ask my system what's going on and let the board query the system and do it in real time. And I have to have analytics, and I have to have it on my personal iPad.
He used an iPad. We do support RIM as well. And then finally, he said, all of my workers, all of them are either on the shop floor making things, whether on the front line taking care of customers, or they're traveling internationally to different retailers to see what is or isn't moving and what is the voice of the customer, a la the unwired platform in a secure way, getting the device linked to the business process so they have the full end to end integrity. This happens in every place we go. And here's the beauty of SAP.
If you want to know the secret sauce, I'll give it to you. If there's 33 floors in an elevator, we hit floor 33 and head right to the corner office. The alternative, the number 2 and beyond, they get off on floor 9, they have the donuts and the coffee, we don't.
May I add one point here? I think the question of Phil and Laura indicated that it could be simply a return of larger ERP deals. And I think the comment of Bill made it very clear, it's not coming back to simple, larger ERP deals. It is that we support the transformation of our customers by providing set of solutions, which go far beyond of ERP. It includes industry specific solutions, more important, business analytics, mobile infrastructure, whatever you can imagine, supported by memory computing capabilities.
And sets a different story than reducing it to ERP is back. It's much, much more.
Well said.
Thank you. I think we owe now the next slot to Raimo.
Raimo Lenschow from Barclays Capital. 2, one for Bill, one for Werner. Bill, going with that kind of idea that customers are transforming their business, you talked about momentum in the industry before. Your biggest competitor obviously had a much better time in a downturn, while now it seems momentum is shifting. Is that partly also driven by the fact that you are more strategic long term vendor, strategic decisions were not really taken in the downturn, it's now coming back, so momentum could shift.
So that's kind of trying to get your perspective on that. And then Werner, in the German press, really a lot at the moment about cost and cost control at SAP. Is there do I kind of sense a slight trend in the past SAP and the uptick would kind of start hiring a lot and start really spending money and spending money for growth? It feels like it seems slightly different this time around in terms of being slightly more disciplined. Maybe just for your perspective, I mean, maybe some of the press releases were not quite close to the truth, but just to get an idea about what's really going on internally in terms of cost control?
Do you want me to go first, Vern? Yes. Okay. So just in terms of taking it first and to give our number 2 competitor a little credit, In the downturn, they did a very good job of selling small. So when you buy a lot of companies, they have point solutions, they have sales forces, and they target a specific line of business within a corporation.
And those conversations were likely to take place in the downturn because the CIO wasn't centralizing the budget. The budgets were in large measure in the line of business. They were buying small. Immediate times of value was the goal. The good thing is you never waste a crisis, right?
We didn't waste one either. So we absolutely started taking this model apart and thinking about the line of business executive, the fast time to value cycles and the pressures that they were under and how we could help them meet their goals. We also advanced our cause with the inside sales force. We had a very small one once. We don't anymore.
We grew that handily and it's quite profitable. We also went after indirect channels where we have more feet on the street in the partner network helping us to sell our software, adding the industry, adding the functionality, adding the local flavor. So we learned to sell small and we learned to have that conversation with the LOB and to extend our reach to offset what the competition was doing well. Now we never lost our fastball. So when it comes to large enterprise strategic transformational deals, as Werner said, at the platform, at the analytics and in memory, at the mobile and at the orchestration layer, nobody can help big companies, midsized companies end to end globally run their business like SAP can.
That's our DNA. But now we're good at doing both. That's the big change.
Raimo, you had a very good question regarding cost consciousness. I think we were always, over the last years, very cost conscious and tried to increase efficiency in the organization. But what has changed since last year is the following. We organize the organization in a way that we start with the customer. We have a customer centric view of how we want to operate internally.
And this gives you a unique choice. This gives you the choice that you really can look to all of your processes you have in
the company end to end. You have one ultimate goal you commonly share. And by doing so,
you can processes and increase efficiency within these processes. And that's just what we initiated last year and what we are continuously focusing on over the next quarters so that we can really deliver this margin expansion we talked about today and talked about in the past. As there's a fundamental shift in how we organize ourselves, we have a clear focus, and this focus helps us to streamline our internal business processes, resulting in the reduction of our overall cost.
Maybe one additional comment on that. This is a belief we have as leaders that being a little bit better all the time is one of our tasks. Throwing more people when you have growth is easy. And actually, if I look at R and D as one example, where we did significant improvements in 2010, throwing more people in R and D doesn't help. It's about the productivity of people, the creativity, the room you give them and the opportunity you give them with their customer, with the customer in the middle, that allows you to get more value from the investment.
And we've proven that in 2010. We know how to do it. And this will be a constant push, not to push people to do more, but to spend more of our time on value adding activities. That's what we're doing.
If I may build on that just quickly, the one thing that you should know is the co CEO model works very well at SAP. One of the things that Jim and I did right away is connect the innovation cycle to the customer cycle. So we can get the innovation out quicker, co innovate, get it to the customer, get value delivered fast and streamline the organization. As you saw in Werner's chart, R and D as a percent of revenue actually went down, yet efficiency and innovation and delivery to the customer went way up. Same thing with G and A.
G and A as a percent of sale went down, yet we were able to invest some in sales, marketing, new branding campaign, new identity for the company. So we're really looking at it from the customer and the shareholder in as opposed to the other way around.
Thank you, Bill. Another question from the web here, Ross MacMillan, Jefferies. I think that's a question for Jim. When do you think about the new areas of innovation? When will these be which of these will be the incremental contributor in 2011, mobile, in memory and on demand?
Yes, I touched a little bit upon that, but let me try and make it very clear. The 2 of these 3 categories that will contribute the most to revenue in 2011 will be the in memory computing with HANA and mobile. Mobile is already contributing with more than 425 if you add the whole of the 432. If you add the whole Sybase, that's of course unfair. But a year ago, SAP customers who had a mobile idea did not talk to SAP.
Now every SAP customer has a mobile idea, they talk to SAP and they're buying Sybase. Even now, before, it's pre integrated with the back end. So that one is an immediate revenue opportunity. In memory, it's an immediate one, but there, we still have to iterate on the innovation and create the scale. And on demand is the least contributor in terms of revenue because it's a subscription model.
You do the math, no matter how you scale it, it's going to be a small contributor, but it opens up a whole new game for SAP. And we are proud to be in a position where we can now capitalize and open that door, while at the same time committing to double digit organic growth and margin expansion. That is a position of strength.
And one fact that you may have an interest in because we've been all over the world at these field kickoff meetings with our team, there's a race and the race is on. Each one of those businesses is chasing the first 1,000 in each one of those businesses. So in memory, on demand, unwired platform, everyone's going for the first 1,000. We think that all 3 of them will hit it this year. It's just a question on what month this year they hit it.
So there's a lot of different ways of looking at this, and we think we can get some rapid adoption in these technologies.
Thank you, Bill. Another question here
in the room.
I saw one from Nicholas von Stackelberg.
Macquarie Research. A couple of questions, if I may. First to Werner. Why didn't you get a bigger lift to margins in the 4th quarter given the stellar performance on software licenses? And connected to that question, since you have the ambition of growing your licenses faster than SSRS, could you break out the 0.5% to 1% margin uplift that you're guiding to in terms of the mix on the one hand and cost control on the other?
First of all, I think 1st of all, I think the margin expansion out of my memory in Q4 was 300 basis points year over year, and I think this is a strong expansion of our margin in the Q4 of yours. Of course, you always can shoot for more. We are willing to do so, but that was a result of the Q4 of 2010. And I think all the different lines of business contributed to it. And you have to anticipate if you have such a strong software revenue growth as we had with 25% in the quarter at constant currency, this varies additional cost compensation cost for the field, which what is money, which is well deserved from those who really delivered this growth on the software side.
If you look to the margin expansion for 2011, 50 basis points, 200 basis points, I think this is across the board. I indicated we want to focus to continue to bring down the ratios for R and D and G and A throughout the next quarters. And what we also said, and we want to capture all the growth which is available that we invest again in people in the field organization while actually selling the stuff to our customers and prospects. And that's something we also have anticipated because we if you see more possibility than this 10% to 14% on the asset side and be clear, the software revenue growth for 2011 must be stronger. Otherwise, you cannot come to 10% to 14% on the SSIS side, but we even would be in a position to capture any additional revenue we could see throughout 2011.
So from that end, I think it's a mix of different sources for the margin expansion, but a clear commitment also to invest in sales and marketing.
At times has been a bit more, how should I put it, accommodative to offering discounts to customers. Of course, it always refers to specific situations and that your one of your big competitors on the other hand has been described as being particularly strict. It's the CFO who needs to sign off on every single discount. Do you see an issue? And if so, how do you think this is something that you want to address with the new sales organization that you recently announced?
Then for Jim, so far, what has been the most surprising third party application that you've come across? Thank you.
Yes. A couple things. One is on the margin too for last year. We did some cleanup on the severance side too without any action. We just took care of it operationally, just so you know, for your information.
And as it relates to sales and discipline, if there is such a person that's controlling discounts in that other company, while they sure say yes, very easy, based on what I've seen in the market. And what we do is we empower our people to a certain threshold that we feel makes sense. And anything that goes outside that threshold, I personally get involved with it in certain instances. We even have other members of the executive board get involved with it depending on what the request is. So I would not say that we at all are liberal on that, and I'll tell you why.
Because at the end of the day, there's 2 elements that you manage in this business that really drives results for customers. 1 is risk. Do you have the risk managed appropriately based on the best business software and the best plan to get that customer successful? And the other is time. There is nobody that would buy a business suite from SAP or any of these innovative technologies because they were saving an extra 10%.
The payback in managing the risk and getting time to market on implementing these technologies to change the way you run your business, That formula is so great that no tactical discount can overwhelm it. That's why we have a value life cycle management approach. That's why we have 7,000 benchmarks in 25 distinctly different industries that take every KPI group in a company and benchmark peer best, peer worst, and we give a customer an ironclad business case in every instance where they buy something. That way, you don't have to discount. Your business case is your greatest defense.
And your question was which third party application or solution was I most inspired by? We work with thousands of third parties, so it's actually unfair to pick 1. And I believe they are all successful because they add significant value. If I need to mention one anyway, I would mention Crossgate as one example. Crossgate is a small company, and I mentioned them because what they have is really the next generation idea, the idea that business processes don't run within companies, they run across entire value chains.
And they actually provide a service on the procurement side where you connect to other companies real time over the Internet. They connect you with the systems that others have in real time with the catalogs of products that they all have, and they will actually enable a business connectivity real time that is unique and special. It's a small company, and I mention it because it's one of those where the idea is next step, and it plays extremely well into our message and our idea that the consistency we have is what helps companies integrate end to end and become best run across a whole value chain. So it's one example of a very inspiring small company with a great idea and a good relationship to SAP. Thank you,
It's from Knut Waller, UniCredit. A question to Werner. In which magnitude should we expect share buybacks in 2011?
If you look to our overall liquidity situation, you see that we have EUR 3,500,000,000 in gross liquidity. We have financial debt of EUR 4,400,000,000 We have seen and talked about the maturity. Roughly 50% of this will be paid back in 2012. And I think considering this situation, we would not go and buy back shares in 2011. At least at this point in time, we do not have any concrete plans to do so.
The reduction of our debt has first has highest priority for us. That's what we said when we announced the acquisition of Sybase, and I think it's prudent to do so. And then we can look for other opportunities to spend our cash in the way you indicate with your question. Okay.
Thank you. And we have the question for Mark Vorder.
Thank you. In real money, you're guiding for €1,200,000,000 of additional product revenues at the midpoint, give or take. And my personal view is that maybe half of that could come from increased support revenues. If we
talk about
the other half simplistically, could you segment that incremental business by region? So do you see maybe more to come from North America the Americas overall vis a vis EMEA? And could you say, even though, of course, you'd like to speak more about the new products, can you speak a little bit about the old fashioned pent up demand, which might still be in the system just to get a magnitude sense?
You're good with the math, I'll tell you that. Americas, North and South, will grow faster than EMEA, but EMEA will grow. And obviously, Asia Pacific, including Japan, will also grow faster. So we have a nice global portfolio in this company of geographies, of industries and of market segments. I really believe that that is one of the core strengths of this business model, that you're not beholding to 1 geo or 1 industry or 1 market segment.
You now have a very diverse portfolio, and that's extremely positive. And what was your second question?
On the old fashioned pent up demand?
Oh, yes,
yes. In terms of the SAP, ERP and the business suite, what you'll see is, in particular, in the BRIC and the Tier 2 fast growing markets, you see a very strong demand for SAP ERP and SAP Business Suite. And in the mature ones, even where they've made ERP investment, they are now still consolidating onto the suite because they haven't done supply chain or CRM or procurement or various aspects of PLM, as example. So it is going to continue to grow. This core business has a lot of elbow room left in it.
But why I love Choice and I love the innovation for the future versus consolidating the past is in the BRIC, they don't have a choice. They have to go for best in class innovation because in many cases, they have to expand beyond their borders. So they have to go global. We're best at that. And in many cases, they want a coherent analytics and real time information strategy.
And my goodness, the BRIC has gone so fast in mobile. So if you look at China as an example with 750,000,000 mobile workers adding them 10,000,000 a month, if you have an unwired platform story to complement your suite, and by the way, you just so happen to have Sybase, which is the database standard in China and the leader and clearly within the government of China, the preferred choice, you have a lot of good options for SAP. And you've seen what we've done in Brazil and you've seen what we did in Russia with triple digit growth, and obviously, India, especially with all of our partners in the network. So plenty of room to go on SAP ERP, SAP Suite.
I just don't think it's pent up demand. It's real demand for improving efficiency in companies everywhere, including in Europe.
My maybe slightly naive assumption was that some people didn't really have the money to spend in the last 1.5% or sometime before that. And some of that demand might still be out there. That's what I call pent up demand. Can I just on a clarification because you said the Americas are going to grow more strongly, were you implicitly talking percentage rates of change or absolute values?
Oh, you're talking percentage rates in that context when you consider the size of EMEA. But have confidence in EMEA, too. I love our business in Germany. It's so well led. We have great loyal customers.
In Business by Design, which Jim covered, Germany is the number one market in the world for Business by Design. So Germany is quick to adopt the cloud technology and Business by design. We're strong in Western Europe. We have really good growth plans in Middle East, Africa, Turkey, as I mentioned. So we are really in good shape in EMEA, and you saw a really strong rebound in Q4, and the momentum is very, very good.
Okay.
Thank you. I think given the fact we've now discussed for almost 90 minutes, we take 2 questions. 1 from the web, and I saw the Alagrocholova, who has then the final question. Let's start with a question from Mark Gill, Deutsche Bank. Can you talk about your support offerings, current maintenance rates for standard support and enterprise support?
How should we model these going forward? Financial analyst question. And can you give a split between standard support and enterprise support?
Yes. The first part of the question is the rates for enterprise support, that's 22%. Standard support in 2011 is 2018. We have the right to increase for inflation, but we will do this only in the countries where we are allowed to and in these countries only for those customers who are not yet at 18%. So that's the summary for 2011.
And regarding the split, I would say that 70% of our new customers go with enterprise support, 70 plus, do it easy, calculate with 70%. And if you look to the base, what I mentioned before, I would say that more than 60% of our maintenance revenue is coming from Enterprise Support. And the difference to what I explained before, the large customers who are under PSLE, which is at 17%.
Well, thank you, Werner. And now I would hand over to Alagor Olaban.
Thank you. Alagor Lova, Deutsche. I have a question going back to your in memory applications. Of those 50 customers, which industries are most presented or it's pretty much spread across? And what industries do you see as the first adopters of the technology?
We wanted explicitly to work with the biggest and brightest at the first launch. These are typically very large companies with very large volumes of data because that stretches us in our innovation cycle to know if we can do the biggest, we can do anyone. That's how we operate. And you will see that in the pipeline or in the customers that we add right now, these are typically retail oriented customers, consumer products oriented customers or banks, where you have these high volumes. But we also have oil and gas companies and immediate analytical sense, very big return on this infrastructure.
They actually can manage volumes of data that they couldn't manage before at a speed, which is just incredible. And these are the brand names you would want. So you take the tops of the tops, and they go with SAP on HANA, and they are excited.
No utilities, speaking of smart grid development?
Yes. Yes. Oh, utilities is also in there. That's another high volume one. We also have, for instance, applied the in memory technology in non SAP areas like seismic measurements in oil and gas.
Is huge volumes of data, and suddenly you can analyze them. And so it's going beyond the SAP, but obviously, we look for the SAP combination first. And we have multiple industries served, but typically high volume, typically consumer oriented and typically real time type of enterprises.
Well, thanks very much. This closes our event for today. Thanks for all your questions and the discussion. And our next event is our Q1 earnings announcement on April 20