The German ERP software multinational is riding a wave of success. The company’s recent financial results reveal how these two key factors are driving its growth and reshaping the enterprise software landscape.
"We cannot imagine the future of our organizations without starting today with cloud-based business management," said Claudia Boeri, President of SAP for the Southern Cone of Latin America , explaining to an audience of eight hundred people the critical role of cloud technology in this transformation.
Boeri's statements were made at Espacio Riesco, an events centre in Huechuraba, a business district of the Chilean capital.
The SAP Now meeting was held there on Thursday, an annual meeting of the firm with partners and clients, to showcase the most recent applications of its software, which are religiously updated and automated every six months thanks to the all-powerful cloud.
The synergy between cloud and AI technologies is creating a powerful ecosystem that enables businesses to automate processes, gain deeper insights, and make more informed decisions at unprecedented speeds. And it seems as if every company is racing to adopt both, in a race with itself to stay on top of its game.
"Today, SAP has 27,000 customers worldwide using AI in a variety of applications. This widespread integration of AI is not just about following a trend," says the executive.
As the Argentine-born executive explains, "SAP applies this technology, machine learning and more to different processes in all the solutions they know. ERP, of course, but also human capital solutions, customer and supplier solutions, payment management, logistics and supply chain, among several others."
With a recent study in hand, called Artificial Intelligence applied to companies, Claudia Boeri highlights that 41% of Chilean companies have a committee to analyze the impact of AI on their company and 95% intend to increase their investment in Artificial Intelligence for next year.
“That tells us that almost half [of companies] are already looking at this very seriously. It's not just any old thing. Almost 50% have a committee dedicated to this topic. There is also a point that came out in this study that indicates that the majority, 81% of those surveyed, believe that artificial intelligence can help them reduce costs. And 19% believe that it will help them generate revenue,” he says.
GLOBAL AND LOCAL PERFORMANCE
So while some companies struggle to innovate, investing huge sums every six months, technology companies like SAP see the fruits of the trade in their financial statements.
SAP’s focus on cloud and AI has translated into impressive financial results. In the second quarter of 2024, the firm reported a 25% increase in cloud revenue, in both nominal and constant currencies, reaching approximately US$3.61 billion. This growth was supported by a robust 33% increase in cloud ERP Suite revenue.
The company's total revenues for the quarter were approximately $8.2 billion, marking an increase of 10% in both nominal and constant currencies.
Perhaps most notably, SAP's current cloud order backlog has grown to an impressive $16.2 billion, up 28% in both nominal and constant currency.
"Our cloud growth momentum remained strong in the second quarter, with enterprise AI enabling many deals," SAP CEO Christian Klein said in a statement, attributing much of this success to the company's AI initiatives. "We continue to execute our transformation with great discipline, leading to an increase in our operating profit ambition for 2025," he said.
The financial outlook for the coming months thus remains positive, with SAP reiterating its financial guidance for 2023 and increasing its operating profit ambition for 2025. “Given our progress and strong pipeline, we are confident of achieving accelerated revenue growth through 2025,” said Dominik Asam, CFO of SAP, when the results were announced.
These global figures are also reflected in the company's performance in Latin America.
Cristina Palmaka, President of SAP for Latin America and the Caribbean, reported at the end of July that the region has seen "the 37th consecutive period of double-digit growth in revenue from sales of cloud solutions."
Brazil, in particular, was highlighted in the global results announcement for its outstanding performance in this segment.
Other segments that also reported double-digit growth include the SAP SuccessFactors HCM human capital portfolio and the intelligent spending and business networks portfolio, which includes SAP Ariba, SAP Concur and SAP Fieldglass.
SMEs, THE LAST FRONTIER
While SAP’s growth story has been steady and meteoric with each new AI and cloud push, the challenge—and opportunity—lies in expanding its reach to small and midsize businesses (SMBs).
“Historically, SAP has been associated with large corporations due to the complexity and cost of its solutions. However, the company is actively working to change this perception and make its technologies accessible to smaller companies,” acknowledges Cristóbal Vergara , the newly appointed Chief Business Officer (CBO) of SAP for the Southern Cone of Latin America , who emphasizes the importance of this market segment.
"Chile has a tremendous challenge in terms of adoption at the SME level," adds Vergara.
"Corporations generally lead in these issues because they have the resources, they have the information, they are concerned. SMEs are a little more orphaned, and I think there is a challenge and also a great risk there, because they could get far behind the big ones in terms of distance, effectiveness, and productivity if they don't get on the bandwagon," the CBO highlights.
To address this challenge, SAP has introduced a public cloud ERP solution designed specifically for SMEs. This offering provides smaller businesses with access to the same high-quality ERP system used by large corporations, but in a format and at a price more suited to their needs.
"Everything that we have historically delivered to large corporations, we also deliver to medium-sized companies, above all, because it is more difficult to include small companies here, so that those clients that do not have the size or complexity of the large ones can also use them," Vergara emphasizes, to highlight the importance of this step by SAP.
According to the executive, who until recently was CEO of SAP for Chile, this democratization of business software is not just about expanding his firm's market share, but rather about leveling the playing field and allowing SMEs to compete more effectively in an increasingly digital economy.
"It's the same solution, with the same quality, and like a complete public cloud, it's a complete software as a service . This can accelerate the transformation of smaller companies, because they have to catch up somehow," Vergara concludes.
