ERP Sales Boost SAP Q3

posted on 10/26/2011 11:15:19 AM

While new products such as its HANA in-memory offering and mobile applications helped goose SAP’s results, the core ERP software gave the enterprise applications leader a true boost in the third quarter.

ERP buyers and other software customers lifted the world’s biggest enterprise software vendor to new heights in the third quarter, as SAP today announced a 14% gain in Q3 revenue to €3.41 billion. The bottom line fared even better, rising to €1.25 billion from €501 million.

These days, the Walldorf, Germany company has more lures in its tackle box than ever, having fully digested its 2010 acquisition of mobility provider Sybase, and having reached production mode on its HANA in-memory business intelligence appliance.

Sales of HANA, which became generally available in June but has been sold since early 2011, totaled €60 million during the first three quarters of the year. That leaves SAP with the challenge of doubling the pace in the fourth quarter to reach its goal of €100 million by year-end.

“You should absolutely anticipate a doubling of HANA…in Q4,” co-CEO Bill McDermott told analysts on a conference call this morning. “We had a goal to exceed €100 million in revenue this year; I can assure you that that will happen.”

McDermott’s fellow CEO, Jim Hagemann Snabe, outlined two ways in which SAP can scale HANA into a volume business. One is by selling HANA to SAP’s Business Warehouse customers, which can now replace the relational databases that underlie BW—read, Oracle, et al.—with HANA. “This will go into a very large installed base of BW customers,” Snabe said. The other growth opportunity resides in customer accounts, where HANA can be used to speed up certain applications in the ERP suite with real-time analytics.

The company’s sprawling ERPflagship, Business Suite, is expanding its customer base, according to Snabe. SAP will continue to deliver updates to the ERP offering on a quarterly basis without requiring customers to upgrade, he noted. McDermott said that the strong license growth in SAP’s core enterprise applications is the result of the new options customers have in using HANA and SAP’s Sybase-sourced mobility tools to extend ERP applications with better analytics and more ubiquitous access on smartphones and other mobile devices. Of Business Suite, McDermott said, “The sleeping giant has woken up.”

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Both men stressed the potential of the company’s mobility division, anchored by the Sybase technology. McDermott cited the example of automaker BMW, which is using the Afaria platform to deliver data and functionality to the edges of the enterprise. A BMW plant manager, for instance, can now check on production KPIs while on the road, via a mobile device. SAP has 30 mobile applications on the market today, and customers can expect “several more” by the end of year, according to Snabe.

SAP also updated its progress as a provider of SaaS-based ERP, via its Business ByDesign software. At the end of the third quarter, the cloud-based ERP system had 650 customers, and 80% of that business was closed through SAP’s channel partners. Originally targeted at small and midsize ERP customers, Business ByDesign is experiencing strong interest from large enterprises looking for a divisional software package, officials said. SAP’s goal is to reach 1,000 customers of the ERP offering by year-end.

In the third quarter, sales of software support, the company’s biggest revenue contributor, rose 13% to €1.757 billion. Software license revenue grew 28% to €841 million, from €656 million in the prior-year quarter.

SAP scored sales increases in all of its geographic markets. EMEA represents the biggest piece of SAP’s revenue pie, accounting for €1.663 billion of the total, up 11%. The Americas region pitched in €1.222 billion in revenue, 13% more than it did in the third quarter a year ago. “ERP deals, strong business analytics, and strong HANA adoption made a strong” contribution in the U.S., McDermott said. Customers in the Asia-Pacific region, including Japan, spent at a record pace, with revenue there up 22% to €524 million.

Despite the strong third quarter, SAP’s outlook for 2012 remains unchanged, as officials court caution in an unsteady world economy. For the full year, the company expects non-IFRS software and software-related service revenue to rise 10%-14% at constant currencies.

“Despite the volatile macroeconomic environment,” McDermott said, “SAP is a growth company.”