Share this content
SAP data centre, Walldorf, Germany
SAP Walldorf_Norbert Steinhauser

SAP 2021 results point to cloud revival

by

SAP, the global leader in enterprise resource planning software, sent out optimistic signals in preliminary results for 2021 this week after going through a difficult couple of years.

19th Jan 2022
Share this content

The German software giant’s total revenue for the year was €27.84bn, up 2% from €27.34 (or 3% in constant currency as SAP also reports it). Under IFRS rules, operating profit decreased by 30% to €4.66bn, with operating margin dropping 7.5 percentage points to 16.7%.

Though sluggish, the headline numbers represent something of a revival after a difficult 2020. SAP CEO Christian Klein flagged a 6% increase in cloud and software revenue (3% at constant currencies) to €6.99bn.

Like any self-respecting international software leader these days, Klein has staked his reputation on transforming the enterprise resource planning (ERP) giant into a cloud-first entity.

“The magnitude of our cloud strength is evident,” he said. “More and more companies are choosing SAP to help them transform their businesses, build resilient supply chains and become sustainable enterprises as they move to the cloud.”

He bolstered his position with some interesting indicators of new growth and optimistic forecasts for 2022. One of these is a non-IFRS measure SAP calls the current cloud backlog.

These stats showed a 32% increase in cloud orders at €9.45bn for 2021, and a “stellar” 84% growth in the backlog for SAP’s Rise with SAP migration programme around the S/4 HANA Cloud ERP product.

Boasting about your backlog may seem counter-intuitive, but the company sees it as a key measure that compares the cloud revenue it expects to recognise in the next year, based on existing contracts. Any change between reporting periods represents the net cloud business volume added or lost over that period.

Industry benchmark

The numbers presented in a multinational software developer’s preliminary results can be opaque. But as a global kingpin of business and finance software, SAP offers a good barometer of the pandemic’s impact on the industry and the global progress of the transition to cloud accounting and the latest results indicate steady growth in that direction.

Covid-19 imposed two counteracting forces on finance software. In many cases, organisations answered the need to support remote working and cut costs offset by investing in new cloud solutions. At the same time, however, falling incomes and longer-term economic concerns have inhibited new spending plans.

Finance teams that pressed ahead with upgrades also had to negotiate complications, including staff absences and skills shortages. Nevertheless, some of the strongest buying intentions to emerge from AccountingWEB’s insight survey last year came from larger organisations, 14% of which said they planned to invest in new ERP software this year; 16% said the same about forecasting and planning tools.

The biggest area for planned software investment was data and expense management, which was on the 2022 shopping list for 18% of corporate respondents. SAP also provides some interesting insights into this trend from its Concur business unit.

Travel and expense trends

As the pandemic hit in 2020, SAP Concur saw its sales plummet 14% for the year as business travel shut down. And while separate 2021 figures for the division are not yet available, SAP Concur executives were making very optimistic noises just before Christmas, following a survey that found 70% of business executives expected to do as much travelling in 2022 as they did before the pandemic.

The shift to hybrid working would create a need for “hybrid spend management”, according to SAP Concur chief product strategy officer, AG Lambert. “Flexibility and agility will be key in all aspects of work, including spend management, as employees split their time between the physical and remote office”.

Do these findings reflect the experience of your organisation? Are you planning to push out the boat for new cloud-based finance systems in 2022, or will you be sitting tight until the economic outlook becomes clearer?

Replies (0)

Please login or register to join the discussion.

There are currently no replies, be the first to post a reply.