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In today’s Cloud Wars Minute, I delve into SAP’s remarkable Q4 and 2023 achievements, spotlighting its substantial cloud backlog growth and CEO Christian Klein’s strategic leadership.
Highlights
00:29 — I think it’s fair to say that SAP’s Q4 results and a full year were a blowout. Here’s the number that really jumped out to me: its total cloud backlog jumped 39%, and is now at almost $50 billion. That’s a sure sign that those 20,000 to 25,000 on-premise ERP customers are kicking in. They’re starting to now fund their migrations to the cloud.
01:23 — These specific revenue numbers look very good for SAP. But these backlog figures, which are not yet recognized as revenue but are on the books, contracted business for future revenue, are also looking very, very strong.
02:05 — A couple of other big things from Q4: its PaaS business, which is primarily the Business Technology platform, was up 46% to $682 million; its S/4 HANA Cloud ERP suite was up 61%, now well over a billion dollars. And for the quarter, its cloud revenue jumped 25% to almost $4.1 billion. SAP’s market cap jumped to over $200 billion.
02:56 — So, overall great performance by SAP. Three years ago, CEO Christian Klein kicked this off; the company had to endure some very difficult times when he said, “We’re switching from a licensed model to a subscription model.” It had to revise revenue figures, and so forth. And Klein, whom I named as CEO of the Year for 2023, I think wisely bit the bullet on that.
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03:57 — One other thing that I think Klein deserves credit for. And I don’t mean to seem cold-hearted about this, because it involves layoffs. 8,000 positions SAP said are going to be eliminated. They’re being eliminated because those positions were tied to the way SAP used to do business and the types of things that customers used to need.
04:54 — Again, I’m not trying to diminish the pain to individuals of layoffs, but the pace at which companies move now involves constant refinement and optimization. It’s what, in many ways, SAP is encouraging its customers to do: Build for the future and the company you’re going to be in the new digital and artificial-intelligence-powered economy, not just to perfect where you’ve been in the past.
