The enterprise software vendors are duking it out

Today, Oct 21, 2024, SAP released its results for the quarter 3/24, which start with a strong statement: "We're ahead of our plans for 2024"!

The highlights include:

• Current cloud backlog of €15.4?billion, up?25% and up?29%?at constant currencies
• Cloud revenue up?25%?and up 27% at constant?currencies [TW: This include a 35 per cent decrease to 117 million Euro of the IaaS component]
• Cloud ERP Suite revenue?up?34% and up 36%?at constant currencies
• Total revenue up?9%?and?up?10%?at constant currencies
• IFRS cloud gross profit up?26%, non-IFRS cloud gross profit up?27% and up?28%?at constant currencies
• IFRS operating?profit?up?29%, non-IFRS operating profit up?27%?and up 28% at constant currencies
• SAP?raises?its 2024?outlook for?cloud and?software?revenue,?operating profit?and free cash flow

To compare, Salesforce's Q2/2025 financial summary shows a slightly smaller growth on a slightly higher revenue (SAP's total revenue converts to around USD 9.164 billion).

Oracle Q1 figures that were released on 09/09 show an overall growth of 7 per cent to 13.3 billion USD, which is mainly driven by the infrastructure growth. Even Oracle's fastest growing (reported) SaaS precut, the NetSuite Cloud ERP grew slower than SAP's Cloud ERP Suite, which is on a significantly higher basis.

Microsoft reported a 16 per cent growth of its Dynamics products and cloud services business.

Some thoughts around the SAP report

Now, I am not a financial analyst but to me it seems that SAP manages a highly profitable transformation of its business from on premises to the cloud. Managing to achieve an overall growth that is higher than the current number 1's business software vendor in spite of this transformation being highly cannibalistic to the old business is no mean feat. This also in combination with a free cash flow of 1.25 billion Euro that is higher than the closest approximation that Salesforce offers (operating cash flow of 829 million USD). Operating cash flow is usually higher than free cash flow.

A share of almost 84 percent that S/4HANA (err, the Cloud ERP Suite) has, clearly shows that the company's focus remains firmly on core enterprise processes. From my perspective, being a CRM guy, this is unsatisfactory, as customer side processes are a key component of business processes.

On the same note, while SAP reports that it has more than 100 partners on its AI foundation, has more than 100 generative AI use cases that have been developed by SAP, partners, and customers, in its portfolio, while Joule offers more than 500 skills, I'd appreciate a more fine-grained reporting on all this. Add the BTP to this.

Why do I ask for these breakdowns? Simple: In order to be perceived as a serious vendor, customers want talk and figures around these topics. Else, there is the risk of not being considered. Who wants to commit to - and be potentially locked in by - a technology that doesn't see a vendor commitment?

Yes, I get it. AI is the topic du jour, but even here we do not see sensible numbers.

What is concerning in general, is an aspired employee engagement index of 70 - 74. There have been times when it was deep in the 80s. This, as well as the targeted customer net promoter score of 9 - 13 have a lot of scope.

Still, SAP has it all. strong customer facing software, the leading ERP software, strong supply chain, strong platform, and a strong AI game. Not to forget: a very vibrant ecosystem.

In my eyes, the only company that stands in SAP's way to retake the throne of the enterprise software world is ... SAP.

Great numbers, great team. Congrats to all of them!

Let's see how SAP's momentum evolves after the storms in the board have been weathered and how the released energy gets used to accelerate even further.