SAP – Leading the Digital Transformation
Fifth German Corporate Conference, Goldman Sachs, Berenberg Bank September 19, 2016, Munich Luka Mucic, CFO
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An introduction to SAP
Helping customers win in the new digital economy SAP's long-term financial ambition Why invest in SAP Appendix
SAP is running the world's mission-critical business processes
76% of the world's transaction revenue touches an SAP system
SAP touches \$16 trillion of consumer purchases around the world
SAP customers distribute more than 78% of the world's food
SAP customers produce more than 82% of the world's medical devices
SAP's brand value ranked #22 of top 100 worldwide1)
Among the top 100 companies worldwide by market capitalization
1) Source: MillwardBrown 2016 BrandZ Top 100 Global Brands
For over 40 years, SAP has turned technological change into customer value
Business software & online processing
Globalization & mainframe computing Internet & clientserver technologies
In-memory & cloud computing
SAP R/1:
Enabled customers to get a complete view of their business with realtime processing of data across integrated modules for materials, procurement, and accounting.
SAP R/2: Helped customers successfully manage large global enterprises on a mainframe architecture, while retaining the integration and real-time processing capabilities of SAP R/1.
SAP R/3 and SAP ECC: Enabled customers to take advantage of clientserver and internet technologies. Created a unified graphical user interface and new functional components.
SAP S/4HANA:
Helps customers thrive in the New Digital Economy. We are now focused on eradicating complexity and running live with our in-memory database technology SAP HANA and cloud computing.
1972 1982 1992 2015
SAP will continue to drive business value – fueled by three powerful trends affecting all businesses in all industries
Cloud computing
In-memory database
Hyper-connectivity
Platform-as-a-service Infrastructure-as-a-service
Machine learning & artificial intelligence
Internet of Things
Network marketplaces
Online platforms
Mobile devices
Innovations Business value
- Software-as-a-service Substantial economies of scale
- Easier consumption of software
- Lower barriers to entry
- Benefits of IT spread more widely
- Big data analytics Instant insight and decision-making based on "live" data
- Reduced operational expenses driven by new wave of automation
- New business models
- Improved business processes
- Reduced risks and costs
- Multiple new ways in which companies can interact with their stakeholders Social media
An introduction to SAP
Helping customers win in the new digital economy SAP's long-term financial ambition Why invest in SAP Appendix
Only SAP can help businesses implement their digital strategy
Companies can now run real time – based on a holistic view of the organization, instant insights, and predictive analytics
Total transparency
- Get a 360° view in real time
- Visualize insights in context
- Align on one source of truth
Instant insights
- Answer ad-hoc questions on-the-fly
- Analyze root causes
- Simulate impact of decisions
Simplified boardroom processes
• Reduce preparation time and effort
For a demo, visit https://www.youtube.com/ watch?v=ofq7ygnWpbw
An introduction to SAP Helping customers win in the new digital economy SAP's long-term financial ambition Why invest in SAP Appendix
2016 outlook and long-term ambitions
| Cloud subscriptions |
€2.30bn |
€2.95 –
€3.05bn |
€3.8 –
€4.0bn |
€7.5 –
€8bn |
| Cloud & Software |
€17.23bn |
+6% to +8% |
|
|
| Total revenue |
€20.81bn |
|
€23bn –
€23.5bn |
€26bn –
€28bn |
Share of more
predictable revenue |
60% |
|
63% to 65% |
70% to 75% |
| Operating profit |
€6.35bn |
€6.4 –
€6.7bn |
€6.7 –
€7.0bn |
€8 –
€9bn |
* All numbers non-IFRS
** All numbers non-IFRS and at constant currency
SAP continues to grow its cloud business rapidly
Well-positioned for strong growth in the cloud
- Broadest portfolio of best-in-class cloud offerings (SaaS offerings for LoB, CEC, and HCM solutions, business network solutions, early HEC traction)
- Extremely synergistic to SAP S/4HANA, providing tremendous cross and upsell opportunities
- Continued solid growth in New Cloud Bookings in Q2 2016
- Combination of backlog and deferred revenue indicates continued strength in contractually committed future cloud subscriptions and support revenue
High growth sustained through additional drivers
- Upscaling of SaaS offerings
- Expanding Concur internationally
- Expanding HEC and fostering a strong ecosystem (IaaS)
- Enhancing S/4HANA cloud editions (public & private)
- Refining the Digital Enterprise Platform (BusinessObjects Cloud, SAP HANA Cloud Platform, IoT Platform) (PaaS)
Our core business remains rock solid
Software licenses revenue
- SAP S/4HANA innovation cycle catalyzes growth across SAP's innovation portfolio and strategic industries
- Certain solution areas e.g. HCM, Procurement, CEC, T&E1) are rapidly shifting to the cloud
- SAP S/4HANA now available as cloud subscription option
- 2016 outlook implies flattish license performance
€10 billion+ support revenue base – and growing
- Very high renewal rates (~97%)
- Net support renewal rate is ~96%, reflecting well-received cloud conversion options and very large customers qualifying for PSLE (Product Support for Large Enterprises)
- The blended support fee across the entire support customer base is ~20%
Illustrative example
Support business can grow even if licenses decline
Example: Pool of customers buying €1.0bn in software licenses in Y0; deals signed at year-ends
Assumptions: License purchases decline by 5% p.a. | Net support renewal rate of 96% | Blended support fee ~20% p.a.
SAP is pushing towards a larger, stickier, more predictable business
Cloud subscription and support revenue
All other revenue
Expanding absolute operating profit which drives operating cash flow
- Revenue mix shift means that managing to a blended group margin would discriminate against our fast growth businesses
- SAP is improving effectiveness and efficiency in each and every business, which all contribute to absolute operating profit growth
- Continued transformation of our services business shift towards a stronger focus on customer outcome which drives higher adoption and renewals
- Expected 2016 hiring similar to 2015 to fuel our innovation engine
Operating cash flow expected to show a positive trend in 2016 – following operating profit evolution and helped by lower restructuring related cash outflows
Targeting accelerated operating profit expansion in 2018 and beyond
An introduction to SAP Helping customers win in the new digital economy SAP's long-term financial ambition Why invest in SAP Appendix
Summary – Why invest in SAP
SAP's innovation leadership is helping customers win in the digital economy
- SAP runs the world's mission-critical business processes and is perfectly positioned at the top of the IT stack – close to the end user where the business value is generated
- In addition, SAP has developed the most advanced in-memory platform available today: SAP HANA
- Based on SAP's groundbreaking new architecture, SAP is in the early stages of a powerful multi-year innovation cycle with SAP S/4HANA as the digital core coupled with the most comprehensive, best-in-class cloud & network portfolio
- Only SAP offers customers choice of deployment model (cloud, on premise or hybrid) and seamless integration
SAP is outpacing the market in topline and bottom-line growth
- SAP's broad global footprint provides resilience in an uncertain world
- Powerful combination of a rapidly expanding cloud business and a growing core
- Successful business transformation improve efficiency and effectiveness in each and every business
- Growing overall operating profit even as we continue to hire in fast growth areas such as S/4HANA, HCM, CEC, HCP (PaaS), Networks
SAP is pushing relentlessly towards a much more predictable business in the long term