Cloud computing is the way forward for cost-conscious businesses, says Germany business software-maker SAP, but at the same time detailing a smaller-than-expected operating profit in its second quarter results. Hayley Platt reports.
It's clear skies ahead for cloud software maker SAP. Customers have been switching to the firm's web-based technology more quickly than expected. And that's allowed the German firm to raise its annual revenue forecast. Revenues from its cloud business jumped 32 percent to 242 million euros in the second quarter. Although overall revenue was up just two percent at 4.2 billion euros for the same period, and operating profit slightly below forecast, it expects annual revenues of over one billion from cloud-related services this year. CEO, Bill McDermott. SOUNDBITE: Bill McDermott, SAP CEO, saying (English): "Our cloud runs on HANA which is a true memory database platform for transactions and analytics and you can run your whole business on it and that really has changed everything. Our cloud grew 39 percent year over year and we see continued good growth for the remainder of the year." The global spend on cloud services is expected to jump this year by 20 percent to $174 billion. And that figure could exceed $235 billion by 2017 - triple what it was in 2011. Businesses like it because they can reduce their costs by ditching bulky servers for network-based software instead. The problem is SAP's rivals, IBM and Oracle are doing the same. SOUNDBITE: Bill McDermott, SAP CEO, saying (English): "It's always good to have competition because it brings out the best in you. I think what companies are now trying to do is to rationalise all of these applications in the cloud. For every one billion US dollars in revenue, most companies have 50 separate applications now." SAP wants to continue investing in the Cloud to keep up with demand. But it says that may mean pushing back a 2015 operating margin goal of 35 percent, by two years to 2017.