By Angus Loten
SAP SE Chief Executive Christian Klein says the enterprise-software giant is redoubling its efforts to move customers to the cloud, offering a new subscription service aimed at helping companies get more value out of making the switch.
The German tech company has room to grow. It is among the smaller players in the cloud, with 1% of global market share as of the third quarter last year, compared with 33% for market leader Amazon.com Inc. and 18% for Microsoft Corp., according to Synergy Research Group.
The Covid-19 pandemic has shown the value of the cloud, Mr. Klein said, as companies ramped up their use of online services to support remote work.
"Customers now acknowledge that they cannot manage their companies within four walls," Mr. Klein said Wednesday in an interview after he spoke at a virtual event kicking off the cloud effort. "What we have seen in the pandemic is that our customers want to transform -- they need to transform."
SAP's new subscription service, called Rise with SAP, includes digital tools the company says could help businesses get more value out of migrating their information-technology systems to the cloud and digitizing their operations.
In October, SAP projected lower cloud revenue through 2025 in part due to "investment delays" in several industries grappling with the pandemic's duration. But on Wednesday, Mr. Klein said the company's goal is to triple cloud revenue by 2025.
For many large, complex companies, he added, the shift requires a mind-set change.
Mr. Klein, 40 years old, joined SAP in 1999 as a student and took over as sole chief executive in April after serving as co-CEO since 2019. He is hoping to coax more customers into the cloud by providing a platform designed to more easily integrate apps. As part of the event, the company announced an expanded partnership with Microsoft that will see Teams, Microsoft's videoconferencing platform, integrated with SAP's suite of applications.
SAP is also offering customers insight gleaned from hundreds of thousands of business processes used by retailers, banks, manufacturers and other companies in dozens of industries. Companies use SAP apps for everything from hiring, to record-keeping, managing inventory, logistics and more. SAP is tapping all this data to create benchmarks for which processes work best.
That access, Mr. Klein said, will enable companies to benchmark and fine-tune their own processes. "We know what is working and what is not working inside an enterprise," he said.
With more than 400,000 commercial customers, SAP has long been a leader in the enterprise applications market, accounting for roughly 8% of more than $220 billion in annual global sales of business software, according to research firm International Data Corp.
But for decades, the bulk of SAP's customers -- including some of the world's largest companies -- have licensed its applications and run them on in-house systems. That includes the company's core enterprise resources planning tools.
By contrast, cloud-service providers run companies' applications remotely in their own data centers, charging only for the amount of computer power they use.
SAP offers its own cloud service, known as S/4Hana, but customers have been slow to shift apps online, in part because their IT systems have grown increasingly complex over time, said Mickey North Rizza, program vice president of enterprise applications and digital commerce at IDC.
She said many companies that have been with SAP for years have spent billions of dollars customizing workloads, while weaving in other software tools and platforms from competing tech providers.
As such, she said, shifting systems to the cloud will be a complicated multiyear project for many firms. "These clients are just scared," Ms. North Rizza said.
Moving to the cloud will also disrupt operations that are already being rocked by the pandemic, she said.
Worse still, the surge in business-continuity efforts during the pandemic has taxed corporate budgets, thinning out resources for large-scale digital initiatives. Morgan Stanley analysts last year warned that even high priority IT projects risk being put on hold.
SAP will need to show it can add business value for its cloud customers, if it is going to convince them to abandon on-premises systems, said Paul Saunders, a senior research director at IT research and consulting firm Gartner Inc.
"Nobody ever goes into a sports store and says I want to buy a pair of Adidas because the company runs in S/4Hana," Mr. Saunders said.
Mr. Saunders said in the year ahead SAP has some tough decisions to make -- not least of which is determining how best to focus its expertise.
"You can't be all things to all people," Mr. Saunders said. "They've tried that for too long."
Write to Angus Loten at firstname.lastname@example.org