SAP's Q2: The hot topics
SAP is set to release its second-quarter results on Thursday, and as usual market watchers will be paying close attention given the vendor’s bellwether status within the enterprise software market.
Here’s a look at some key details to watch for in the announcement and conference call.
Continued cloud momentum: SAP has invested heavily in cloud software acquisitions, including SuccessFactors and Ariba, and posted 373 percent year-over-year gains in cloud subscription and support revenue during its first quarter. While cloud software still accounts for only a tiny portion of SAP’s overall revenue, analysts will be watching to see whether it was able to maintain or top that performance in the second fiscal reporting period.
SAP will also announce cloud subscription and support numbers referring to monies that “that are contracted for and paid by the customer and that are expected to be recognized in cloud subscription and support revenue in the future,” as well as a “backlog” cloud total representing revenue that is “contracted but not yet invoiced.”
These figures reflect the level of long-term commitment to SAP’s cloud products on the part of customers, as well as provide another way to view its cloud segment’s size, and will also be closely watched.
HANA hype: As has been the case for some time now, expect SAP executives to spend plenty of time talking up the company’s HANA in-memory computing platform, which is now at the center of its product development moving forward.
HANA software revenue tripled in the first quarter year-over-year to €86 million (US$112 million). SAP could top that figure in the second quarter, although it’s perhaps too soon to expect a major contribution from HANA Enterprise Cloud, a new hosting service based on the platform, which SAP announced in May.
HANA Enterprise Cloud allows customers to run their SAP Business Suite and other applications as a HANA-powered managed service. SAP will likely give a progress report on how many customers so far have made that leap.
Database wars: Speaking of HANA, SAP is reporting second-quarter results not long after Oracle announced the long-awaited next generation of its flagship database, version 12c.
Oracle CEO Larry Ellison also recently spilled the beans on a future version of its database that will incorporate in-memory computing. Further details have been scarce but based on Ellison’s statement, the product appears to be the most direct response yet to HANA from Oracle.
SAP itself is hoping to convince customers now running Oracle databases to migrate those workloads to HANA, which presents an interesting competitive situation.
HANA is still a relatively new product, but at the same time, most Oracle customers tend to wait until the second version of a major database release before upgrading, preferring to let the bravest early adopters work through any remaining bugs and kinks.
But Oracle is betting big on 12c, which includes features for multitenancy, a key architectural concept in cloud computing. It recently struck a deal with Salesforce.com that will see the cloud provider commit to Oracle technologies, including 12c, for the long term.
That endorsement, along with 12c’s new features, could help Oracle keep some database customers considering HANA in the fold.
Overall, it will be telling to hear whether, and in what manner, SAP executives respond to 12c’s launch on Thursday’s conference call.
Economic insights: As with any major technology stock, SAP’s second-quarter results will provide a window into the buying moods of customers around the world.
In the first quarter, SAP’s Asia-Pacific-Japan business segment experienced a decline in software and cloud subscription revenue. Observers will be keen to see whether performance there rebounds, as well as give close scrutiny to results from Europe, where the economic mood remains especially jittery.