Last week, SAP announced preliminary results of its 2011 fourth quarter financial performance and the results were impressive, exceeding analyst expectations for revenues and profits. In Q4, software license revenues increased by 16 percent and total revenues grew by 11 percent. Operating profit from a year ago is expected to increase by over 200 percent . Similarly, full fiscal 2011 financial performance was equally impressive prompting SAP senior management to declare that SAP delivered “the best year in its 40 year history.”
Upon review of the preliminary earnings release we noted statements indicating that growth in core applications business, increased momentum for analytics and mobile product lines, and accelerated growth of SAP HANA were each cited as growth engines. SAP had established a 2011 revenue goal of €100 million for HANA, and has indicated that it exceeded that goal by €60 million. The company also exceeded its €100 million goal established for its mobile based applications, reflecting even more interest by customers in engagement type systems, empowering the user wherever he/she may be located.
Enterprise software companies have a tendency to perform creative allocation among internal revenue segments, thus we have to context SAP’s with some caution. Also, many of the SAP HANA applications have experienced a delayed market entry and are just reaching customer release visibility and confined to certain non-mission critical application segments. All that as an aside, the SAP performance is still impressive, especially when placed in context to the ongoing market battle with rival Oracle. In December, Oracle surprised analysts with a disappointing fiscal Q2 2012 financial performance, indicating only a 2 percent adjusted growth rate in software license revenues.
For readers unfamiliar with HANA, it will become SAP’s answer to leveraging today’s advanced in-memory computing for areas such as advanced planning and predictive analytics. In our Supply Chain Matters attendance at SAP’s 2011 Sapphire customer conference, we shared our belief that if successful, conversion of SAP applications and software infrastructure to take maximum advantage of in-memory technology would be market game changing. Last year’s Sapphire customer conference provided a more detailed understanding of how extensive and far-reaching this objective really is, as well as the difficult technical challenges that SAP needed to overcome. Subsequent SAP influencer focused events have lacked some details related to the future release schedules of HANA powered applications. At face value, the fact that customers are now beginning to buy into the potential of HANA is noteworthy.
From a supply chain and supplier relationship management lens, the real test for HANA focused applications is yet to come. The initial test will be the long awaited Sales and Operations Planning (S&OP) powered by HANA application that is scheduled for initial customer release this quarter. Supply Chain Matters has been attempting to secure a detailed briefing on this specific application. During his keynote address at the 2011 Sapphire conference, SAP father and Supervisory Board member Hasso Plattner declared that if he had his way, all of SAP’s business planning applications and specifically the SAP APO application should be the initial targets of further HANA enablement. We were quick on the keys to “tweet” that statement in belief that SAP’s SCM and SRM customers take note of the implications of that statement.
We continue to believe that in-memory computing will have profound impacts in supporting future supply chain sourcing, planning, fulfillment, collaboration and decision support needs but customers will need vendors like SAP to actively integrate this technology within the existing applications, and not leave that burden on the shoulders of existing customers.
The preliminary uptake of HANA is indeed impressive but the real test will come in SAP operations and mission critical applications such as supply chain and supplier relationship management focused applications.