SAP falters in face of cloud targets
SAP drops margin ambitions in favour of cloud sales
EUROPE’S BIGGEST software group SAP has cut profit forecasts and pulled back from a target for higher margins, with its push to deliver products through the cloud likely to have a chilling effect on profits until 2018.
SAP, along with many of its competitors, have been involved in a hard-fought race to provide cloud products to accounting firms and businesses, but the German company may now have to row back on its long-promised margin gains that had been such a draw to investors.
SAP said it expects operating profit in 2017 to be between €6.3bn (£4.82bn) and €7bn, with revenues of €21bn-€22bn.
In January 2014, SAP pushed back its target to achieve a 35% margin by 2015 for two years, and instead is focusing on driving up cloud sales.
“We are in a market-share game,” SAP chief executive Bill McDermott told Reuters. “If you can combine a healthy cloud-growth business with high renewal rates, meaning a customer is very loyal … you can really expand the margin.”