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Germany's SAP may speed up shift to the cloud

Logo of German company SAP is pictured at the CeBit computer fair in Hanover, March, 6, 2012. REUTERS/Fabian Bimmer
Logo of German company SAP is pictured at the CeBit computer fair in Hanover, March, 6, 2012. REUTERS/Fabian Bimmer

By Paul Sandle

BARCELONA (Reuters) - German business software group SAP may speed up a shift towards providing its products over the internet in order to tap demand for so-called cloud services and take advantage of Germany's reputation for data privacy, it said on Friday.

SAP and rivals such as IBM and Oracle are dashing to meet surging demand for cloud computing, which allows clients to reduce costs by ditching bulky local servers for network-based software and storage in remote data centers.

With the cloud services market forecast to grow 18.5 percent this year to $131 billion worldwide, according to research firm Gartner, competition is fierce and software firms face a challenge to adapt.

"We have a situation now where we see the move to the cloud, particularly in certain markets like North America, happening even faster, and this is a great opportunity for us to revisit whether we should accelerate the move to the cloud," SAP co-chief executive Jim Hagemann-Snabe said at a Morgan Stanley investor conference on Friday.

He said accelerating the shift could make it a little harder for SAP to meet its 2015 sales target of 20 billion euros ($26.9 billion), but could be beneficial over the medium term.

"This would have impact on the 2015 level, I don't expect enormous impact but it would have some impact because you are delaying some revenues. However in a (2017) time frame you would have more than that back, so I think it would be the right thing for the company if we had the opportunity," he said.

In the first nine months of the year, SAP generated 547 million euros in cloud subscriptions and support revenues.

It has a target for revenue of 750 million euros from this field for this year, while aiming for 2 billion euros by 2015.

As well as IBM and Oracle, SAP faces competition from smaller rivals like Salesforce.com Inc and Workday Inc, and the group spent $7.7 billion last year to buy Internet-based computing companies Ariba and SuccessFactors.

Questions about the security of data stored in cloud, and often on servers in many countries, have intensified this year after accusations about spying by authorities from the United States and other countries.

Hagemann-Snabe said the fact SAP was based in Germany, which has some of the most stringent data protection laws, was "absolutely" an advantage in winning new business in Europe and countries such as China.

"I think we have the benefit of being global in the sense that we actually have data centers in all regions," he said.

"With the investments that Germany, in particular (German Chancellor) Merkel, have done in the relationship (with China), SAP is actually a preferred vendor, so we see an opportunity to use this situation to accelerate our business."

(Additional reporting by Harro Ten Wolde; Editing by Kate Holton and Mark Potter)

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