EUR 850.00 For Business Accounts Only

Morningstar | Cloud Reacceleration Drives Strong Start to 2019 for SAP

In our view, SAP is at a crossroads as it is in the early phases of a strategy to transform its product offering to focus more on the cloud. With the introduction of S/4HANA, SAP believes it can leverage its dominance in the enterprise resource planning market to gain a foothold in databases and steal share from competitors like Oracle and Microsoft. SAP introduced its new cloud ERP system, S/4, with the important caveat that the next-generation product only runs on SAP’s HANA database, thus potentially causing customers to rethink their cloud ERP and database decisions. The HANA database is an in-memory database, which provides faster query speeds for improved real-time analytics. Conversion to S/4HANA is driving growth in cloud, which has grown 28% over the last two years. SAP has experienced some success converting customers to S/4HANA, with roughly 20% of its 30,0000-plus legacy ERP customers signed on. SAP's ability to convert customers to S/4HANA will be critical to the success of the company’s cloud strategy. At this early juncture, we think SAP has a good chance to migrate many of its customers to S/4HANA over time.ERP includes solutions for human capital management, finance and accounting, inventory, and supply chain management, and SAP is a market leader in the space. We think SAP customers would be hard-pressed to replace the software, given the mission-critical nature of the data and how widely the solutions are utilized in a typical companyOutside the core system, SAP offers a handful of additional modules that can be integrated into its ERP offering, including customer relationship management, business intelligence, and a business network group. The business network group includes acquisitions Ariba, Concur, and Fieldglass, which provide procurement, expense management, and contingent workforce management solutions, respectively. These applications are also available as discrete SaaS offerings. However, the applications, in line with the strategic vision for the acquisitions, add the most value when integrated with the core ERP offering.