SAP aims for bigger cloud footprint in China

German software vendor plans to expand its current partnership with China Telecom as it looks to grow its cloud play in China, where it clocked "outstanding double-digit" growth last year.

SAP is looking to grow its cloud footprint in China and betting on its current partnership with China Telecom to help lead the way.

The German software vendor said it was beefing up its investments in the Chinese market, where it expects to see increased spending of state-owned organizations and small businesses drive demand for enterprise software. A report by South China Morning Post (SCMP) noted that SAP would look to current cloud services partner, China Telecom, to help expand the delivery of its software-as-a-service offerings to customers. 

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The software maker is currently midway through its five-year, US$2 billion investment roadmap for the Chinese market.  

According to stats from Forrester Research, China's public and private sectors are  forecast to spend US$124.5 billion on IT in 2014 , an increase of 10.5 percent over last year, and retain its position as the world's third-largest tech market.  

Quoting SAP Greater China President Mark Gibbs, the SCMP report said the software vendor highlighted significant growth in IT spending among Chinese state-owned enterprises in the second half of 2013, fueling SAP's "outstanding double-digit" growth for the year. 

Gibbs said the company added, on average, 100 new customers each quarter last year, with big wins in the cloud computing space that included China Minsheng Banking, China Petroleum and Chemical Corporation, and Agricultural Bank of China. 

SAP clocked 427 percent year-on-year growth in the banking industry, 267 percent in oil and gas, and 131 percent in retail, he said, adding that the vendor secured 100 new customers in mainland China for its HANA  platform. 

It now wants to expand its alliance with China Telecom to focus on growth opportunities in the small and midsize business segment, which accounts for 74 percent of SAP's 11,600 customer base in mainland China, Hong Kong, and Taiwan. 

"We are currently exploring with China Telecom the prospects of bringing SAP's full suite of cloud offerings over the public internet on the mainland," Gibbs said in the report, which noted that the current partnership between the two companies was focused on SAP's human resource management software, SuccessFactors.

But while the vendor saw growth in the Chinese market, its  fourth-quarter 2013 results fell short of revenue expectations . It clocked 5.1 billion euros in revenue for the quarter, just short of Wall Street's forecast of 5.18 billion euros. At 2.1 billion euros, software license revenue was also shy of the 1.94 billion euros expected. Cloud revenue was short of 216 million euros expected in the fourth quarter, and its HANA revenue of 633 million euros was short of SAP's guidance of 650 million to 700 million euros at constant currencies.