SAP set to reap from Asia Pacific's accelerated cloud adoption

SAP believes the Asia-Pacific region, in particular the Australian and New Zealand markets, will be key drivers for the company's cloud portfolio.
Written by Aimee Chanthadavong, Contributor

The SME market in the Asia-Pacific region is set to be a driving growth opportunity for SAP, according to Adaire Fox-Martin, the company's president of APAC.

Speaking to media at the recent 2016 SAP Sapphire Now conference in Orlando, Florida, Fox-Martin acknowledged that while SAP is not naturally perceived as an associate of the SME market, she said it's a strong growth market for the business.

"When you look at the overall revenue in Asia over 70 percent of our APAC revenue comes from SMEs. I truly believe SMEs in Asia today are tomorrow's multinationals, and today some of the SMEs in Asia will be in the Fortune 200 10 years from now," she said.

"For us, it represents an opportunity to go on a journey to help companies with phenomenal startup ideas, new business models, and is challenging the normal to come on a journey with SAP by having underpinning technology."

Fox-Martin pointed to the growing population of young people and macroeconomic conditions such as trans-pacific partnerships in the region as key drivers for SMEs to consider partnering with SAP.

She highlighted the company's first quarter results of the 2016 financial year as evidence of the potential growth SAP expects to see in the region, saying it was "extremely strong" based on the acquisition of 500 S/4 HANA customers globally during the period, with a number from APAC.

Cloud revenue also grew by double digits to 26 percent during Q1, while the company's traditional business only grew 1 percent. Fox-Martin said while the traditional revenue growth may be a "disappointing figure" she was still pleased it grew, marking the 11th consecutive quarter growth in APAC.

"Last year in 2015 we had our biggest Q1 ever; we had a number of significant transactions, one in particular was a very large transaction, but this year we didn't have that same elephant transaction," she said.

"People describe a big transaction as you get it twice: Once you get to celebrate it and then twice you have to deal with the year-on-year compare. So, what I'm very pleased about is that we still grew without a transaction of that size, and the underpinning business in Asia is growing at an extremely solid rate."

She added that there are expectations the revenue mix will be further reflective of the market's transformation into the cloud, and believes it will become more predictable for SAP based on the service contracts it signs.

From an Australia and New Zealand point of view, SAP ANZ president and managing director John Ruthven told ZDNet that cloud adoption continues to accelerate, with the belief that more than 30 percent of total revenue of market unit this year will be achieved through the company's cloud portfolio. He added that based on Q1 results the company is already on trend to achieve that.

Specifically, Ruthven said within the SME market the company doubled its performance last year and expects to do it again this year, believing the adoption of cloud solutions will make up a "very significant" portion. Meanwhile, within the mid market, Ruthven said customers will continue to transition their existing environments potentially to HANA enterprise cloud.

SAP ANZ has signed 40 S/4 HANA customers to date, with expectations to add another two to three more by the end of the month. Ruthven noted there are still a "good number" of customers still refreshing their application environments.

Ruthven explained that the key drivers for the adoption vary between industries but the main reasons are often around customers understanding markets are moving from the "batch to the live world", the rise of the Internet of Things, and an aspiration for businesses to deliver a better customer experience.

As a company that continues to make its own transition to the cloud, which saw 2,000 global positions axed, Ruthven said SAP has been growing its local headcount in its cloud business, with plans to further grow existing numbers. He admits, however, that finding the right skills has been tough, particularly given the lack of uptake of STEM education in Australia and women in the talent pool.

He added that the company is currently making "very good progress" on improving pay equity for women, and plans to increase the percentage of female employees in ANZ to 30 percent in 2016, which currently stands at 26 percent.

Disclosure: Aimee Chanthadavong travelled to 2016 SAP Sapphire Now with SAP.

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