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SAP lays out its strategy for growth, with HANA at the forefront

Chris Kanaracus | Feb. 5, 2014
SAP's strategy event for the investment community on Tuesday offered few major surprises to anyone who's been closely monitoring the software vendor lately, but did serve to cement the company's future direction for product development, growth and customer retention. Here's a look at some of the highlights of the event.

ConAgra Foods is one of the companies that have adopted the suite on HANA, at least in part. "We have portions of our suite on HANA," said Mindy Simon, vice president of IT, who appeared at the event. "Where it makes sense, we accelerated those processes." ConAgra is also a month away from having its entire analytics operation on HANA, Simon said.

Much has been made by SAP of HANA's tremendous processing speed. But speed in and of itself will become a commodity over time, with a more difficult challenge being the discovery of ways to help the business with the technology, Simon said.

One of the "more revolutionary things" HANA has let ConAgra do is run what-if scenarios to forecast the future price of materials the company uses in its products, and analyze the prices' potential effect on margins, Simon said.

Executive board member and product chief Vishal Sikka echoed Simon's sentiments in a sense, saying that while HANA's "power is unprecedented ... the burden is on us to come up with great applications."

He also cited the hype around "big data," saying it is "sad" that people get so excited merely about how colossal a given information store can be. "Data on its own is dead," he said. "You need processes to tie it together."

Cloud creates cash: SAP wants to give customers the option of subscription pricing for all its products. But even though customers can avoid large one-time payments through this method, over time SAP makes out better with subscription pricing, said Luka Mucic, global managing board member and head of global finance.

Mucic displayed a slide showing two hypothetical deals of roughly similar size, with one for traditional on-premises licenses and the other using subscription pricing. The subscription model garnered SAP less money initially but reached a "break-even" point with the on-premises deal after about four years, according to a graph he showed. Following that period, subscription pricing brings in more money overall.

"This model is extremely attractive in the long run, provided we are successful holding a high rate of renewal," he said.

That's the catch for SAP, which has aims of reaching €3.5 billion (US$4.7 billion) in total cloud revenue by 2017. This would represent a 35 percent compound annual growth rate. "We have a plan and it's clearly achievable," Mucic said.



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