SAP's Bill McDermott grabs share.
SAP, the company everyone in Silicon Valley loves to snicker at (it is German, after all) just finished a stellar quarter, with 14% revenue growth, and much of that coming from new deals. The stock is up today, if only slightly because SAP didn't bump up projections for future results. Here's what SAP co-CEO Bill McDermott has to say about SAP, growth, and the competition, notably Oracle.
Victoria Barret: SAP's software license growth this quarter was 28%, remarkable, especially considering how much business SAP does in Europe, the current doom and gloom capital of the world. What share of that growth was from new customers to SAP versus existing customers buying more from SAP?
Bill McDermott: I'd say 60% of that was from our existing customer base, 40% was net new to SAP.
What you're seeing is interest in the consistent software core. Companies want to quickly get insight: How do I replenish stock that is selling? How do I kill stock that isn't? Our Business analytics, HANA, is taking off in ways that even we didn't predict. Mobile is really hot. People want everything to be connected to mobile.
VB: What's the profile of those new customers?
BM: Whether I meet with customers in Abu Dhabi or Sydney, they are telling me they want a consistent platform to run their business on. They never want to invest in something they can outgrow. And they want it to be simple.
The alternative, Oracle, grew through acquisition, and that hasn't proven to be the customer choice - just look at our growth rates compared to theirs.
We worked with one bank that didn't have SAP. They needed to give loan processing more attention. Their customers weren't happy. They needed to separate wealthy clients and high-risk clients. To do all this, they wanted business insight easily accessible inside their branches. We can do this.
VB: Which SAP products are driving this growth?
BM: Our business suite grew 26%; 35% in business analytics. HANA is meteoric. Mobile we can't compare year over year, so it also is meteoric. Every industry is really doing well and buying from us. The volume of deals we're seeing is way up. And the value of those deals is way up.
The indirect channel is now how we get 23% of our sales. A year ago when we chatted it accounted for just 10%. So we've more than doubled that.
VB: Workday is planning an I.P.O. for sometime next year. They're selling to customers with on average 10,000-15,000 customers, not small. How do you view that competitive threat?
BM: I think they have a good offering if you're comparing it to SAP's Business ByDesign. They're coming at it from the HR perspective, that's their DNA, and that's fine. Now they're moving in financials. From what I understand, that's still a construction project.
People have underestimated how we are going to assert our will in the cloud. We've been low key. We said we'd get a thousand customers running on Business ByDesign, and we will. But now we're letting the tiger out of the cage. People are going to see a different kind of SAP.
Workstream, procurement, talent management, data as service... all in the cloud. Maybe we're not in the west coast media every day, so people are underestimating us. But SAP is coming, and coming fast.
VB: Your co-CEO mentioned that you're seeing customers even talk about ripping out existing CRM systems. Was that a shot to Salesforce?
BM: Yes, that's not unusual. We're seeing customers switch from Salesforce to Business ByDesign. It's a slow roll , about to accelerate.
VB: Oracle acquired RightNow earlier this week. How do you view that? Does it signal a shift, in your mind, in how Oracle views cloud computing?
BM: Oracle if nothing else has been consistent. They've been focused on consolidating the past. RightNow is another example. It isn't growing particularly fast. I assume their strategy is go up against Salesforce. RightNow is a point solution. They can tell more of an on-demand CRM story now. We take more of a suite view.
VB: What kind of discounting are you seeing in the industry?
BM: Our business hasn't changed one bit. We're doing less discounting right now, actually. But I've seen this for some time now. Others are discounting heavily. Our strategy shifted a while ago, to customer outcomes, and if we do that right, we don't have to discount.
