SAP Announced Fantastic Q2 Results – And Vijay Says..

Good job – SAP, Kudos on having an awesome Q2. Those are impressive numbers indeed. An 18% jump in revenue is nothing to sneeze at, especially for a German company with a huge European market where everyone else seems to be suffering. Every region had double digit growth. What I loved the most was that average deal size was up. That is not something a lot of companies can pull off in a bad economy.

So where did all the money come from? Looks like HANA brought in more than its fair share. With Sanjay Poonen/Steve Lucas at the helm – I would not have expected any less. Their team probably would have also covered for Q1 misses if they had any, with some room to spare. Vishal would be a happy camper seeing the number of HANA customers rise.

I am seeing a lot of traction for BW on HANA in the field. Many customers have bought Hana licenses already – and several have done so before they have a finite time line for implementation. So consulting and HW business for partners would lag software quite a bit. But BW on HANA is the cheapest version of HANA now – and that alone is not going to make big numbers. Business Suite for HANA is probably going to come out by end of year – but I have my doubts on how many customers will make the switch in near future. RDS might see good traction since it lets customers start small with HANA.

Here is some color from my buddy Dennis Howlett – it is an excellent read. http://www.zdnet.com/sap-defying-gravity-whoda-thought-that-7000001501/

Dennis points out that SIs might see an issue going forward because SAP is aiming to reduce the consulting effort needed to implement its products. I am not going to hold my breath quite yet – time and again, across product lines – very few customers have been able to live with vanilla installations. RDS might help some – but probably not in sufficient scale. Even as recently as HANA – SAP could not scale implementations without partners getting involved. I strongly believe that had partner enablement been efficient up front, HANA would have sold about 2X what is has sold so far. Good thing is that it is all good now – and I expect to see more traction from HANA.

HANA is not a discounted product. However, big SAP customers don’t buy SAP licenses without discounts.HANA is not at a stage that large number of customers will just buy without a sweetened deal. So SAP sales people will need to throw something into the basket for sake of discounting. It is a game SAP taught customers, and now they cannot do away with it.

From Den’s post, my understanding is that SAP has taken the foot off the pedal for Analytics part of their portfolio. I wouldn’t worry too much about this . SAP has a very capable sales force that can overcome this quickly in rest of the year.

But there is an investment question that worries me a bit. With most of the development force dedicated to Hana – and SAP keen on bringing out several new products ( Visual Intelligence, Zen, Predictive Intelligence etc) – I have a feeling that the Analytics team are in a position of doing more with less resources. Despite million man hours, BO 4.0 had bugs that many customers have complained about. SAP has been pretty good about solving issues and supporting customers. However, it remains to be seen if SAP can allocate enough resources to effectively cater to the needs of such a growing portfolio. Alternate approach would be to not trying to be everything to everyone in BI. But I doubt Adam Binnie and Jon S and Michael R would want to take that direction.

Analytics has several options to increase market share. Most ERP customers don’t have BOBJ presence for starters, and it is a market SAP can readily tap. And Analytics is by far the only HANA usecase for now. So there should be some pull through demand too.

Mobility seem healthy too – but despite SAP spending a lot of effort, I somehow don’t get the comfort feel on their value proposition. I am not holding by breath on apps saving the day – or even platforms. Where I see traction is mostly in Afaria. I am seeing some traction for mobility – and some for SFSF, but not to the extent that I think that this will be the next billion dollar opportunity for SAP. I could be wrong – and I will be happy to be proven wrong. It could also be that Hana just gets more oxygen and Mobility messaging just chokes for now . I will wait for Sanjay to chime in with how he sees the future.

All things considered – I am bullish on SAP, and think that they are well placed for future. I can imagine a lot of champagne flowing in China this week where SAPPHIRE is happening 🙂