Q4 2022 SAP SE Earnings Press Conference
Speaker 2: Get this and.
Speaker 3: Good morning everyone. Guten mong. I'm Oliver Rowell. I'm SAP's Chief Comm's Officer. Thank you so much for being with us today, either in the room or for those of you joining via our streaming platform. For those of you in the room, I think some of you were here a few years ago. It's so nice to be in person again.
Speaker 4: So thank you again for joining us. In a moment we'll have comments from our CEO , Christian Klein, from our CFO , Luka Mucic. Couple things before we start. One, please note that this session is being recorded. And then secondly, please note that all figures are non-IFRS.
Speaker 5: and all growth rates are non-IFRS at constant currency unless we state otherwise. Once we finish remarks, we'll hand it over to you for questions. If you're in a room in the front two rows, you have a wonderful device in front of you. Please press the button on the right-hand side at the bottom.
Speaker 6: and your microphone will turn red. If you're in the rows behind that, just raise your hand. And if you could also raise your hand in the front row, I'll kind of identify you and ensure that your question is asked. If you're dialing in via a streaming platform, I will be getting your questions on my iPad.
Speaker 7: and we'll obviously get to those questions as well. So with that, Christian, hello, welcome, and over to you.
Speaker 8: Thank you.
Speaker 9: Thank you, Oliver.
Speaker 10: I.
Speaker 11: I wish everyone a happy and healthy new year. And indeed, Oliver, I was this week two times in the canteen and I have to say the canteen was packed and it feels so much better to be back also together and also to have you all here now with us for our annual PwEIS conference.
Speaker 12: I would like to keep my opening speech pretty short, to also allow time for questions. I have three buckets which I would like to outline very quickly about financials, about strategy and portfolio and of course to talk also a little bit about our outlook.
Speaker 13: The years to come I mean, let's start with financials and let the numbers tell the story
Speaker 14: And here, I mean, we have a chart prepared with two lines, which actually also tell the story best.
Speaker 15: I mean we started with a significant relaunch of our strategy two years ago. Luca and I also gave our shareholders, our investors a promise.
Speaker 16: give us two years to transform SAP into a true cloud company.
Speaker 17: And we will sit here then after two years and we will also deliver strongly then also on the bottom line. Now, if someone would have asked Luca and myself, you know, what in the meantime could happen in the world, we would never ever have expected a terrible war.
Speaker 18: in Russia, followed by the exit of SAP. In Russia, we would probably also never have predicted the high inflation environment we are living now in here, and of course also COVID.
Speaker 19: was still coming up but of course not to that extent was not expected and still
Speaker 20: we delivered on our promise. We didn't change our revenue guidance.
Speaker 21: despite all the macroeconomic curveballs we had and we also now guided today for double-digit operating profit. And I can share with you that transforming a company of that size is never easy.
Speaker 22: You can find easily also examples where maybe the transformation didn't happen. Now SAP reached a very important tipping point showing and proving to all of our employees first of all, where I'm very proud of that they are supporting this transformation in such a substantial way but also showing
Speaker 23: to our customers, partners and investors that SAP is now a true cloud company. And when you look at the numbers in Q4, our current cloud backlog is 12 billion. Today we're going to report for the first time our total cloud backlog amounting to 34 billion of Euro, which is in the...
Speaker 24: across the tech industry.
Speaker 25: And then again, I guess even more important for Luca, but of course also with my support, we were very keen of course also to transforming our portfolio and to scale and reach our promise of delivering also solid double-doubles.
Speaker 26: double-digit operating profit close and there was a lot of work going on in 2022 which is now paying off.
Speaker 27: If we continue...
Speaker 28: to our strategy and portfolio.
Speaker 29: Last week.
Speaker 30: It's like
Speaker 31: Years or months ago, Star Wars.
Speaker 32: Of course, as every other CEO I attended a lot of panels and attended a lot of forums. And if you believe Davos is solving in one week all the challenges of this world, I guess this is too high of an expectation. But what you can do is to collect ideas and to verify.
It's your company on track and now we're focusing with our technology on the most pressing needs of our customers.
company on track and are we focusing with our technology on the most pressing needs of our customers? Yes we do.
This is why we are also so confident about the year to come because...
when you look at the first pillar.
A few weeks back I was in Brazil and talked to a chemical company called Unigel.
complete change of their business model as we are doing it in the tech industry and replicated to thousands of our customers and they want to become one of the largest green hydrogen provider in the world. So they need our solutions.
to change the upstream and downstream processes in their company.
But even more, they said, hey, we want to deliver this green hydrogen to Germany. And Germany wants for me a certificate to show that the hydrogen is green.
So they need our sustainability solutions to deliver
transparency across scope one and scope two around carbon footprint. And is the hydrogen, at the end of the day, really clean? And we are doing this together with them.
Last week I met the Ukraine government in Davos.
And we announce now a partnership where we have to quickly deliver.
and our access to our network where we are helping them to build a very resilient medical supply chain for the people in Ukraine who need help, who need medical supply and they are doing this with our business network where we have millions of suppliers and buyers
And as you also have heard about Katina, we are now doing this to...
to the automotive industry but also with our minister Harbeck. I talked last week that we want to replicate this now to manufacturing.
and chemical and now this is going to be a very big business for SAP and
I call it actually this could become also the Amazon of the B2B world.
And these topics...
They are really relevant these days for our customers.
and they are thriving our portfolio.
But
Look at the customer logos here on that slide and I know SAP is known for running the world's largest enterprises. And yes we do. I mean this morning BMW announced a strategic partnership with SAP. They are going all in on SAP.
And again, our transformation is not only a technical shift to the cloud. I cannot emphasize that often enough. What we are doing with BMW is actually automating their factories, their manufacturing, where we are using our AI to really make sure that on the shop floor, also with predictive maintenance, we are giving them the best quality of life.
also helping them on ESG transparency, what I just mentioned before. We have Porsche, we Lockheed where we are together with Google building one data layer for Lockheed Martin to steer the business in real time to optimize inventory in seconds and not in months.
Just to give you some flavors, this is not only a shift to the cloud.
This is much more to that. But also very important is...
The new SAP is also about that small and mid-sized customers come to us in the cloud.
We have GoLives in weeks, in months. Dr. Lib.
NetSuite replacement we did last quarter is now live.
fully live, end to end, use now our ERP, our S4HANA Cloud solution to scale their business, to expand their business.
in order to also make the next step in their company.
Evaluation.
If we then move on.
Why are we further working on optimizing our portfolio?
why we are further working on optimizing our portfolio.
Two years back.
We almost started with zero cloud business in our core.
The business technology platform, and we heard the criticism, was a platform which was not built for integration. In the meantime, we put a lot of engineering work into this platform. It's the foundation of our portfolio. 80% of our deals are having the business technology platform with it.
where we not only integrate our modular cloud applications to increase agility, to increase speed for adoption.
to shorten time to value for our customers. Not like in the on-premise world where it sometimes took years to implement the huge system we are offering.
But also to also extend the solution. This is a movement where our ecosystem, where Accenture, Deloitte, the IBMs of the world and look at what Microsoft this week announced, the 50% growth of the SAP business, they are with us and building side by side new innovations on top of this platform because the ERP per se wants to...
very mission critical, but also complex business scenarios. An extension is key, and this is why this is such an important pillar. Now, we are seeing the win rate in ERP, 90% growth in S4HANA Cloud Q4, again an acceleration. We see win rates whenever we connect our lines of businesses to the core of what SAP does.
But, and this is also a very difficult decision to take.
We see other areas where we still see optimization.
And while we are very confident to deliver on our outlook on 2023, also with the high RICO and Gavinshah we have in the meantime.
You know, sometimes you also have to make decisions to look beyond 2023.
This is where we said we also going to make the difficult decision to do a restructuring.
I saw a quote this week where Satya said,
Technology industry is really unforgiving.
And we, as the Executive Board of SAP, just want to make sure that SAP is never behind.
in the places where it matters for SAP's future. And this is why we are doing a targeted restructuring. It's not performance based. It's a targeted restructuring where we are optimizing our portfolio. We are winning in CIM in certain places every time when we connect.
our CIM capabilities to the supply chain, to inventory, where we are coming with our industry expertise. But we have other places where we can still optimize our portfolio in the CIM and the industry portfolio. And this is what we are doing. This has a very moderate impact on 2023, but it allows us also in the years to come to be able to do this.
to deliver further on our commitments on the financial side, but also of course allows us to invest into the areas where it matters for LCP to be even more competitive in the future.
And with SAP it's never getting boring so we have more news to share today. We also announced the intent to...
explore a sale of our staking Qualtwix. So why?
Look, when we acquired Vaultrix a few years back,
We acquired for sure.
the best product in the experience management market.
management market with triple
failed since then.
We actually have a very successful partnership both on the technology and on the go-to-market side With wine and sick and the team there we definitely also have the best
team who actually also is living in precinct.
experience management. Now, why did we jointly make this decision?
On the one hand side, Sigg and Wine said, hey, great partnership with SAP and we already had this in mind when we did the IPO back then and said, yeah, but we want to do even more partnerships like that.
We are seeing that we want to invest into our capabilities in the core, where we see high win-weights, where we can further expand our market share. And at the end of the day we said, hey, we can do what we are doing today, continue our partnership.
But then, you know, what we can also do, we can enhance the value of our shareholders, which was the most important factor which led to this decision.
And this is why we are doing it, to continue the great partnership what we have, but also to do what is right, what we believe is right for our shareholders.
So finally...
We are the number one enterprise application company.
And when I see the growth rates in the core
When I see the net new names joining us, when I see the partners coming into this.
When I see how our products evolve and when I see when I look at our leadership team and we got some new additions to the family over the last two or three years.
I could not be more happier about.
the state of where we are. We are confident about 2023 despite the difficult macroeconomic environment.
And again...
Luca and I both...
agree that
Despite a lot of curveballs we had in the last two years, we never adjusted our revenue guidance once and we delivered.
We delivered on our promise also on the bottom line. This is where I would like to thank you, our over 100,000 employees worldwide, because again, we are also changing their daily lives.
and this transformation also is a lot of change.
I am very happy to lead this company and I am very happy about the support we are seeing day in and day out. Talking about support. I am very happy about the support we are seeing day in and day out.
It's a pretty emotional day, I guess for Luca even more than I do.
We just said it's our last dance and...
I would like to thank Luca for 37th earnings.
This is a lot. But even more so, not only for the partnership. I mean, we know each other for a pretty long time. I also have to thank Luca for his mentorship.
Again, being a CFO and supporting such a tremendous shift in our strategy was also not easy, but we were in this together. Luca, many thanks for your personal support. I wish you...
only the best for everything what is coming. I guess a world tour is coming with your daughter and I'm very happy to hear that and no again many many many things Luca and over to you.
Thank you very much Christian, at least you saved the last dance for me, that's very nice. And to also quote another statement from the music industry, the great and late John Lennon once said, in the end everything will be okay, if it's not okay, it's not the end.
This is indeed for me the end, but everything is okay for SAP and that's the most important thing. I'm actually proud That I have the chance to leave the company that I owe a lot for at the position where we have come positively out of a tremendous transformation
and are actually now in a position to reap the fruits from it. And that's essentially what you see covered in our numbers, as Christian already highlighted. We hit all of our outlook promises for 2022. On the top line, despite the headwind that we got from our exit,
of Russia as well as the divestiture that we did in Q4. On the bottom line, again, despite significant headwinds that we also drove from the exit of Russia, which was a very profitable and also cash generating market for us.
in the past. So, despite the fact that due to the exit from Russia we had to adjust in April our guidance for operating profit, if you make the math and include the impact that this exit had, we would have comfortably met also the original guidance outlook on profit without this event unfolding. But for me, more important is...
the position that we are in when we look into the future. It's very important to see that we closed a very strong year in terms of our cloud order entry. We ended the year with 24% constant currency adjusted growth, despite the fact that we had a 1.5% roughly headwind from the exit of Russia, as well as the divestiture of labor.
current cloud backlog growth of 27%. So there you can see the trend towards larger transactions with multi-year ramps of the type of the arrangement that we just closed with BMW, where many of those large transactions in the fourth quarter and in 2022, actually in Q4 for the first time, our share of a large...
product as Christian said a couple of years ago that was a rounding error in our cloud figures now it's already from a backlog performance the largest of our single cloud businesses still growing at very very high rates 82 percent backlog growth at the end of the year
actually in Q4 even higher revenue growth, so still accelerating to 90% growth, 79% in a full year. And next year, so in 2023, it will also not only from a backlog but also on the revenue side be the largest of our cloud businesses. And that underpins the success of the business transformation.
I will come to that in a second. So now we are entering the second leg of our business transformation in which we will see acceleration both on the top as well as on the bottom line. And very important, the predictability of our business increases as well. We increased our share of predictable revenues by 4% during the...
For us, it has been always very important to also stay focused on the key non-financial indicators that we use to drive our business.
As you will know, we are considered a leader in the sustainability space in our industry and beyond. And therefore aspects around supporting the mitigation of climate risks, supporting diversity, supporting the impact that we are having from a social perspective.
close to 30% now, which is actually up more than 4 percentage points from where we were just five years ago in 2017. You see nevertheless also on a non-financial front that the world is a challenging place these days. There's a lot of volatility and uncertainty.
that SAP is moving into the right direction that we help them also through difficult times which are sometimes inevitable and the same on the customer front where we also have to have the same focus. Now just very briefly I wanted to kind of give you a little bit of a view of how powerful actually the underlying business transformation is in
different and what you can clearly see is when you look back to the end of 2021 when we had just one year after the significant strategy change that we jointly announced Christian and I under the belt we wanted to achieve three things first of all accelerate our move to the cloud and that would come along with accelerate
resiliency of our cloud infrastructure. And we were clear with the capital markets that this accelerated shift to the cloud would mean more muted revenue growth at the total company level for two years and then followed by acceleration. And on the profit side, it would lead to two years of flat to slightly decline.
work now in the cloud. We continuously increased our growth momentum through the last two years coming out of the pandemic impacts. Actually in the total revenue and cloud and software revenue line we did better than I would have expected in particular due to the strong resiliency.
of debate and a lot of attention by the media and the capital markets, you can actually see that our cloud business continues to amplify its contribution in terms of gross profits with even higher growth than on the revenue side.
and that helps the total gross profit of the company also very well. On the operating profit line, yes, the investments in R&D and sales and marketing have dampened the progress and of course in 2022 we had the curve ball from our exit of Russia on top of everything else, but now the curve is bending upwards and clearly what we have seen in Q4 2022.
looking back two years out, have increased even the one in our software and support business despite all of the declines that we have seen in this business so far. So as we are now moving to a state where the incremental investments in R&D and sales and marketing capacity are moderating.
then we will see the full strength of the underlying efficiency of those business models coming through and ultimately returning the outsized growth in profits while continuing to accelerate on the total revenue and the cloud revenue line for us in the next coming years. And that brings me then as a final point to
To the outlook which we have published, I think we are keeping the promise, which has been very important for me as well, with continued strong growth in the cloud based on our strong backlog performance up to 25% at the high end at constant currencies, an acceleration on the revenue line.
is again the increased resilience and predictability of the business with an 83% highly predictable revenue share. Our midterm ambition on that matrix for 2025 is for approximately 85%. So we are well ahead as we have said on other matrix and occasions.
we will reach zero emissions across SAP in its own operations. So we're well on our path to achieve the net zero across our entire value chain by 2030 and we will stay focused on customer satisfaction and employee engagement but acknowledge
for the always constructive and respectful dialogue that we had over the past many years. I certainly always try to do my best to provide you transparency about where we are going as a company and where our current performance lies and where the strategy is leading us.
I hope that I have achieved that target despite of course all of the volatility that we have seen in the last few years and also the unprecedented transformation of our company in the time I was CFO . But it was always a pleasure and a privilege and thank you for allowing me to really stay close to you throughout all of this time. And with that...
I think we are ready for Q&A and thank you for your attention so far. Thanks Luca. Thanks Christian. Let's turn to questions. If you have one in the room just raise your hand and I'll find you. And if you are in the front two rows there is a button on the bottom right of your device. If you are in the back just we will bring a mic. And if you are streaming in ask your questions through the tool and we will get those answered too. So why don't we start over here. Hello from Reuters.
Could you just also state your name and who you're writing for? Hi, I'm Harkan Hezen from Reuters. I have two questions on the job cuts. First, since when is that job cut? When did you have them the last time? And the second one is you said...
that you look beyond 2023, what do you see there for your company and the sector as a whole when you're cutting 3,000 jobs or did you just overhire like some of the other companies?
Thank you.
Okay, we definitely didn't over hire and you see that our business is over proportionally growing and but as I said and look this is never an easy decision to do a restructuring and
But for us it's very important to also set our CIM and industry business up for success.
and also to allow SAP to be even gaining further market share and the area where it matters to this company.
This led to this decision and while we are of course doing restructuring, we still continue to invest.
which is the right thing to do because you cannot just, you know, freeze the company or you cannot just, you know, sprinkle your investments. That would be absolutely the wrong thing to do. And that's what led to this. What I'm seeing for the tech sector...
It depends. I mean, the tech sector is big and in a while in the pandemic, there was a huge focus on digitizing the front office and we benefited from that also in our commerce business.
Now it's a lot about automation of the core business processes to offset inflation pressure. There is huge pressure on many bottom lines and the guidance you have seen from us today is something I guess pretty substantial because we feel the pressure as well. But our technology helps and we are betting on our technology, of course, inside.
thousands of other customers are now investing and doing the same to further try further automation, increased productivity, supply chain sustainability. And that's why when you are in this part of the business, I actually see healthy growth rates and...
While other parts of the tech industry are maybe seeing now more like moderate growth, but for us it's very important that we see we are actually at the heart of what our customers now need and that what also leads to the confident outlook. And just to add on top of this, I think you made a good...
options and also significant voluntary programs. We are not doing this this time because we don't have a broad restructuring need and we have one that is very targeted to specific areas of the company in order to be able to still appropriately invest in our core growth areas and still satisfy the commitments that we of course have made.
we see great momentum entering into 2023. Our visibility in terms of the share of predictable revenues is getting better. And clearly we have an ambition in the future years to also deliver on the further promise that is actually to see the revenue and profit growth further accelerating also beyond 2023.
For that, the program will provide a meaningful benefit, will result in run rate savings of 300 to 350 million as of 2024. But the main purpose is really to continue to invest properly so that the growth stays as positive as it is.
currently and we are very confident in that. Thank you Herr Ersan and Herr Freiße. I think you have a question. Bottom right.
That's it. You're on.
Just a follow-up. So why is the broken so expensive you mentioned not to pay for early retirement? and broken so
Where do the costs come from? But first of all, I don't think that it's expensive we are calculating with 250 to 300 million In 2019 where we had I think a little bit more than 1,000 more and we paid actually over a billion So there you can see already
that it's in line with the size of the program. And it consists obviously of severances to those who are subject of the program. And also to a certain extent to the acceleration of equity vesting. And that sums up to that amount.
Was there another question here at the front? Hi, Sebastian Schmitbau, Sado. Well, two questions. First one concerning Qualtrics. What did not materialize? I mean, you bought the company, they intended to go public. Yes, it grew. What did not materialize?
But certainly there's some things that you expected that didn't come to fruition. And the second question would be, when it comes to restructuring, you're often talking about CRM and not going the way that you actually hoped for. Is that also a possibility to use the CRM and not go the way that you hoped for?
the money that you will probably get from selling Qualtrics to invest in M&A and basically find something that will help you more in the CIM on the CIM side then probably Qualtrics did which was probably something that you also were hoping for.
What led to this decision to now consider potential sale of Qualtrics? When we did the IPO back then, we already knew that this probably will not be the last step. The numbers are proving it. Qualtrics reported last night the earnings. They are making great progress both on the top and bottom.
about the feedback and it's incredibly important for us to have this sentiment data for many other customers out there as well. And we also gonna continue our go to market partnership, nothing will change. But what you can also see, I mean we have a lot of ideas.
to further expand and accelerate our growth in the core. And that will of course allow us to double down on our investments into where SAP is currently super strong at and where our customers are also asking us, hey, do more!
When you would ask our product owners these days, they have a lot of ideas on AI, on certain transformation capabilities, on the business network. I mean, we have so much potential there. And also think about one thing.
Also this discussion around Fionr. We also have to realize when you compare our market now to the market 10 years ago there was a red company and there was a blue company.
And now there are more and I guess it's super important.
to have this focus and to see us winning where it really matters to give SAP also a very bright future and we are on a very good track and trust me today Luca and I would also love to talk to you about different things but sometimes you have to make this very difficult decision to strengthening where you are super strong at.
and to let things go while, and this is not the end of the world, you can still continue your partnership with Qualtrics. And again, we also believe that this is at the end also the best for our shareholders both on the Qualtrics and SAP side something
We should also always have in mind when we are doing these decisions. I think that's important. I think we see an opportunity to crystallize more value, both for Qualtrics shareholders as well as for SAP shareholders. Because honestly speaking, we are super satisfied with our collaboration and with the momentum that Qualtrics has enjoyed.
We're not sure whether the market is at the moment in this set up giving the right recognition both for SAP as well as for Qualtrics for this success and I think crystallizing this value through a sale might help on both ends while at the same time giving us...
the ability to invest in further assets that are close to the core in general are M&A philosophy in the future if we decide to you know invest parts or the whole of any proceeds that we get into an acquisitions Has evolved over time. It's now way more focused on strengthening our
So if we engage in any acquisitions, it is always going to be way more likely to happen in areas that are close to our core. That's important to note. And I guess one final remark. When you compare SAP to our peers,
There is no lack of market for us. I mean we are dancing on so many fronts. I mean we are an intelligence brand, we are in ERP, we are in supply chain, we are in HR. We are in CIM in dedicated markets focused where we see the win rates are high. Not everywhere but where it makes sense to win customers like Coop who trust in us.
to also understand retail and try customer loyalty and customer retention. And so there is enough market and it's very important for us to also make sure that in these markets we have enough investment and that we use partners to help us to expand our portfolio. And that's also so much different.
Our ecosystem actually has seen even higher growth in the last year. And that's also a mindset shift, where we are constantly reminding our product owners about, the code can come also from partners, great products can come, you can position partner solutions as much as SAP solution. That's going to be beautiful because we are enhancing our value.
I guess this is the way to go and to even strengthen our competitiveness in the market. Let's take a question. A few questions are coming in of our streaming platform. If you have questions in the room, just raise your hand. I got you, Havela. This is a question, Havela, we'll probably start with you.
of the Plata Brief. How worried are we about activist investors like Elliot who are focusing on the software and tech sectors and what factors are protecting us from those kinds of investors? Well, first of all, I think in general, the best strategy for having a constructive dialogue about Upstate Lab and social Fellows is to try and narrow down the congressional
argue that we have exactly followed the playbook of our strategy and we have delivered operationally and from that perspective as long as we continue to do this I think we will have support and we will also have positive engagement with our shareholders as we are enjoying it today.
I know that this question is certainly based also in part on the fact that we had actually investment from Elliot in SAP a couple of years ago, and I must say we had a constructive engagement with them then. We seek to have this constructive engagement with any
investor that is part of our shareholder roster and I think constructive engagement and transparency are the right recipe whoever the Counterpart is not only on the shareholder side the same goes with customers or the press for that matter as well So let's go back to the room Havila from DPA
Just a short question regarding your customers. Your net promoter score decreased in the last year. What do you think was the reason for this and what are your plans to achieve a better result this year? First of all, you have seen our customer NPS increasing in the first half year and then the second half year. We have seen our customer NPS increasing in the last half year and then
We increased prices about 3%. Is this enough to cover our pressure we are getting from inflation? No, it's not enough. Are peers of ours doing much more? Oh yes, they are doing much more. But we are saying, okay, let's do it more in a moderate way. Still, of course, customers are never happy.
But we also believe that over the mid and long term we are doing the right thing because at the end we of course want to do also more business together, we want to go in a way together. And that's why we took this step and what we are seeing in the results when you break it one level down, it's exactly this impact what we have seen in the half year too.
So I have another question coming in online from the register and it's referring to a Gartner comment that 69% of S4HANA has not been licensed for the ECC clients according to Q3 data and will we extend the 2020 session to the next session?
Again, there is a long list of what we have in mind to deliver on AI, to deliver on user experience, to deliver on new capabilities around the supply chain and sustainability. And for us it's very important that we convince our customers to move with us with value and good business cases. SAP is the only software vendor.
in the ERP space who still gives a commitment for on-prem until 2040. There is no other one who gives such a commitment. And that also costs us money. In a world like that, we are investing over 1 billion in localization. 1 billion. And because there are geopolitical tensions, there are legal requirements coming up here, there, everywhere. China, India,
I mean there is so much change, but we gave the commitment that we are not leaving one customer behind. But at a certain point in time, we also have to make sure that we are moving together. This is why we are working so hard. And when I look at why and the success there, I mean customers are moving with us. And you know, I heard the number, I can share with you the internal numbers there.
Looking very good because we see a lot of customers now who are making, you know, who are starting the way with us to move to S4HANA. And again, there is choice. There is a choice between on-prem, running hybrid landscapes big time, but of course, we also move a lot of customers to a much more agile landscape in the cloud.
And this is of course the commitment that we as SAP also will continue to give.
I'll come back to those of you on the streaming platform, Frau Kraus. Your question, please. Is it on? Yes. I got a question for the restructuring. We all know these early retirement programs we always had, and I know, Mr. Muttick, you already said something about that, but I want to ask you about the early retirement programs.
Could you make it more clear why you don't do it that way now? Look, the early retirement programs that we have done in the past, they were pursuing a different target and objective. In 2019, but also in 2015, we actually had broad-based programs where the main target was actually
on single areas of our business. It's not geographically focused. It's really focused on topics. And therefore, a early retirement program would not be the right means to go after it. It's really surgical and targeted on the business areas that we have to harmonize and consolidate.
you one example our supply chain business is heavily successful these days on the sales side led by a gentleman called Bern Brondel he's here since
For example, our supply chain business is heavily successful these days. On the sales side, led by a gentleman called Bernd Prandtl, he is here since, I don't even know, but for a long time.
And I need these people like him because he has so much expertise. When we are selling, we understand this business inside out. And I need him to transfer his message to the next generation and to the next generation. And I want to, and these people have an incredible contribution to the success of these companies. And you need new people coming in.
with new ideas or with new skills. We talked in the morning about cyber and we are bringing this together. But this diversity is at the end what makes us so successful. And this is why we need all of them, young, old... Are we mid-aged, old, young? I don't know.
But we need everyone. Speak about yourself. Because this is also a discussion what we have internally. I want to really emphasize that here. We need everyone.
So there's a couple of questions that came in on the tool and they're very similar. Could you give us a sense of the 3,000 positions that we've been talking about? What are some of the areas being de-emphasized? Yeah. When we talked about…
CM in industry and look, oftentimes when we are winning it's with our industry capabilities. When you, we have here, by the way, if some of you have time, I would welcome to look into our manufacturing showcase here, where you're going to see from the design of a product to the delivery to the logistics, how we can digitize this core process of our customers end to end. F fluctuate with a
Always when we lead with industry, we are going to win. Same as in the CIM. But then we also have areas where we actually competing stand-alone. Less success. So we want to focus double down on these areas where we see strong win rates in CIM and there we are also going to invest, it's very important. But then we also see overlaps between the industry solutions and the CIM solutions. We cannot always serve 25 industries.
And that's one main area. And the second area is when you look at our customer success, we brought huge teams together. And in the transformation, you invest, and we invested heavily the last two years. But of course, there are certain things that we can do.
things in the operating model of a non-prem business compared to a cloud business, which you also over time need to harmonize and where you need to shift.
We do a lot with free-skilling, but also there we double down on and have to say, yes, we can also there be as a company a bit more efficient, more productive. And this is actually two of the main factors what led into this decision to do a restructuring. Is there another question in the room? Hek hek man bitte.
Thank you very much. Now it's working. I have a question about artificial intelligence intervals. There have been many discussions about how a new generation of AI, generative AI, can change business. I would like to...
here if there are any internal discussions about how it can change the SAP business and if so if there are any projects that you're working on? I mean internally, I mean definitely there's a lot of talk about chatgpt and I guess I have to give kudos to open AI because they actually managed
logistics app or a new supply chain app I would not go that far. But where it can help we get millions of tickets about how-to questions.
And we definitely gonna see that AI is capable and this kind of technology is capable to automate a lot. To drive efficiency, productivity there by a huge factor. We are translating our software into...
over 100 languages, much more than that. Are we actually partnering and using such technology to try further automation there? Absolutely! We are growing our business but we are not growing the amount of people for such an activity, for such information on localisation activities.
And so these are only two examples, but we can also see some examples on, of course, digital assistance are very important, you know, questions and search. It's very key also in the SAP world. So there are multiple scenarios where we are doing a lot of research, but of course we are also now implementing more and more practical use cases as part of our portfolio.
Anything else in the room? We're getting to – Okay, so can you just give us a sense, Kristin? You did comment on this briefly in your comments. But at the macro level, talk to us a little bit about the demand of tech and kind of the different perspectives we're seeing in terms of the general cost of demand of the tech in this environment that we're currently in.
When we look into Q4, I guess Luca it's fair to say, when SAP would have been the company it was two and a half years ago.
we would be in trouble because to justify an on-premise business case with a lot of capex investment is not easy these days.
and a lot of CFOs clearly watching the spend which is also going into IT. So it is definitely not an easy place out there. But in the cloud, first of all it is a different way. We are changing the license model. But on top, as I said, for me it is just very important. You can talk about AI day in and day out.
But at the end it is very important that our product owners can explain us what does it do to the business, what does it do and this is for us very important that we have technology with which is not nice to have but relevant, very relevant and this is what we have in the areas which I already outlined a few times. And then of course we see…
When you talk to other decision-makers, CEOs these days, I mean, will be the industries where the quotes will go down? Absolutely, will be the other industries where, you know, digitization is at the forefront and they will quote their business? Absolutely. So this is not something where you can say, you know, everything will develop in the same linear way. But I'm actually cautiously optimistic because look at the inflation reduction net. Now, we can complain all day about, hey, this 99-day ecosystem we are inDAQ bear on demand. Yes, I believe this. This is not the likelihood you'll see the financial recovery of this economic growth scale that you see today. Yes, you may or may not. I feel
we in Europe , you know, there's SAP and a few more but, you know, they understand the public sector can be way more efficient if they digitize in a consequent manner. So they are doing this. Now, I have to say on looking at Europe in the last month there were clearly some good decisions as well.
And this is not going to mean to go into a trade war. That would be bad for everyone. We have enough of that when you look at, you know, US and China. But it's about, you know, fighting this environment of very high inflation and, you know, helping especially those companies in the mid-market, the term Mittelstand, for example, who really need it when you look at the energy prices. And so I would say there's a lot of action.
also now coming from the public sector from government, which is good. They should do it together, build bridges is very important these days because especially as Germany is an export nation, we should really be keen on keeping this. And so I'm cautiously optimistic, but of course, you know, depending on which industry you are in, depending on which.
Thank you very much. One question. After the third quarter figures, you said you would give an adjusted outlook for mid-term outlook for 2025 because of the strong cloud transition. How you postpone this outlook? Is that a sign the macroeconomic growth?
I guess Luca already mentioned it when you see that the reco and revenue share when you I mean our midterm guidance is based on a 22% close CACR in the cloud when you look at you know What we delivered last year and what we are going to deliver this year. We are ahead of plan and we are very confident
to also overachieve this plan. But now we also announced the intent to sell Qualtrics and so we said, hey, let's put this together. And by Sapphire, you have my commitment. We are going to update then also our outlook together then with Dominik and this is now the agreed plan we had. Also with the buy-in from Luca and that one. There is just a very easy answer. I generously agreed to give Dominik a great start.
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