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How SAP Plans to Grow in 2018

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Posted February 6, 2018 By Sean Michael Kerner     Feedback

CEO William McDermott does not expect to make any major acquisitions, but will move aggressively to grow the business.

SAP has aggressive plans for the future, which will see more workloads moving to the cloud and increased competition across multiple areas of the enterprise application world.

For the last eight years, William McDermott has held the post of CEO at SAP, helping to transform the company and leading it forward into the cloud era. Now in 2018, SAP is continuing to move forward, pushed forward by positive 2017 financial results and a big acquisition.

"Back in 2010, we set bold ambitions for SAP. We focused on our customers to be a truly global business software market leader, and we set out to reinvent the database industry," McDermott said on his company's fourth quarter and full fiscal 2017 year earnings call. "Today, we have 7,900 SAP S/4HANA customers representing 46 percent year-on-year growth."

For the fourth quarter, revenue came in at EUR 6.8 billion, up by 1 percent over the fourth quarter of 2016. For 2017, SAP reported full year revenue of EUR 23.5 billion, up by 6 percent year-over-year.

Over McDemott's tenure as CEO, SAP has acquired multiple companies including SuccessFactors, Ariba, Fieldglass, Hybris, and Concur. On Jan. 30, SAP announced the $2.4 billion-acquisition of Callidus Software to boost its customer relationship management (CRM) portfolio.

"The proof is clear: SAP converts acquisitions into fast organic growth stories on a global basis." McDermott said.

While SAP has done well so far under McDermott's direction, he emphasized that there is more to do. In 2018, he expects multiple key milestones to be achieved, including cloud revenue overtaking software license revenue for the first time. SAP will also focus strongly on CRM in 2018 in a bid to displace incumbents including Salesforce.com and Oracle.

"SAP will fuse our commerce solutions and S/4HANA fulfillment engine with CallidusCloud’s market-leading sales solutions," McDermott said. "Together, we will deliver the most complete end-to-end cloud-based offering in the market."

McDermott added that the CRM market is too big a market to leave alone, and some of the participants have had it a little easy lately. It's now SAP's goal to change that.

While SAP is investing billions to be a player in the CRM space, large acquisitions are not core to SAP's growth strategy for 2018.

"This is a tuck-in, probably the higher end of a tuck-in size, but this is not a trend," McDermott said. "We decided [on] a string-of-pearls strategy with CRM, and we executed on that strategy. "

He emphasized that SAP is not going to aggressively pursue merger and acquisition activity in 2018, but that doesn't mean that SAP won't be aggressive in its business and product developments, especially in the areas of artificial intelligence and automation.

"We believe this is not a time for measured ambitions," McDermott said. "In a world filled with anxiety about automation, SAP will lead a new economy where intelligent machines enable augmented humanity. SAP will come to the table on the global stage to help restore trust, which of course is the ultimate human currency."

Sean Michael Kerner is a senior editor at EnterpriseAppsToday and InternetNews.com. Follow him on Twitter @TechJournalist.

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