Dive Brief:
- SAP is leaning on its Joule copilot to help drive customers to its cloud-based S/4 HANA ERP, company executives said Monday, during a Q3 2024 earnings call for the three-month period ending Sept. 30. Just one-fourth of SAP's customers have started the transformation journey, CEO Christian Klein said.
- One year after Joule’s introduction, cloud generated more than half of the enterprise software vendor’s 8.5 billion euros ($9.2 billion) in Q3 revenues, up 9% year over year. The company’s cloud ERP suite was the main growth driver, Klein said, as segment revenues increased 34% year over year to 3.6 billion euros ($3.9 billion).
- “We are supercharging Joule with collaborative AI agents,” Klein said. “We have added over 500 skills to Joule and we are well on track to cover 80% of the most frequent business and analytical transactions by the end of this year.”
Dive Insight:
AI add-ons are just one of the enticements SAP’s deployed to encourage its customer base to shift legacy ERPs to the cloud.
The company revamped the RISE with SAP migration incentives program at the start of the year, promising to cut the cost of moving to cloud in half and provide customers with technical support to limit disruptions. SAP also created a board-level migration unit at that time.
“It was the right decision to centralize our cloud operations,” Klein said Monday.
“Some customers who are deeply on the journey to move to the public cloud suite, like Exxon and others, are now ramping up,” Klein added.
SAP is using a carrot-and-stick approach to spur migrations, adding data and knowledge graphing capabilities to the cloud ERP suite while warning customers that maintenance support for on-prem ERP Central Component systems will sunset in 2027.
Mainstream support for legacy ECC products — ECC EHP Packages 5 or before — will terminate on Dec. 31 of next year, but customers with more recent versions can extend contracts through 2030 for an additional fee, according to Gartner research.
SAP pledged a dedicated enterprise architect to each customer in need of migration assistance during a July earnings call and set out to hire technical support staff. Talent shortages are expected to create a bottleneck as tens of thousands of companies race to meet the 2027 deadline, according to Basis Technologies research.
More than half of current customers are likely to blow past the target date, Basis Technologies CTO David Lees told CIO Dive.
RISE with SAP buy-in slowed year over year in Q2, dropping to 41% of the vendor’s ERP sales from 67% during the same three-month period in 2023, according to Gartner.
While SAP does not disclose customer counts, the company increased its 2024 cloud revenue outlook Monday. Its current cloud backlog, a measure of contractually committed spend the company expects to recognize over the next 12 months, grew 25% year over year to 15.4 billion euros ($16.6 billion).
Klein touted SAP’s success selling IT leaders on the cloud solution but acknowledged the company could do better courting finance organizations.
“On the marketing side, we are doing a lot to excite the CIOs, but I’m convinced we can expand our footprint to the other buying centers,” Klein said. “The CFO should be happy when he sees how SAP can connect the financial planning with the HR planning and the supply chain planning.”
