An Introduction to SAP - SAP.com

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SAP – Leading the Digital Transformation Commerzbank Sector Conference Frankfurt, September 1, 2016

© 2016 SAP SE Investor Relations. All rights reserved.

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Agenda Focus – SAP Digital Business Services An introduction to SAP Helping customers win in the new digital economy SAP’s long-term financial ambition Why invest in SAP Appendix

© 2016 SAP SE Investor Relations. All rights reserved.

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SAP Digital Business Services is the trusted partner Industrialized & preconfigured Services

Direct feedback into SW development Reduce TCI & TCO

Realize the digital enterprise

© 2016 SAP SE Investor Relations. All rights reserved.

Faster Time-to-Value

Move customers to the Cloud

Make S/4HANA the digital core

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Next Generation Services New Products to High Adoption Fast, Standard, Safe Standard Development New Product Release

Innovation Adoption Lab VALUE ASSURANCE

Model Company: Run Live • Ready-to-go E2E system landscape • Industry business content • Rapid prototyping (in the Cloud)

• Team: Dev & Services, dynamic, rotational staffing • Customer selection: digital lighthouse accounts as start

• • • •

Coverage: global, Presales to Run supporting each MU First focus: IoT and Machine Learning Roll-in: direct feedback into Development & Services Roll-out: Spread knowledge into ecosystem

• Service extensions, no SW dev

© 2016 SAP SE Investor Relations. All rights reserved.

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Agenda Focus – SAP Digital Business Services An introduction to SAP Helping customers win in the new digital economy SAP’s long-term financial ambition Why invest in SAP Appendix

© 2016 SAP SE Investor Relations. All rights reserved.

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SAP is the world’s leading business software company

A compelling customer base

Unmatched vertical expertise

~320,000

25+

Customers

Industries

Percent Global 2000 that Run SAP

© 2016 SAP SE Investor Relations. All rights reserved.

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For over 40 years, SAP has turned technological change into customer value

Business software & online processing

Globalization & mainframe computing

Internet & clientserver technologies

In-memory & cloud computing

SAP R/1:

SAP R/2:

SAP R/3 and SAP ECC:

SAP S/4HANA:

Enabled customers to get a complete view of their business with real-time processing of data across integrated modules for materials, procurement, and accounting.

Helped customers successfully manage large global enterprises on a mainframe architecture, while retaining the integration and real-time processing capabilities of SAP R/1.

Enabled customers to take advantage of client-server and internet technologies. Created a unified graphical user interface and new functional components.

Helps customers thrive in the New Digital Economy. We are now focused on eradicating complexity and running live with our in-memory database technology SAP HANA and cloud computing.

1972

© 2016 SAP SE Investor Relations. All rights reserved.

1982

1992

2015

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Today, SAP is running the world’s mission-critical business processes 76% of the world’s transaction revenue touches an SAP system

SAP’s brand value ranked #22 of Top 100 worldwide1)

SAP touches $16 trillion of consumer purchases around the world

Among the Top 100 companies worldwide by market capitalization

SAP customers distribute more than 78% of the world’s food

Broadest global footprint APJ 3.2bn | 15%

SAP customers produce more than 82% of the world’s medical devices

Revenue Americas

EMEA 9.2bn | 44%

8.4bn | 41%

2015 1) Source:

MillwardBrown 2016 BrandZ Top 100 Global Brands

© 2016 SAP SE Investor Relations. All rights reserved.

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SAP will continue to drive business value – fueled by three powerful trends affecting all businesses in all industries Innovations Software-as-a-service

Cloud computing

Platform-as-a-service Infrastructure-as-a-service Big data analytics

In-memory database

Machine learning & artificial intelligence Internet of Things Network marketplaces

Hyper-connectivity

Online platforms Mobile devices Social media

© 2016 SAP SE Investor Relations. All rights reserved.

Business value • • • •

Substantial economies of scale Easier consumption of software Lower barriers to entry Benefits of IT spread more widely



Instant insight and decision-making based on “live” data



Reduced operational expenses driven by new wave of automation

• • •

New business models Improved business processes Reduced risks and costs



Multiple new ways in which companies can interact with their stakeholders

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Agenda Focus – SAP Digital Business Services An introduction to SAP Helping customers win in the new digital economy SAP’s long-term financial ambition Why invest in SAP Appendix

© 2016 SAP SE Investor Relations. All rights reserved.

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Only SAP can help businesses implement their digital strategy

Business Networks

Customer Experience

Digital Core

Workforce Engagement

SAP HANA Platform

Security

© 2016 SAP SE Investor Relations. All rights reserved.

Internet of Things and Big Data SAP HANA Cloud Platform

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In the digital core, SAP’s next-generation business suite SAP S/4HANA helps companies harness “live” data for immediate action  Groundbreaking new architecture: SAP S/4HANA has changed ERP from a system of record to a system of innovation  It provides immediate insight, intelligence beyond automation, integration between departments, and connections to the world  These technological advances were made possible by the most advanced in-memory platform available: SAP HANA  SAP S/4HANA provides an enhanced user experience with SAP Fiori  SAP offers on-premise and cloud editions to provide customers with real choice  SAP S/4HANA is catalyzing broad customer adoption of our entire innovation portfolio

© 2016 SAP SE Investor Relations. All rights reserved.

>3,700 SAP S/4HANA customers – fastest upgrade cycle in SAP’s history, four times the adoption rate of SAP R/3 in the 1990’s

>7,000 trained partners

3,750 startups developing on SAP HANA platform

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SAP helps companies, ISVs, and partners create value in networked economies SAP’s unique business network assets  SAP is leading the charge in connecting businesses and building new ecosystems across all spend categories – materials and services with SAP Ariba, contingent labor with SAP Fieldglass, and travel with Concur  These network solutions are highly synergistic to SAP’s other offerings

SAP is a forerunner in the Internet of Things (IoT) revolution  Drawing on deep insights into companies’ business processes and leveraging a broad range of products and technologies  IoT use cases include:  Monitoring the status, location, and movement of physical assets  Providing contextualized experiences based on information from sensors  Delivering new services based on IoT-enabled products  SAP HANA Cloud Platform plays a key role in consolidating all the data generated by IoT – and enable advanced analytics on top of it © 2016 SAP SE Investor Relations. All rights reserved.

~2.2 million connected companies trade over $820bn of commerce on the SAP Ariba Network

~42 million end users process travel and expenses effortlessly with Concur

>2.6 million flexible workers were managed in about 130 countries over the past 12 months on the SAP Fieldglass platform

~75 billion connected devices in the Internet of Things by 2020 Page

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Companies can now run real time – based on a holistic view of the organization, instant insights, and predictive analytics Total transparency • • •

Get a 360° view in real time Visualize insights in context Align on one source of truth

Instant insights • • •

Answer ad-hoc questions on-the-fly Analyze root causes Simulate impact of decisions

Simplified boardroom processes •

Reduce preparation time and effort

For a demo, visit http://www.youtube.com/ watch?v=ofq7ygnWpbw © 2016 SAP SE Investor Relations. All rights reserved.

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Agenda Focus – SAP Digital Business Services An introduction to SAP Helping customers win in the new digital economy SAP’s long-term financial ambition Why invest in SAP Appendix

© 2016 SAP SE Investor Relations. All rights reserved.

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2016 outlook and long-term ambitions

2015*

2016

2017

2020 ambition*

ambition*

guidance**

Cloud subscriptions

€2.30bn

€2.95 – €3.05bn

Cloud & Software

€17.23bn

+6% to +8%

Total revenue

€3.8 – €4.0bn

€7.5 – €8bn

€20.81bn

€23bn – €23.5bn

€26bn – €28bn

Share of more predictable revenue

60%

63% to 65%

70% to 75%

Operating profit

€6.35bn

€6.7 – €7.0bn

€8 – €9bn

€6.4 – €6.7bn

* All numbers non-IFRS ** All numbers non-IFRS and at constant currency © 2016 SAP SE Investor Relations. All rights reserved.

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SAP continues to grow its cloud business rapidly Well-positioned for strong growth in the cloud

Cloud subscriptions & support revenue

 Broadest portfolio of best-in-class cloud offerings (SaaS offerings for LoB, CEC, and HCM solutions, business network solutions, early HEC traction)  Extremely synergistic to SAP S/4HANA, providing tremendous cross and upsell opportunities  Continued solid growth in New Cloud Bookings in Q2 2016  Combination of backlog and deferred revenue indicates continued strength in contractually committed future cloud subscriptions and support revenue

Upper end CAGR +28% (2015 – 2020)

€3.8 – Upper end €4.0bn CAGR +32%

High growth sustained through additional drivers     

Upscaling of SaaS offerings Expanding Concur internationally Expanding HEC and fostering a strong ecosystem (IaaS) Enhancing S/4HANA cloud editions (public & private) Refining the Digital Enterprise Platform (BusinessObjects Cloud, SAP HANA Cloud Platform, IoT Platform) (PaaS)

© 2016 SAP SE Investor Relations. All rights reserved.

€7.5 – €8.0bn

(2015 – 2017)

€2.3bn

2015

2017

2020

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Our core business remains rock solid Software licenses revenue  SAP S/4HANA innovation cycle catalyzes growth across SAP’s innovation portfolio and strategic industries  Certain solution areas – e.g. HCM, Procurement, CEC, T&E1) – are rapidly shifting to the cloud  SAP S/4HANA now available as cloud subscription option  2016 outlook implies flattish license performance

Illustrative example Support business can grow even if licenses decline 1,605 1,512 1,404 1,285 1,150 1,000

200

382

547

697

832 Support

€10 billion+ support revenue base – and growing  Very high renewal rates (~97%)  Net support renewal rate is ~96%, reflecting well-received cloud conversion options and very large customers qualifying for PSLE (Product Support for Large Enterprises)  The blended support fee across the entire support customer base is ~20%

1) HCM

Software

Y0

Y1

Y2

Y3

Y4

Y5

Example: Pool of customers buying €1.0bn in software licenses in Y0; deals signed at year-ends Assumptions: License purchases decline by 5% p.a. | Net support renewal rate of 96% | Blended support fee ~20% p.a.

– Human Capital Management, CEC - Customer Engagement & Commerce, T&E – Travel & Expense

© 2016 SAP SE Investor Relations. All rights reserved.

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SAP is pushing towards a larger, stickier, more predictable business

Total revenue mix 2020 ambition

2015

€20.8 bn 11%

+18pp

29%

€26–28 bn 71%

89%

Much larger cloud business in 2020 relative to core business – change in revenue mix weighs on blended operating margin for the group in short/medium term

Share of more predictable revenue 2020 ambition

2015

40% €20.8 bn

60%

+15pp

70– 75%

Share of more predictable revenue is expected to increase to 70–75% by 2020

Cloud subscription and support revenue

Support + Cloud subs – share of revenue

All other revenue

All other revenue

© 2016 SAP SE Investor Relations. All rights reserved.

20– €26–28 bn 25%

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The cloud gross margins are on track towards SAP’s long term ambition

• Business network gross margin** increased to 75.9% in H1 2016 Business network ~80% long term gross margin*

2020

71%

ambition

€26–28bn

Public cloud Private cloud

All other revenue

• Overall H1 2016 cloud gross margin improved to 65.7%, up 30 basis points year-over-year • Expect stable cloud gross margin in 2016

29%

~80%*

Cloud subscriptions and support revenue

• Private cloud gross margins still negative but expected to break even by year-end

~40%*

• Speeding up investments in cloud infrastructure to deliver on the massive cloud bookings and backlog • Migrating acquired cloud offerings onto HANA – massive benefits for customers – significant long term savings

* Long term cloud subscriptions and support gross margin potential in mature state (excluding cloud-related professional services) ** Cloud gross margin of business network segment

© 2016 SAP SE Investor Relations. All rights reserved.

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Expanding absolute operating profit which drives operating cash flow

 Revenue mix shift means that managing to a blended group margin would discriminate against our fast growth businesses

 Operating cash flow expected to show a positive trend in 2016 – following operating profit evolution and helped by lower restructuring related cash outflows

 SAP is improving effectiveness and efficiency in each and every business, which all contribute to absolute operating profit growth  Continued transformation of our services business – shift towards a stronger focus on customer outcome which drives higher adoption and renewals

Operating profit ~3–5% CAGR

~6–9% CAGR

€6.3bn

€6.7–7bn

2015

2017

€8–9bn

 Expected 2016 hiring similar to 2015 to fuel our innovation engine 2020

Targeting accelerated operating profit expansion in 2018 and beyond © 2016 SAP SE Investor Relations. All rights reserved.

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Agenda Focus – SAP Digital Business Services An introduction to SAP Helping customers win in the new digital economy SAP’s long-term financial ambition Why invest in SAP Appendix

© 2016 SAP SE Investor Relations. All rights reserved.

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Summary – Why invest in SAP SAP’s innovation leadership is helping customers win in the digital economy

SAP is outpacing the market in topline and bottom-line growth

 SAP runs the world’s mission-critical business processes and is perfectly positioned at the top of the IT stack – close to the end user where the business value is generated  In addition, SAP has developed the most advanced in-memory platform available today: SAP HANA  Based on SAP’s groundbreaking new architecture, SAP is in the early stages of a powerful multi-year innovation cycle with SAP S/4HANA as the digital core coupled with the most comprehensive, best-in-class cloud & network portfolio  Only SAP offers customers choice of deployment model (cloud, on premise or hybrid) and seamless integration

 SAP’s broad global footprint provides resilience in an uncertain world  Powerful combination of a rapidly expanding cloud business and a growing core  Successful business transformation – improve efficiency and effectiveness in each and every business  Growing overall operating profit even as we continue to hire in fast growth areas such as S/4HANA, HCM, CEC, HCP (PaaS), Networks

© 2016 SAP SE Investor Relations. All rights reserved.

SAP is pushing relentlessly towards a much more predictable business in the long term Page

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Agenda Focus – SAP Digital Business Services An introduction to SAP Helping customers win in the new digital economy SAP’s long-term financial ambition Why invest in SAP Appendix

© 2016 SAP SE Investor Relations. All rights reserved.

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Q2 2016: Record-setting revenue and profit € millions, unless otherwise stated

IFRS

Non-IFRS

R ev enue N umb ers

Q2/16

Q2/15

∆%

Q2/16

Q2/15

∆%

∆% at cc

Cloud subscriptions and support Software licenses Software support Software licenses and support Cloud and s oft w are Serv ices rev enue Tot al rev enue

720 1,040 2,598 3,639 4,359 878 5,2 3 7

552 979 2,531 3,510 4,062 908 4,970

30 6 3 4 7 -3 5

721 1,042 2,598 3,640 4,3 61 878 5,2 3 9

555 979 2,531 3,510 4,065 908 4,972

30 6 3 4 7 -3 5

33 10 6 7 11 0 9

- 3 ,968

- 4,2 69

-7

- 3 ,72 4

- 3 ,578

4

8

1 ,2 69 -23 1 ,1 44 -331 81 3

701 -11 63 7 -168 469

81 >100 80 97 73

1 ,51 6 -23 1 ,3 91 -412 979

1 ,3 94 -11 1 ,3 3 0 -369 960

9 >100 5 11 2

11

2 4.2

1 4.1

+1 0.1 p p

2 8.9

2 8.0

+0.9p p

+0.5p p

0.68

0.3 9

73

0.82

0.80

2

O p erat ing Ex p ens e N umb ers Tot al op erat ing ex p ens es Profit N umb ers O p erat ing p rofit Finance income, net Profit b efore t ax Income tax expense Profit aft er t ax O p erat ing margin in % Bas ic earnings p er s hare, in €

© 2016 SAP SE Investor Relations. All rights reserved.

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Balance sheet, condensed June 30, 2016, IFRS Assets

06/30/16

12/31/15

Cash, cash equivalents and other financial assets

4,591

3,762

Trade and other receivables

5,025

5,275

932

703

Total current assets

10,549

9,739

Goodwill

22,354

22,689

€ millions

Other non-financial assets and tax assets

Intangible assets

3,884

4,280

Property, plant, and equipment

2,284

2,192

Other non-current assets

2,718

2,490

Total non-current assets

31,239

31,651

Total assets

41,788

41,390

© 2016 SAP SE Investor Relations. All rights reserved.

Equity and liabilities

06/30/16

12/31/15

1,047

1,088

191

299

Other liabilities

2,865

4,478

Deferred income, current

4,470

2,001

Total current liabilities

8,574

7,867

Financial liabilities

8,705

8,681

Provisions

201

180

Deferred income, non-current

106

106

Other non-current liabilities

1,238

1,262

Total non-current liabilities

10,250

10,228

Total liabilities

18,824

18,095

Total equity

22,963

23,295

Total equity and liabilities

41,788

41,390

€ millions Trade and other payables Provisions

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Operating cash flow increased by 5% to €2.9 billion in H1 2016 and by 7% to €0.4 billion in Q2 2016

€ millions, unless otherwise stated

Operating cash flow - Capital expenditure Free cash flow Free cash flow as a percentage of total revenue Cash conversion rate Days sales outstanding (DSO in days)

© 2016 SAP SE Investor Relations. All rights reserved.

01/01/16 – 06/30/16

01/01/15 – 06/30/15

2,921

2,775

+5%

-406

-276

+47%

2,516

2,500

+1%

25%

26%

-1pp

2.11

3.15

-33%

73

68

+5



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Additional outlook information and non-IFRS adjustments The company now expects a full-year 2016 effective tax rate (IFRS) between 27.0% to 28.0% (2015: 23.4%) and an effective tax rate (non-IFRS) between 28.0% to 29.0% (2015: 26.1%).

Actual Amounts H1/15

Actual Amounts H1/16

Est. Amounts for FY 2016

€8m

€4m

<€20m

Share-based payment expenses

€314m

€177m

€560m to €610m

Acquisition-related charges

€371m

€336m

€680m to €730m

Restructuring charges

€418m

€22m

€30m to €50m

Sum of all adjustments

€1,112m

€538m

€1,290m to €1,410m

Non-IFRS adjustments Revenue adjustments

© 2016 SAP SE Investor Relations. All rights reserved.

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Gross margin development Q2 2016 Non-IFRS

Cloud*

Business Network*

Software & Support

Cloud & Software

Services

FY/14 64.3

75.2

86.3

Q1/15

Q2/15

65.1

65.7

75.1

74.8

85.1

86.1

86.7

82.3

83.3

84.1

19.6

23.4

23.4

84.6

29.0

Q3/15

Q4/15

68.8

Q1/16

65.6

66.3

74.9

75.3

76.3

86.6

85.9

87.4

82.4

83.7

63.0

77.3 72.3

87.7

84.8

24.3

Q2/16

FY/15

83.8

22.7

65.2

17.9 13.9

Total gross margin

74.3

70.6

72.4

73.6

75.6

73.3 69.7

72.7

* subscriptions and support © 2016 SAP SE Investor Relations. All rights reserved.

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Revenue mix shift weighs on ATS and cloud gross margins

Non-IFRS

Share of Cloud subscriptions revenue*

Q2/15

Q2/16

13.7%

16.5%

App., Tech. & Services

Business Network

39,6%

59,2%

44,5%

53,9%

ATS margin

51.5

51.5

Business Network margin

74.8

76.3

Cloud margin

65.7

65.2

 Continued fast growth in cloud while investing in personnel and moving our acquired cloud applications onto SAP HANA – cloud margin decreased to 65.2%  Cloud margin – business network cloud margin increased to 76.3% and ATS cloud margin was stable at 51.5%  Revenue mix shift effect within ATS – accelerated growth in private cloud business weighs on ATS margin since private cloud margin is still negative; expected to be break even by year end  Revenue mix shift effect within cloud business – higher share of ATS segment of total cloud business weighs on cloud margin, which is expected to be stable for FY  Revenue mix shift effect within cloud and software – cloud and software margin increased to 83.7%; Strong performance in core business overcompensated the mix shift effect usually seen from our cloud business on the cloud and software margin

* Cloud subscriptions revenue share of cloud and software revenue © 2016 SAP SE Investor Relations. All rights reserved.

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SAP’s non-financial KPIs SAP also publishes the financial impact of four non-financial KPIs*

2013

2014

2015

Employee Engagement Index (%)

77

79

81



Business Health Culture Index (%)

67

72

75



Employee Retention (%)

93.5

93.5

91.8



Greenhouse Gas Emissions (kt)

545

500

455



* For more information about social performance KPIs, see the Employees and Social Investment and Notes to Social Performance Reporting sections of the SAP Integrated Report 2015. © 2016 SAP SE Investor Relations. All rights reserved.

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SAP Investor Relations contacts

Stefan Gruber Head of Investor Relations Phone: +49 6227 7-44872

James Dymond Socially Responsible Investing (SRI) Phone: +49 6227 7-61823

Johannes Buerkle Retail Investors, Europe Phone: +49 6227 7-70157

Dr. Ekkehard Lange Institutional Investors and Analysts Phone: +49 6227 7-67389

John Duncan Institutional Investors and Analysts Phone: +1 212 653 1413

Scott Smith Institutional Investors and Analysts Phone: +1 650 461 2905

SAP SE Investor Relations Dietmar-Hopp-Allee 16 69190 Walldorf Germany Investor Hotline: +49 6227 7-67336 Telefax: +49 6227 7-40805 E-Mail: [email protected] Internet: www.sap.com/investor Twitter: @SAPinvestor

Astrid Stroemer Institutional Investors and Analysts Phone: +49 6227 7-52167

Any statements contained in this document that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “predict,” “should” and “will” and similar expressions as they relate to SAP are intended to identify such forward-looking statements. SAP undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect SAP’s future financial results are discussed more fully in SAP’s filings with the U.S. Securities and Exchange Commission (“SEC”), including SAP’s most recent Annual Report on Form 20-F filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. © 2016 SAP SE Investor Relations. All rights reserved.

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An Introduction to SAP - SAP.com

SAP – Leading the Digital Transformation Commerzbank Sector Conference Frankfurt, September 1, 2016 © 2016 SAP SE Investor Relations. All rights rese...

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