SAP Sap SE

By Sara Castellanos 

Business software maker SAP SE is seeing increases in cloud revenue that it plans to sustain with this year's $8 billion acquisition of market-analytics company Qualtrics, said Chief Executive Bill McDermott.

The Germany-based company offers a range of products and services to businesses, including its Concur expense-management platform, IT-data platform SAP Hana, analytics, customer-experience software and digital supply-chain tools. It is in the middle of completing a nearly $1 billion restructuring set to be finished in the third quarter, as it continues to shift toward cloud computing and focus on opportunities such as analytics and artificial intelligence.

Cloud revenue for the company totaled EUR1.72 billion ($1.93 billion) in the quarter ending June 30, up 40% from the year-earlier period. Cloud and software revenue rose 11% to EUR5.52 billion. Total revenue for the quarter was EUR6.66 billion, up 11%.

SAP has been expanding its cloud-computing business as growth in its core software division has slowed, The Wall Street Journal has previously reported.

The Qualtrics acquisition, SAP's largest, helped make the company more competitive in the cloud market, Mr. McDermott said.

"We made a bold move with the Qualtrics acquisition and we had a vision, " he said.

The deal made SAP a major competitor in the cloud-based customer-relationship management software business, where Salesforce.com Inc. is the leader. Qualtrics offers surveys that companies can use to gauge employee, product, brand and customer feedback in what Mr. McDermott refers to as experience management.

He is betting that businesses will want to use the technology to help personalize services based on "data that represents the experience that people are having," Mr. McDermott said. That could include how customers interact with the brand on social media or how responsive they are to email marketing. "It's a net new opportunity for CEOs and business owners to think completely differently," he said.

Qualtrics could also help customers in sectors such as banking and automotive more easily pilot new products based on near-real-time customer feedback, he said.

The market opportunity for the technology is estimated at $1.6 trillion because there is such a big gap between what businesses think their customers are getting and what the customers feel they are getting, he said.

Mr. McDermott said this year that SAP aspires to reach EUR35 billion in total annual revenue. Its 2018 revenue totaled EUR24.7 billion.

The company also aims to more than triple its cloud revenue by 2023, the CEO said. One of the fastest-growing parts of the cloud is its analytics platform, because companies want to see portfolio metrics in real-time, he said.

Growth opportunities in the cloud also include a move into database-as-a-service and the ability for companies to use Hana in the cloud as a service. "We've only just scratched the surface," Mr. McDermott said.

The company had about 98,330 employees at the end of June 30, up 5% from about 93,850 a year earlier. SAP said about 4,400 jobs will be affected by the restructuring and it expects to end 2019 with more employees than it has now.

Write to Sara Castellanos at sara.castellanos@wsj.com

(END) Dow Jones Newswires

July 18, 2019 01:29 ET (05:29 GMT)

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