We'll get you later: SAP CEO promises help for customers in 'financial distress'
(2020/11/03)
- Reference: 1604410210
- News link: https://www.theregister.co.uk/2020/11/03/sap_ceo_promises_help_for/
- Source link:
SAP CEO Christian Klein has committed to extending customer payment terms and helping partners struggling as the second wave of the COVID-19 pandemic grips Europe and governments enforce further lockdowns.
In [1]an interview with Bloomberg TV , the 40-year-old German exec said Europe's biggest software vendor would be "reaching out" to customers and service partners struggling with cash flow during the continuing economic crisis.
"My biggest challenge is to make sure that our customers can deliver, sell and produce tomorrow and SAP is doing that, not only by the way on helping them to transform their business models [but] also by helping the customers who are in financial distress in the crisis. We are prolonging payment terms. We don't want to leave one single customer, or one single partner, behind," he said.
The commitment came following a turbulent month for the enterprise software giant. Last week, SAP saw [2]its value crash after cutting profit and sales outlook for the full financial year as businesses continued to scale back investments during the pandemic. SAP said it expected non-IFRS cloud revenue to be €8bn to €8.2bn, down from an earlier estimate of €8.3bn to €8.7bn. Meanwhile, it cut estimates for software revenue from a range between €23.4bn and €24bn to between €23.1bn and €23.6bn.
But despite posting a 4 per cent year-on-year fall in total revenue to €6.54bn for the third quarter, SAP's cash position remained strong: operating cash flow for the first nine months of 2020 was €5.09bn, up 54 per cent year-over-year.
Klein's comments echo [3]statements from the Sapphire conference in June when the CEO said : "When a customer, for example, had severe liquidity issues, we of course were open to talk and to find another financing options, to also change contract to make deals work. We are doing this on a case-by-case basis. We cannot do this for everyone, but especially to small and midsize customers who are really suffering, and I include their partners as well, we are reaching out with a helping hand."
Elsewhere in the interview, Klein sought to gloss the software firm's cut to financial guidance, saying it represented a shift in strategy to help customers move to the cloud, something they were demanding because of the COVID-19 crisis. As a result, SAP would take a hit on licence revenue.
"We couldn't trade the success of our customers, versus the old guidance we had out there in the capital market," he said.
However, the hit SAP takes on licence revenue is short term. In the long term, the vendor anticipates getting more from each customer in the cloud – if they can keep them sticking around. CFO Luka Mucic [4]told analysts last week that the cloud/subscription model is "increasing customer lifetime revenue".
"We are effectively expanding our share of the wallet," Mucic said. ®
Get our [5]Tech Resources
[1] https://www.bloomberg.com/news/articles/2020-11-02/sap-s-ceo-says-sales-weakness-is-evidence-of-cloud-transition
[2] https://www.theregister.com/2020/10/26/sap_covid_crash/
[3] https://www.theregister.com/2020/06/19/servicenow_contract_inflexibility_coronavirus/
[4] https://www.theregister.com/2020/10/28/sap_new_strategy/
[5] https://whitepapers.theregister.com/
In [1]an interview with Bloomberg TV , the 40-year-old German exec said Europe's biggest software vendor would be "reaching out" to customers and service partners struggling with cash flow during the continuing economic crisis.
"My biggest challenge is to make sure that our customers can deliver, sell and produce tomorrow and SAP is doing that, not only by the way on helping them to transform their business models [but] also by helping the customers who are in financial distress in the crisis. We are prolonging payment terms. We don't want to leave one single customer, or one single partner, behind," he said.
The commitment came following a turbulent month for the enterprise software giant. Last week, SAP saw [2]its value crash after cutting profit and sales outlook for the full financial year as businesses continued to scale back investments during the pandemic. SAP said it expected non-IFRS cloud revenue to be €8bn to €8.2bn, down from an earlier estimate of €8.3bn to €8.7bn. Meanwhile, it cut estimates for software revenue from a range between €23.4bn and €24bn to between €23.1bn and €23.6bn.
But despite posting a 4 per cent year-on-year fall in total revenue to €6.54bn for the third quarter, SAP's cash position remained strong: operating cash flow for the first nine months of 2020 was €5.09bn, up 54 per cent year-over-year.
Klein's comments echo [3]statements from the Sapphire conference in June when the CEO said : "When a customer, for example, had severe liquidity issues, we of course were open to talk and to find another financing options, to also change contract to make deals work. We are doing this on a case-by-case basis. We cannot do this for everyone, but especially to small and midsize customers who are really suffering, and I include their partners as well, we are reaching out with a helping hand."
Elsewhere in the interview, Klein sought to gloss the software firm's cut to financial guidance, saying it represented a shift in strategy to help customers move to the cloud, something they were demanding because of the COVID-19 crisis. As a result, SAP would take a hit on licence revenue.
"We couldn't trade the success of our customers, versus the old guidance we had out there in the capital market," he said.
However, the hit SAP takes on licence revenue is short term. In the long term, the vendor anticipates getting more from each customer in the cloud – if they can keep them sticking around. CFO Luka Mucic [4]told analysts last week that the cloud/subscription model is "increasing customer lifetime revenue".
"We are effectively expanding our share of the wallet," Mucic said. ®
Get our [5]Tech Resources
[1] https://www.bloomberg.com/news/articles/2020-11-02/sap-s-ceo-says-sales-weakness-is-evidence-of-cloud-transition
[2] https://www.theregister.com/2020/10/26/sap_covid_crash/
[3] https://www.theregister.com/2020/06/19/servicenow_contract_inflexibility_coronavirus/
[4] https://www.theregister.com/2020/10/28/sap_new_strategy/
[5] https://whitepapers.theregister.com/
Re: Meanwhile at Oracle...
J27
SAP and Oracle are two peas in a pod. Overpriced legacy solution providers that only make money because of customer lock-in.
Expanding their share of the wallet
msknight
It doesn't make sense. Not everyone can expand their share of the wallet. Something has to give. It's like all these streaming and subscription services. There's only X amount of money, and in a world where people and companies have less of it... I just can't get my head around why everyone thinks they're going to get more, and more, ad infinitum.
Re: Expanding their share of the wallet
Jay Lenovo
What's the issue?
You sacrifice all your infrastructure to a cloud solution company and hope you never miss a payment so it doesn't disappear over the next billing cycle.
And then hope these terms only get friendlier...and buy time...and buy time...
Meanwhile at Oracle...
"How can we bleed more money out of our customers? These super yachts aren't going to buy themselves!"