SAP reported revenue growth in the second quarter driven by growth in cloud subscriptions and revenue from support and its HANA in-memory database.
However, the company lowered its growth outlook for software and software-related service revenue for the full year 2013, citing lower software revenue expectations as a result of macroeconomic challenges, particularly in Asia Pacific and Japan, and a rapid transition to the cloud.
The business software company said Thursday that its revenue grew 4 percent to €4 billion ($5.3 billion) from the same quarter last year, according to IFRS (international financial reporting standards). Profit grew 10 percent to €724 million.
Software and software-related service revenue grew 6 percent year-on-year to €3.3 billion although revenue from software dropped 7 percent to €982 million. Cloud subscriptions and support revenue increased 206 percent to €159 million, while support revenue grew 8 percent year-on-year to €2.2 billion.
"We have reached an inflection point in the business of technology," with companies "radically shifting their businesses to the cloud," co-CEO Bill McDermott said during a conference call Thursday.
"The move to the cloud in the US is happening faster and much more broadly than any other geography," added co-CEO Jim Hagemann Snabe.
Non-IFRS software and cloud subscription revenue in the Asia Pacific and Japan region declined 7 percent, although it was up 18 percent in the Americas, as the company saw strong growth in software revenue in markets in Latin America, particularly Brazil.
SAP said HANA was a major "growth engine" and contributed to €102 million in software revenue, growing 21 percent year-on-year in the quarter. The company continues to expect HANA software revenue to be between €650 million and €700 million in 2013. Strong customer interest in SAP Business Suite powered by HANA which was made generally available in May and HANA Enterprise Cloud, a new hosting service based on the platform, are expected to drive adoption of HANA, it said.
SAP has inked a "triple-digit" number of deals for the Suite on HANA so far, according to McDermott.
While SAP's on-premises software license business experienced a drop in the second quarter, the company remains confident, McDermott said. "We believe there are business opportunities in core business applications," particularly in emerging markets as companies there continue to globalize their operations and need to move to higher-end software packages, he said.
In a sense, HANA Enterprise Cloud allows SAP to preserve its on-premises license business while offering customers a cloud deployment option. That's because the service uses a "bring your own license" model wherein customers shift licenses they are currently using in on-premises installations.
"We want to go where our customers want to go," McDermott said. "If the customer can put it in the cloud and its more efficient and better for their customers and their shareholders and employees, that's what they're going to do."
SAP has also "equalized" the way its sales people are compensated for cloud and on-premises software sales, in order to avoid biases toward one product or another. "They get paid the same," McDermott said. "We completely equalized that in the company."