German business software maker SAP cuts its full-year outlook as customers drift towards buying software over the Internet - but says so-called cloud software will begin to prop up revenues in coming quarters. Hayley Platt reports.
Riding high on the crest of the cloud. That's the future it seems for German software maker SAP. More of its customers are buying their software over the internet rather than in the traditional way. But sales are staggered over the life of the contract, which could be several years. That's caused SAP to cut its outlook for the year. SAP's CFO, Luka Mucic. SOUNDBITE: Luka Mucic, CFO, SAP, saying (English): "The same revenue and profit that we would have booked in a traditional software license today would be made from a cloud deal after four, respectively five years and then over the total customer life cycle we actually have a greater contribution over the top line and the bottom line. That's why it's a sustainable long term business model and that's why we're firing on all cylinders to get as much growth as possible." Overall profit in the third-quarter rose five percent. But SAP now sees its full year profit to be less than the expected six billion euros. And more like 5.6 billion to 5.8 billions euros. It's so-called cloud software now accounts for more than one-third of SAP's licence sales. And it's returning a profit. Still SAP is also looking beyond the cloud for future growth. SOUNDBITE: Luka Mucic, CFO, SAP, saying (English): "New processes such as Omni channel ecommerce where our solutions are around our Hybris acquisitions as well as our cloud for sales, cloud solution for sales professionals are enjoying really explosive triple digit growth." More and more businesses are moving to cloud computing. SAP counts Coca-Cola, McDonald's and Vodafone among its customers. It's popular because there are no upfront costs for licences, hardware or installation. But one problem for SAP could be that its rivals, IBM and Oracle are doing the same.