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SAP Investing and Aiming for $4.75 Billion Cloud Revenue in 2017

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Business software giant SAP announced this week that it is revising its profit targets to invest in cloud. SAP expects cloud revenues of between $4 and $4.75 billion in 2017.

The company had targeted 35 percent profit for 2015, but will now shift more of its revenues into growing the market share of its SaaS offerings and SAP Business Suite, according to InformationWeek.

SAP customers such as Coca-Cola, McDonald’s and Vodafone are adopting cloud in large numbers, and if SAP can get them to use its Business Suite and other services on its Hanna Cloud Platform, it can grow its recurring revenues from roughly 50 percent now, according to Reuters, to its goal of 65 percent by 2017.

“In line-of-business, HR, sales, procurement, and finance, we are growing faster than pure-play cloud players like Salesforce.com and NetSuite,” co-CEO Jim Hagemann-Snabe said.

SAP built its cloud business on the acquisitions of Ariba and SuccessFactors for a combined $7.7 billion in 2012. In 2013 the company saw a 121 percent increase in cloud revenue.

SAP did not detail how it will spend the increased cloud investment funds, but co-CEO Bill McDermott suggested investment would be more on organic growth than acquisitions. “When an acquisition makes sense, we will do it,” he said.

2013 cloud revenues for SAP were approximately $1 billion, so reaching its lofty target will most likely involve new cloud applications and software products. The cost of developing, integrating, and marketing those products is now accounted for.

A recent Forrester report suggested that software will be the exception to otherwise slow growth in cloud revenues in 2014. Others are more optimistic.

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