SAP (SAP)—the German enterprise software firm—powered higher on Friday following a strong third-quarter earnings report.
As pressure continues to mount on “old tech” software names—like SAP and others like Microsoft (MSFT)—to reshape portfolios and cater to a changing consumer, a shift to the cloud remains in focus.
“The consumer is mobile, and the enterprises that serve the consumer want to provision the best service with the most innovative solutions as quickly and inexpensively as they can,” said SAP CEO Bill McDermott. “That’s why the cloud has become the pervasive computing theme of the 21st century.”
In SAP’s third quarter, cloud subscriptions and support revenue grew 28%—a much faster clip than its core on-premise software licenses, up 5%.
And McDermott said the company’s acquisition-oriented strategy has set the company up well for growth—but that he’s not looking at anything big anytime soon.
Acquisitions—from SuccessFactors to Concur and Ariba—have all been an important part of the company’s strategy a few years ago. But while competitors have upped their acquisitions more recently—including Salesforce (CRM) for Demandware, Oracle (ORCL) for NetSuite, Microsoft for Linkedin (LNKD)—McDermott said his company doesn’t need to look for acquisitions right now.
“We took a company who did very sophisticated things, and we made it a much more simple company,” he said. “Other companies who were simple companies are now buying a lot things to try to do sophisticated things. I can assure you, it’s easier to take a company that can already do sophisticated, global things … and make it simpler.”
McDermott added that the company is well primed for growth because of its spate of acquisitions a few years ago.
“We did the buying we needed to do early. Those cloud acquisitions made us easy, simple and relevant,” he said. “We’re not going to look for big acquisitions.”
SAP: The stock for the changing digital economy
McDermott added that he believes SAP is perfectly situated for the rapidly transforming and developing digital economy—and particularly for growth in Europe.
“There is a $2.5 trillion opportunity for Europe to industrialize their Internet—they call it ‘Industry 4.0’—at the same rate as the US has done,” he said. “SAP’s brand and our software is essential to make that happen in Europe.”
Meanwhile, McDermott said his technology applies to a variety of industries—including health care—as well.
For example, SAP’s Hana fits right into Vice President Joe Biden’s moonshot project to beat back cancer.
“Our technology, like Hana, is doing the genome sequencing on those cancer cells to give personalized care to the patient and completely reinvent health care,” McDermott said.
“Whether its moonshots in health care or reinventing Europe around digital or simply leapfrogging both in China or India, SAP is at the center of the economic relevance associated with the digital economy,” he said.
Political impact on business investment in technology
McDermott said companies haven’t been affected by recent political uncertainty and seems to be pricing in a continuation of the status quo.
“When things are stable, markets are happy. Markets don’t like surprises,” he said. “Right now a person who is looking to be a free trader, have a very open heart as it relates to equality and people everywhere mattering, and having a slant on a diverse world, a global world … I think that type of a person will keep markets very stable and sustainable for some time to come.”
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