SAP is morphing fast from the conventional on-premises enterprise software company it was for more than 30 years into a cloud-based software and services company for the 21st century.
The enterprise application, database and middleware maker turned in its fourth-quarter 2013 and full-year financial results Jan. 21, and it had good news to report. 2013 turned out to be the fourth straight year SAP showed double-digit percentage improvement in its software and services businesses.
The main reason the Walldorf, Germany-based company has been able to make a fast transition to the cloud is because it has never given in to the temptation to market its own proprietary hardware that needs to be refreshed every 18 to 36 months. It partners with companies such as Hewlett-Packard, Dell and others to handle that.
HANA Now Three Years in the Market
2013 also happens to be the third year the company has sold its HANA in-memory database. That single product, primarily designed and developed by Hasso Plattner, one of SAP's founders, has played a major role in carrying the company to improved prosperity.
HANA also has prompted Tier 1 competitors—and a number of startups—to build in-memory systems of all types, not just databases that run in dynamic random access memory. In its own way, HANA has become a game-changing IT product.
SAP HANA, used for real-time enterprise applications such as financial services and high-end scientific use cases, was the key growth factor for the company in 2013. HANA software revenue increased a whopping 69 percent in 2013 to $902 million. Projections indicate that income may surpass $1.5 billion by this time next year.
SAP's overall software business increased 11 percent to $19.2 billion in 2013. The company's cloud subscription and support pipeline increased 50 percent to approximately $1.63 billion as of Dec. 31, 2013. Deferred cloud subscription and support revenue increased 25 percent to $606 million as of Dec. 31, 2013.
HANA Uses DRAM and RAM for Speed
SAP's HANA DB, launched in December 2010, takes advantage of the low cost of main memory (RAM), data processing abilities of multicore processors, and the fast data access of solid-state drives relative to traditional hard drives to deliver better performance of analytical and transactional applications.
It offers a multi-engine query-processing environment, which allows it to support both relational data—with both row- and column-oriented physical representations in a hybrid engine—as well as graph and text processing for semi-structured and unstructured data management within the same system.
"The SAP HANA product continues to be the industry standard in the software industry," CEO Bill McDermott explained to analysts and members of the press on the company's earnings conference call.
"While our competitors are making a lot of noise while they try to catch up, this simply validates our leadership position. We are going to step on the accelerator."
SAP has more than 3,000 HANA customers. The company also reported that it has about 800 customers using its SAP Business Suite designed for HANA, and that that number has exceeded the company's own expectations since its launch in May 2013.