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SAP reports strong Q4 earnings; acquires Taulia

SAP Q4 2021 cloud earnings were strong, and the company added to its portfolio by acquiring Taulia for cash management and investing in intelligent contract firm Icertis.

SAP reported strong earnings for the last quarter of 2021 and is buying a majority stake in Taulia, a provider of capital management software.

SAP is also investing in and expanding a partnership with Icertis, a contract management automation firm. Both investments emphasize the company's focus on filling gaps in its portfolio and providing customers with more functionality within the SAP footprint, according to Christian Klein, SAP CEO, in an earnings call to investors and analysts Thursday.

Additionally, Klein reported significant cloud growth in the last quarter of 2021.

"SAP accelerated growth in the cloud significantly, and Rise with SAP is a blockbuster success," he said.

For Q4 2021, overall cloud revenue increased 19% to €9.59 billion or about $10.68 billion; cloud and software revenue increased 5% to €24.41 billion or $27.18 million; and S/4HANA Cloud revenue increased 46% to €1.09 billion or $1.21 billion. SAP's current cloud backlog, which represents expected contractually committed cloud revenue for the upcoming year and is an indicator of future growth, was up 32% to €9.4 billion or about $10.5 billion.

For Q4, SAP reported 3,000 net-new customers and 19,000 go-lives, although it did not specify which products were deployed. As of the end of 2021, SAP reported that it has 18,800 S/4HANA customers but does not break out how many of these are on-premises or cloud implementations.

Complementary products    

The acquisition of Taulia and expanded partnership with Icertis are intended to complement SAP's products and provide customers with tools to automate and improve cash management and processes like procurement.

These moves may allow SAP to add value to the SAP Business Network, a platform that connects the SAP Ariba Network for procurement and supply chain, the SAP Logistics Business Network for transportation and logistics management, and SAP Asset Intelligence Network for manufacturing and other enterprise assets via IoT devices.

SAP CEO Christian Klein on an earnings call
SAP CEO Christian Klein speaks to investors and analysts during an earnings call this week.

Taulia, based in San Francisco, provides software that helps companies manage their cash flow and meet short-term operations costs and debt obligations. Taulia's capabilities will be integrated with applications in the SAP Business Network, according to SAP.

"Taulia will be a great addition to our business network and procurement portfolio," Klein said. "SAP solutions generate billions of transactions, and with Taulia, we will enable our customers to finance those transactions and improve their cash flow."

Terms of the deal were not disclosed. Taulia will operate as an independent company with its own brand within SAP, and Cédric Bru will remain CEO of Taulia, according to the company.

SAP's new investment in Icertis will deepen the relationship with joint product roadmaps and the integration of Icertis' intelligent contract capabilities into SAP systems for ERP, procurement, sales and HR, according to the company. The companies have been partners since 2020.

SAP customers will be able to integrate the Icertis Contract Intelligence capabilities like smart contract creation, online negotiation and AI-enabled risk management into SAP Ariba and SAP Customer Experience, automating and enhancing processes like lead-to-cash and source-to-pay.

Acquisitions help fill gaps

The Q4 results were good for SAP, and perhaps even a bit surprising, said Holger Mueller, an analyst at Constellation Research.

Holger Mueller, analyst, Constellation ResearchHolger Mueller

"SAP has done well, and, given expectations, even very well when it comes to cloud revenue and S/4 HANA adoption," Mueller said. "But one swallow doesn't make it summer, so SAP will have to continue this momentum into Q1 [2022], which traditionally is SAP's weakest quarter."

Both the Taulia acquisition and the Icertis partnership are a good way for SAP to plug some functional gaps in the portfolio, he said.

"Working capital management and better purchasing and sales integration have been high up on the SAP customer wish list, so it is good to see these being addressed," Mueller said.

The Taulia acquisition gives SAP the capability and network to meet its ambition to become a leader in providing useful financial applications for customers that allow them to more easily deal with problems like cash flow management, said Jon Reed, co-founder of Diginomica, an enterprise industry analysis firm.

However, there are questions as to whether SAP can put all the Business Network pieces together seamlessly, and the company will need to demonstrate the value through proven customer use cases, he said.

Jon Reed, co-founder, DiginomicaJon Reed

"SAP seems to feel that it's self-explanatory how all their business network assets fit together, but I don't think it is self-explanatory, so they have work to do there," Reed said. "They have definitely compiled a significant amount of assets in this area, and the assets are individually solid. It's the full integration of those assets that gets interesting. So we'll have to stay tuned for that."

Similarly, the investment and partnership agreement with Icertis doesn't have much value in and of itself; instead, the ROI depends on how the two companies can work together, he said. However, Reed added, the investment's potential is clear, as there is a big need for effective enterprise contract management capabilities.

"You need to look for results on the ground, which requires execution from both parties," Reed said. "If SAP builds the so-called 'network-of-networks' from the core of SAP Ariba out to industry networks, they will need smart contracting functionality."

Jim O'Donnell is a TechTarget news writer who covers ERP and other enterprise applications for SearchSAP and SearchERP.

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