SAP tells financial analysts cloud growth will make it the fastest-growing mega-cap company in IT.

If the investment community had any doubt about SAP’s commitment to becoming a cloud-driven company, co-CEO Bill McDermott tried to erase it on Tuesday in a speech before greater than 100 financial analysts in Big apple, not faraway from Wall Street.

“We’re formidable on every measure,” McDermott declared, after reviewing the company’s position in on-premises applications, analytics, data management, and more, “however the cloud is where we’re taking the corporate.”

Echoing themes shared during SAP’s last quarterly conference call, McDermott said cloud computing is the cure for one of the most intractable issue faced by CEOs today: complexity. “Customers are attempting to get complexity out in their lives,” he said. “They’re seeking an organization which could help them simplify a good way to execute on their plans and grow.”

[Want more on Oracle’s cloud ambitions? Read Oracle’s Hurd: A ‘Once-In-A-Career Opportunity’.]

Pointing to 50% growth in cloud billings and a 39% increase in cloud subscription revenue at SAP last quarter, McDermott said cloud has already helped make SAP “the fastest-growing mega-cap company in IT.”

Of course SAP isn’t alone among IT giants embracing the cloud. Oracle president Mark Hurd also recently touted cloud computing because the answer to IT complexity. And on Tuesday Microsoft crowned a brand new CEO, Satya Nadella, who was instrumental in building the company’s Azure cloud infrastructure and cloud-based Office365 services.

“SAP and Oracle have both named salesforce.com as their biggest competitive threat,” noted a Salesforce.com in a public relations appeal in regards to the “legacy giant” cloud conversion on Tuesday. Cloud talk notwithstanding, this statement suggested, customers of “old guard companies” like Oracle, SAP, and Microsoft are still “held back of their legacy models.”

SAP executives insisted on Tuesday that consumers are actually free to select the cloud model — which it described as fostering agility and hastening innovation — or the traditional software licensing model, which lets companies treat software as assets and, in response to SAP, offers lower total cost of ownership over the long haul. That choice is obtainable not only through Ariba and Success Factors, SAP’s two big cloud-vendor acquisitions, but through dozens of edge applications, for everything from sales force automation to time and expense management and carbon emissions tracking. The following big push, executives said, might be bringing SAP’s core apps into the cloud at the Hana Cloud Platform.

“The war [for the cloud] would be won by some of the best platform,” declared SAP cloud executive Sanish Mondkar, describing the in-memory technology now underpinning all SAP cloud services, including Ariba, SuccessFactors, edge apps, and Business Suite on Hana within the cloud (the last including SAP’s core applications: ERP, CRM, supply chain management, etc).

Executive Board Member Vishal Sikka took analysts on a technical tour of just why Hana is the important thing to simplification, promising the elimination of duplicated data and duplicated infrastructure required by conventional databases and older generations of technology that required copies of information in data warehouses, aggregates of enormous datasets, and batch processes to repeat, transform, and analyze data. By doing analyses in memory against live transactional data, SAP will achieve “radical simplification” so as to give it performance and price advantages within the cloud, Sikka asserted.

Analysts and customers has been hearing about Hana’s promise for years, but SAP brought in a brand new, heavy-hitting Hana customer, ConAgra Foods, to reinforce its case. The $18 billion consumer products goods giant is within the means of moving multiple applications onto Hana, and it’s about to finish a migration of its 20-terabyte data warehouse and analytics environment to Hana within an issue of weeks, said Mindy Simon, ConAgra’s VP of IT.

“i might say our most revolutionary use of Hana have been around material forecasting,” said Simon, citing the knowledge-crunching challenge of calculating the impact of fluctuating costs for 4,000 raw materials on some 20,000 products, from Swiss Miss Cocoa to Chef Boyardee pasta. “If the cost of beef goes up at the commodity exchange, what’s that going to do to our margin? Hana lets us do what-if analysis, and that is the reason crucial because volatile commodity markets have a big effect on our margins and our pricing.”

ConAgra has chosen to deploy Hana on-premises as opposed to inside the cloud, but McDermott said customers moving Business Suite applications to the SAP cloud could have two options. First, they are able to bring their very own license, within which case they’ll buy software and pay maintenance as usual while subscribing to SAP’s (or a partner’s) managed services for running the software. Second, they may convert from licensing to a subscription approach, wherein case they’ll avoid up-front capital expenditures and cash in on the software-as-a-service subscription model. Customers choose a mix of both approaches, said McDermott.

The toughest argument SAP needed to make to financial analysts is that it’s going to see “strong single-digit” growth with on-premises applications — mostly in places like China, Japan, the center East, and elsewhere where cloud computing will not be yet fashionable — while also growing at double-digit rates inside the cloud, with the North American market leading the way in which. What’s more, SAP is promising 35% margins and €3.0 billion to €3.5 billion (US$4.0 billion to $4.7 billion) revenues by 2017.

McDermott said that SAP has “swept away each of the old arguments” against working with the corporate — consisting of high-initial software cost, long deployment times, and the continued cost and complexity of shopping for, implementing, and maintaining hardware — and would thus win over more customers.

Financial analysts had lots of clear-eyed questions on the associated fee models, and that they poked on the many assumptions, making it clear there are doubts that SAP — and in addition IBM, Microsoft, and Oracle — can eat away at its high-profit, on-premises software cake and gain heretofore-elusive cloud riches, too.

Too many companies treat digital and mobile strategies as pet projects. Listed here are four ideas to shake up your organization. Also within the Digital Disruption issue of InformationWeek: Six enduring truths about selecting enterprise software. (Free registration required.)

Doug Henschen is Executive Editor of InformationWeek, where he covers the intersection of enterprise applications with information management, business intelligence, big data and analytics. He previously served as editor in chief of Intelligent Enterprise, editor in chief of … View Full Bio

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