SAP CEO Klein goes all-in with adoption of cloud computing

BERLIN, Jan 27 (Reuters) - Christian Klein, chief executive of German software group SAP, launched a drive on Wednesday to encourage customers to move operations to the cloud, a shift that has brought short-term pain to investors but that he hopes will pay off over time.

Klein, 40, in sole charge at SAP since April, has adopted a subscription-based service model that generates predictable revenue over time rather than the lumpy up-front cash flows from software licences.

Ahead of the kick-off event, called Rise with SAP, Klein pitched the idea of a deeper transformation that would empower clients like German industrial group Siemens to redesign businesses processes from end to end.

“It’s much more than just a technical migration,” Klein told journalists in a briefing. “They want to change how their enterprise functions.”

SAP - the leading provider of ‘mission-critical’ apps that more than 400,000 firms use to run finance, personnel, logistics and e-commerce - has traditionally run software in on-premise servers powered by its proprietary database.

Now it is promoting its latest S/4 HANA data engine that is hosted on remote cloud servers, offering improved connectivity with its own apps and - should customers choose - those of its competitors.

Klein abandoned his medium-term profit goals last autumn when he announced SAP’s cloud pivot, cautioning that its business would take longer than expected to recover from the coronavirus pandemic.

That announcement, which came with a third-quarter earnings miss, sparked the biggest drop in SAP shares in a generation, causing SAP to lose its mantle as Europe’s most valuable technology company. (Reporting by Douglas Busvine; Editing by Edmund Blair)