SAP SE (SAP) Earnings Call Transcript & Summary

[indiscernible] for joining our Virtual SAPPHIRE NOW Financial Analyst Conference. I'm joined here in the room by our CEO, Christian Klein, who will make opening remarks on the call today. Also joining us for Q&A are Board Members, Luka Mucic, our CFO; Adaire Fox-Martin, who runs customer success; and Thomas Saueressig, who leads SAP product engineering. And now I need to look to my piece of paper because I have the usual safe harbor statement. Any statement made during this call that are not historical facts are forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995. Words such as anticipate, believe, estimate, expect, forecast, intend, may, plan, project, predict, should, outlook and will, and some of the expressions as they relate to SAP are intended to identify such forward-looking statements. SAP undertakes no obligation to publicly update or revise any forward-looking statements. All forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. And the factors that could affect SAP's future financial results are discussed more fully in our filings with the U.S. Securities and Exchange Commission, the SEC, including SAP's annual report on Form 20-F for 2019 filed with the SEC on February 27, 2020. Participants on this call are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. And now finally, before I hand over to Christian, a brief housekeeping items. [Operator Instructions] And with that, I'd like to turn things over to our CEO, Christian Klein.

Thanks, Stefan. And a warm welcome from my side to all of you. Last year, at SAPPHIRE in Orlando, no one would have ever imagined that we will do this meeting virtually. Unfortunately, you have all seen that we have had technical difficulties today. We apologize for that, and we are working extremely hard to remedy the problem. We live and learn. And for now, I hope that you, your friends and family are well and healthy. 2020 has proven in so many ways how fragile the world truly is. The recent pandemic showed us how helpless we can feel if something hits us unexpected. And I cannot leave unmentioned the shocking developments in the U.S. As business leaders, we have to act and stand strong against racism. At the end of the day, we will only have done our job if we take real action for more diversity in our companies. We need to be an example of the change we are advocating. At SAP, we have almost 130 locations, 5 generations working together, more than 100,000 colleagues from over 115 nationalities across the globe, each one with a unique perspective and background, but all equal. So diversity is a fact at SAP. But also, we at SAP can do more. In addition to significant financial commitments, we will roll out measures in July to reach our high ambitions for both gender and racial diversity. With that, I know we have just an hour today, and you are keen to get into Q&A, but please allow me some short remarks. My first months of being the sole CEO of SAP were, of course, dominated by the pandemic. With 95% of our employees working from home, I'm extremely proud how we are holding up in this crisis. Our customers continue to run without any disruptions. Our cloud operations are running at 99.9%. And we already put around 14,000 customers live this year. Also, our customers appreciate our special COVID-19 offerings with our reopening business suite of solutions with Qualtrics at the heart of it. One thing I have to underscore today is how crucial our colleagues are in all of this. According to our latest Pulse Check in May, employee engagement is up in the crisis by 3 percentage points. And I cannot thank my colleagues enough for their tireless commitment to SAP and, above all, to our customers. But despite the crisis and all its challenges, believe it or not, I enjoy my new role every single day, and I tell you why. In this crisis, many CEOs have realized the need to transform and digitize their business processes across the value chain to become more resilient. Many tech companies create a lot of buzz these days around digital transformation. But let's face it, a great workflow service or the technical move to a scalable cloud infrastructure alone will not result in a real business transformation for our customers. In the digital age, SAP's broad solution portfolio is more relevant than ever for the business transformation of our customers. Therefore, my vision for SAP is to change the game how enterprises work in the future. We want to transform SAP and our over 440,000 customers into intelligent enterprises. And let me tell you 3 reasons why: resiliency, profitability, sustainability. Every business transformation can only be successful if you change how your enterprise runs. And this is what our software does. This is why SAP is the trusted partner to bring the intelligent enterprise to life. Now that we talked about the relevance of the intelligent enterprise, let's talk about the question how to bring it to life. To master the transformation is the key challenge for many companies out there. To lay the foundation for an intelligent enterprise, you need to build on 3 key principles: integration; innovation; and agility and speed. Let's come to the first lever, integration. Our USP has always been that we are able to run the world's most mission-critical business processes integrated end-to-end. I have not seen an enterprise out there which is able to offer personalized experiences or manage real-time demand and supply seamlessly with functional silos, with apps not talking to each other. Therefore, integrated business processes and the harmonized semantical data model are key. SAP can do this for our customers. Already today, we deliver 50% of the required integration qualities across all organic and acquired SAP cloud apps. And it will be 90% by the end of this year. This will be a key differentiator against many best-of-breed vendors, which are asking customers to use expensive third-party integration software to transfer data between apps without harmonized semantical data models. The integration layer is the SAP Cloud Platform. Key is to be open. And there, therefore, SAP will further strengthen the API layer for integration of SAP to non-SAP apps, moving beyond the 1,500 APIs we already offer today. Integration is important to run a company; innovation secures its future and makes it resilient. Let's come to the second principle, innovation. SAP became the market leader in business software by developing, together with our customers, the best business applications in the world. Now it's time to set a new standard by co-innovating with our customers and applying new technologies, such as AI, to their business processes. Therefore, by enabling new business models and increasing automation, I have no doubt that SAP is and will remain the #1 player in ERP and LoBs, like supply chain, HR, finance, procurement, travel expense, commerce or experience management. To evolve the vision of the intelligent enterprise, we are now launching our industry cloud, which delivers new cloud-native industry applications on top of the SAP Cloud Platform to offer our customers differentiating business capabilities and drive productivity. Why this industry focus? This is a huge new addressable market of more than $165 billion for us. SAP has the right to win. The starting point of many industry verticals is the SAP ERP and LoB applications. On top, we will partner with our ecosystem to gain broader coverage across all industries. We will build on our partners' expertise to expand the scope of our solution and enhance the vertical capabilities of SAP. Just let me give you some examples. Together with Honeywell, we are building a solution that offers new digital services for the real estate industry. And we already started to build a new innovative utilities app on the SAP Cloud Platform with a big utilities provider to efficiently serve over 14 million consumers. We expect to deliver this in less than 12 months. And this is just the beginning. Finally, the business technology platform is the foundation of the intelligent enterprise. It is the B2B business platform for our customers, partners and developers, enabling development of new, highly innovative solutions, extensions of existing solutions, integration of SAP and non-SAP solutions and cutting-edge 360 analytics. Planning and predictives only works with a harmonized semantical data model and not just by putting all of the data in a third-party data lake. With regards to the commodity infrastructure layer, we will continue to offer choice and partner with Microsoft Azure, Google Cloud Platform, AWS or Alibaba to optimize TCO and resilience of the cloud infrastructure. So we will draw a clear line in the sand: SAP has to lead the business transformation and we will continue to own the application layer. The third principle, agility and speed. Customers expect from SAP fast time to value. All SAP cloud apps follow clear, consistent product architectures and design principles and are highly modular to allow rapid, targeted deployments. We increased the speed of our release cycles in the cloud, delivering innovations every 4 weeks. The Corona App we have developed within just a few weeks is an example of the development agility and speed we strive for. Now let me reiterate one thing. We continue to change the mindset of SAP: Land, adopt, consume, expand. This is the way how SAP will work, and the reason for adjusting our org, steering and compensation as renewal is as important as winning a new deal. And finally, it's also about changing business processes inside SAP to move everyone behind customer success. Finally, what does the intelligent enterprise mean for our financial performance? In the short term, it is difficult to project how the crisis will impact the economy. But in April, when we announced our Q1 results, we have guided for the full year as best as we can see it. We have strong confidence in our business model and the relevance of our solutions, like supply chain, finance and commerce, in this crisis. In the mid-term, our intelligent enterprise strategy will drive growth, in particular in the cloud, increase customer adoption and our more predictable revenue. Why? Tighter integration will create significant cross-sell potential. It will allow also accelerate the move of our customers to the cloud as we deepen integration within our cloud portfolio, including cloud ERP. Innovation. We continue to leverage our #1 position in ERP and other key LoBs. Our business technology platform will become key foundation for new growth levers, like the industry cloud and sustainability solutions, together with our expanded ecosystem of partners. With our focus on agility and speed, we will drive time to value, adoption and customer success. Intelligent enterprise will drive profitable growth for each of SAP's business model. SAP is driving its own transformation as we execute on our Best Run program. We have streamlined our organization in February, gaining synergies while setting clear accountabilities within SAP. We will serve customers through a holistic approach to drive business outcomes rather than approaching them with siloed sales plans. At the same time, we are consolidating our portfolio, focusing innovation where we have a right to win and use partners to expand our portfolio beyond that. There is no need for SAP to play in every market. To sum it up, these are indeed challenging times, but it is an honor to drive SAP into the future, a company which is more relevant than ever in times when customers need to completely change the way their business works today. No other company is more experienced than SAP to transform businesses because we have been doing this for almost half a century. With that, let's move on to Q&A. I'm very happy to be supported by Adaire, Luka and Thomas. Back to you, Stefan.

Yes. Thank you very much, Christian. We can now start the Q&A session. [Operator Instructions] And we're seeing already lots of questions in here, so I'll do my best to accommodate almost everyone. And the first question should go this time to Mark Moerdler from Bernstein Research. Mark?

Can you hear me?

Yes. We can hear you.

Excellent. It's great when the technology works. SAP ERP has been known for the level of customization and the breadth of customer integrations that customers implement to many other systems. Can you give us some more color on how does all of this work as customers are moving, as you're driving the customer base from on-premise into the cloud?

I can start first and then, Thomas, you can take over. I mean when we talk about integration, when you look into our installed base, we have still over 40,000 SAP ERP customers now who want to move with SAP to the cloud. And these customers are running today their HR, finance, logistics, supply chain processes in a tightly integrated way. And this is how enterprise will work in the digital world. And even more so, it is even more important now to connect not only people with each other but people to machines. And this is why we are striving now a lot of efforts to really put this integration into place. Integration means, in the SAP context, not a technical integration. You have to harmonize data models. You have to harmonize workflows in order to provide real business process integration. And as I also said in my opening remark, we have now delivered 50% of the suite integration qualities. And by the year-end, we will have 90% of all the integration qualities which a modern cloud ERP has to deliver.

Thank you, Christian. And on top of that, I think what is very important, that S/4HANA is a very open system. So Christian talked about APIs. To just give you some color, SAP S/4HANA in the cloud has more than 300 APIs which we export, which means 80% of all business objects are available for integration for extensibility. And this is, for sure, very important. As you rightfully said, I mean our customers coming from the history that they, for sure, customize their solutions. And we offer that opportunity, on the one hand side, with in-app extensibility in S/4HANA itself, but also with the SAP Cloud Platform as our extension platform to extend our solutions with differentiating capabilities. So there's absolutely a possibility for our customers to differentiate their business processes on the cloud platform and with that, keep the core clean, which means they can innovate quickly, they can consume our innovation in a rapid suite. As Christian mentioned, we will increase the level of releases. And that means we have a win-win situation for the customer as well as for SAP.

Maybe, Mark, I could just add to both Christian and Thomas' perspectives from the point of view of the customer and their approach to this journey with us. I mean certainly, many customers in the past have differentiated their business from others by the degree of customization that they have invested in, in previous versions of SAP. And this is, of course, a consideration as we migrate the customer, particularly existing customers, to the S/4HANA environment. I think the agility of the platform, the agility of the environment that Thomas and his team have created, has meant that many of these customizations that were in the past necessary are no longer necessary for customers in the next generation of ERP, which is represented by S/4HANA. And that, of course, helps our business case inordinately because the total cost of ownership of managing that environment comes down significantly for the customer as a result of knowing that functionality that they had to customize in the past is now part and parcel of the processes that the agile S/4HANA environment provides. And therefore, that cost can be taken from the long-term equation of the customer.

Great. I think we can now take the next question. The next question comes from Adam Wood from Morgan Stanley.

So just coming back to this idea of platform, Christian, you talked about the need for SAP to own the application layer, which I think everybody understands, but also to own the integration and the platform beneath that. Could you maybe just go into a little bit more detail around what you mean by that, where there are elements of conflict or at least competition with hyperscalers that would pose a problem? And would there be a need to review any of the existing agreements that you've got with those hyperscaler partners, given the stance that you're taking on that side of things? And maybe just as a quick follow-up on integration. Is there any way you could help us with the benefits you get from sales when you move into a world that is more integrated? So how much pushback have you had from customers around, "Things are not integrated, we're frustrated with that"? How well do you think you could accelerate the business as you deliver this through the end of the year?

Yes. So thanks a lot, Adam, for the question. So first of all, I mean as I also mentioned in my opening remarks, the decision to provide customers choice on cloud infrastructure is a winning strategy. This is why we will continue to offer our customers the choice to run our solutions either on Azure, GCP, AWS or Ali. Now when it comes then to one level up in the stack, when it comes to integrating applications, SAP but also SAP to non-SAP, when it comes to extending our solutions, this is where the SAP Cloud Platform has to play. Now that we put our data model on the SAP Cloud Platform, now that we are providing world-class business services, like identity management, like workflow, like others, this is now very important now, not only for integrating our own applications in a modular way so that you can still consume our apps from an LoB-to-LoB perspective, but also for our partners now to come in and really also integrating much more seamlessly into the SAP portfolio now that we really share all of these services, that we share our data model. That's extremely also important now in the industry cloud. As we will not cover all the 25 industries, we will use strong partner solutions out there in the market. We will co-innovate with partners to build new apps on our platform, who can help in verticalizing our portfolio. And this is, for me, a key element of the intelligent enterprise, to really deliver the business platform for all SAP applications, where all developers, partners want to come and really integrate their own solutions but also extend the SAP applications. And maybe, Adaire, you can comment also on the sales side of the house?

Thanks. Thanks for the question, Adam. I mean certainly, the level of integration that is available to our customers as the product is delivered, again is a cost of ownership consideration for our customers. And Thomas and the team have been doing an incredible job on taking the various different components of the SAP portfolio and providing process-orientated integration across that portfolio. So we don't talk about a product to a product. We talk about a business process that may involve more than one product but underpins and provides some very significant business benefit to our customers. And the feedback from our customers to that kind of integration approach has been extremely positive. And I know that in Thomas' keynote tomorrow, he's going to provide an update on how far we've come, and we're extremely grateful to our colleagues in development for the focus that we've seen on this over the last 6 or 7 months and the deliverables that have emerged from our product engineering organization. And I think on top of that, you asked a question about whether that would accelerate our opportunity. I think we've already seen examples of that. And so for instance, we have, very carefully and in a very considered way, integrated SuccessFactors to the Qualtrics portfolio, creating human experience management as a category. And that integration and the thoughtful consideration of that process has, in fact, accelerated the revenue of both of those products. We've seen the same thing on the commerce side, particularly in the current COVID environment, where our e-commerce portfolio is really resonating exceptionally well with organizations that are moving from a brick-and-mortar environment to an online environment and again integrating experience into that element. And finally then, even on the procurement side, giving buyers and suppliers the opportunities to provide feedback on the procurement process to each other. So we've already seen some of that acceleration that you refer to even in the integration points between a cloud solution to a cloud solution. So as the development team deliver more and more of that process-orientated integration, I'm confident that it will help accelerate our value proposition for our customers.

Yes. And if I may just quickly come back to the hyperscaler question more from a financial perspective, one of the biggest reasons why I believe that our partnerships with the hyperscalers are truly very much a win-win scenario is that they help us to really scale our cloud business, in particular in terms of a geographical and solution-based expansion in a very agile fashion and a very efficient fashion. From our end, we contribute some of the most attractive application workloads that they can run. That's why they have embraced SAP as a partner. On our end, we, of course, can scale our cloud business in a very CapEx-efficient way. You have seen that coming through in the last 2 years with significant steep declines in our CapEx spend. And since I know that there are some concerns out there on what our CapEx spend will look like going forward, I can only tell you that we continue to see a very, very a high level of efficiency in terms of our CapEx through the partnerships. And we believe that in 2020, you will continue to see this shining through, in particular since also on the more non-cloud CapEx side and facilities and so on, we are not looking at spending a lot for obvious reasons. So this is very positive news also for our free cash flow.

Now we take the next question from Stefan Slowinski, Exane BNP Paribas.

Great. Maybe just a quick follow-up on the previous question, which was do you anticipate any changes...

Hello, Stefan? [Technical Difficulty]

Sorry. Can you hear me now?

Yes.

Okay. Just to follow up on the previous question actually to start with on the hyperscalers. And I think one of the parts was do you anticipate any changes to the existing relationships that you have? I'm thinking specifically...

You have been fading out again, Stefan.

Sorry. I don't know if that's any better.

Yes. Try it again.

Yes. Just wondering on the hyperscalers, if there's any changes to those existing partnerships in terms of reselling.

So what we are currently doing with all of the hyperscalers, we, of course, constantly evaluate how can we further adapt our offerings to our customers. So -- and we are just currently investigating new ways of making it for our customers even more simple to consume out-of-the-box SAP software with hyperscaler cloud infrastructure and with the necessary services to consume it. So we will stick to the strategy to really provide choice. But we're now working on how to make it even more simpler to move to the cloud together with our partners on the hyperscaler side.

Let's take the next question, please, from Knut Woller, Baader Bank.

Actually, two. The first one to Adaire. Adaire, you took over responsibility for digital business services earlier that year. Can you share with us some insights on the acceptance from customers and your first experiences here? And secondly, to Thomas. Thomas, I think you started to adopt new technologies, like machine learning, artificial intelligence in support. Can you give us some ideas here how do you think that basically helps to maintain the high attach rate but also to further increase efficiency in support services?

Knut, thank you very much for the question. Yes, I think in February of this year, we made the decision to create a new Board area. That new Board area combines sales, services, the former DBS organization as well as all of the customer-facing support resources of SAP. And the intent of this new Board area, which represents a substantial proportion of SAP's employee base, is to have the opportunity to orchestrate the entirety of our customer-facing resources around the customer and around their value and their life cycle with SAP. And of course, services plays a tremendous role in this, and even more so in the world of cloud and cloud delivery. So now with this opportunity, we have, for instance, the opportunity to bring architects, for instance, who previously may have been involved in project implementation exercises, all the way up to the front part of the sales motion. And this means that we can really close the gap between the vision that we set and the value that we set an objective for in that sales motion with the reality that we deliver. And so, so far, the feedback from our customers in terms of understanding our intent to orchestrate our customer-facing resources, regardless of internal divisions in SAP, around their life cycle, is something that we've received a very positive feedback from. Now obviously, I think as you can imagine, there's quite a large-scale transformation behind that organizational change. And that is a journey. But I think it is a journey that we have started very strongly. COVID allowed us to accelerate some elements, particularly on the services side, around the concept of remote delivery, again quite well received by our customers. But we are on a journey of transformation, but we're doing it very much in a customer-first mindset.

Yes. And with regards to the support services, what your question is, actually we believe -- we deeply believe that actually, especially in support, that actually, the customer experience is center stage. And that's the reason why we augment our processes with intelligence. To give you one concrete example of one of the services we embedded is intelligent solution matching. So fundamentally, if a customer has a problem and he types in the text, we automatically find the right solution for him. And that, for sure, goes super quickly for him to find the right solution. We automatically learn from other customer incidents, and that's basically all what we embed. Because at the end of the day, it helps the customer to be quicker. It helps SAP because we avoid the ticket and the cost associated with it. And we benefit from the broader good of the knowledge we actually have in place. And this is just one of the examples, and we have many more of these intelligent services. We even go one step further with our support experience, because we actually embed in-app help into our applications. So if you use S/4HANA Cloud, directly press a button, and we recognize the context, the screen which you are in, get the respective learning videos to help specifically for your context and you get again a direct possibility to chat with an expert and the like. So all embedded to really provide the most modern support experience in the market. And we're actually quite proud about that because it helps our customers and again also SAP. And the notion around intelligence, I think, is a very important one. Because we truly believe that we need to embed AI in everything that we do. Again, to give you an example about S/4HANA Cloud. We embedded now 240 intelligent use cases in the last release, which we just shipped actually in May. And this is just the beginning, and we do that across the portfolio in the CX arena, in the HXM arena and the likes, which means this is super dear to our heart, and we fundamentally change from a mindset perspective how our development is actually working. Because embracing AI, but also quite frankly, experience management in Qualtrics into the processes is very important because we fundamentally can change with that the various experiences. That's also the reason why Qualtrics is embedded in our support experience. So we directly get feedback from our customers, which we not only take seriously for the support process itself but also for our products. So you can give feedback to each and every product and the respective product manager straight away get this end-user feedback. And this helps us to deliver the next version. So you see how all of this is coming together, putting the customer in the center of what we do. And that's actually what we do with that.

So we take the next question from Alex Zukin from RBC Capital Markets.

Are you able to hear me okay?

Yes.

Yes.

Perfect. So I guess my question, and it can be for Christian, Adaire or for Luka. When you're thinking about with respect to sales cycles, with respect to the types of conversations that you're now having with your customers in a post-COVID world, when you think about the types of -- any differences in the activity in the marketplace from a geographic perspective, from a vertical or product area, you mentioned industry cloud? Give us the lay of the land of what you're seeing right here, right now, with respect to that dynamic. And how is it different or changed since the last time we spoke?

Yes. I'll have a stab at that first, Alex. Thanks for the question. And then if my colleagues want to add, then feel free to do so. Maybe I'll just lift it up to talk about the markets and, I guess, the industry view first. And then I'll bring it down to some of the specificity around the common themes in the conversations with customers. So I guess from an industry and from a market point of view, we're very fortunate that we have a very broad portfolio. And if I look at it from a regional perspective right now, we're absolutely seeing an uptick in terms of our business in Asia and in China and Greater China, in particular, as notwithstanding events of this week, we've seen China emerge into a post-COVID world. And that was absolutely reflected by an uptick in activity. We can start to see some of that happen in the European theater of operation. And obviously, Latin America is in a much earlier evolution in terms of its management of this particular pandemic. So I think from a regional perspective, good portfolio. As countries begin to come out of the lockdown measures, we can actually see an uptick. And I'm very proud of our team, and I'm very proud of how the teams maintain the connectivity and the relevance of their role, their function to their customers during this particular time, and incredible creativity on behalf of the customer-facing teams in maintaining that engagement. And then I guess if you look at it from an industry point of view, again, we're also very fortunate in terms of the division of our revenue by industry. Some of the industries that were most exposed, those in the travel and transport sector, aren't industries that have significant double-digit market share for us in terms of the amount of revenue that comes to SAP from those segments. So again, a very good balance of portfolio of the industries that had a headwind to manage, and we've been partnering with our customers side-by-side during those difficult times, but also those who experienced a tailwind. So again, very fortunate in terms of the balance of the portfolio. In terms of just the specificity of some of those conversations with customers, if there are projects that are underway, it is fair to say that those projects are still continuing. And I think, as Christian mentioned, we've had a few go-live scenarios over the course of the last few months, albeit that we've managed them remotely. I think the large transformational programs, we're seeing 1 or 2 things happen: Either those large projects that require significant CapEx and investment are being broken down into bite-size chunks, where there are short-term deliverables that can have a significant impact on the company's ability to reimagine its business post-COVID; or they are being delayed until there's a little bit more certainty in that sector. So those would be just, I think, some of the commonalities that we're seeing in some of the dynamics with our customer conversations across the globe. And perhaps if any of my colleagues...?

Yes, perhaps I just don't have too much to add, but just from an industry perspective, I think it's worth reiterating again and again, because this is not what SAP is usually so much brought into connection with, our biggest vertical is actually retail and consumer products. And that has actually been doing quite well despite the crisis, first thing. And the second thing, what we see clearly as a trend is that while in the last 2, 3 years, public sector spending on IT and digital capabilities has been relatively moderate, now during the crisis, I think there is a clear step-up that also governmental authorities around the world understand that digital capabilities are a true competitive differentiator in the global competition. And therefore, they are finally now really doubling down and embracing, in particular, the cloud as a fast and agile delivery model for new capabilities. We've seen that certainly here in our home market with the German government and some of the work that we were privileged to have an opportunity to work with them. But it happens in other markets as well. And that's where the global reach of SAP and where we really have a broad penetration in local data center capabilities in different markets, including markets like China or Russia, clearly plays to our advantage.

Okay. We take the next question. I see here a gentleman named Brian S. I assume it's Brian Schwartz from Oppenheimer. Brian? [Technical Difficulty] Okay. Then we take another question and maybe we can take the question from Brian later on. The next question goes to Kirk Materne from Evercore Partners.

Can you hear me okay?

Yes, very good.

Great. So I guess my question is around the industry cloud. And I was wondering if you could offer some more specificity around what industries you're maybe focusing on near term, what products are involved with those industries? Obviously, different industries would probably have a different amalgamation of products you'd want to bring to bear. Can you just give us some idea of that? And then how much do you want to develop in certain industries versus leaving it open for ISVs and/or SIs to add industry-specific knowledge on top of your offerings?

Yes. Thanks a lot for your question, Kirk. And just to give you some focus industries we are now really pulling off short term. First of all, automotive is, for example, one key industry. As you probably have seen in the keynote today, that we're really moving fast on digital manufacturing. Connecting digital factories to our ERP and supply chain provides customer an immense business value when it comes to business scenarios like predictive maintenance. So this is very key for us, manufacturing is key as we have a huge customer footprint already. In retail, we heard about the commerce scenario, supply chain scenarios. This is where SAP already has today all the data you need to really create a personalized customer experience in the store, in the commerce store, but then also do the inventory supply checks down into the supply chain. So this is a combination of [ high press ] and supply chain. Plus I talked in my opening remarks about utilities. With a very big utilities provider, actually we already checkmarked that we are going into a core innovation to really serve new business models in utilities and cut the cost of serve over 40 million of consumers by at least 30% by figuring out new ways of billing the customers, new ways of serving the customer. So these are some of the key industries. In other industries, like health care, media, there, we want to expand our huge ecosystem already, co-innovate together or integrate via our SAP Cloud Platform, these partner solutions to really enrich and broaden our footprint in other industries, where maybe the footprint of SAP on its own is not that big as in other industries I just mentioned. So that's the strategy. And we are seeing a huge, huge interest. CEOs coming and saying, "You need to help me in really also in these industry-related processes." And it always ties back to ERP and supply chain and other LoBs. And of course, partners want to come to SAP because we own the data. And now that we also build more and more of these business services on the platform, it becomes also for them much more easier to participate in the industry cloud.

That's helpful. And maybe if I could just ask one really quick one for Luka. Luka, as we've now been in this new world for a few months, I was wondering how you're thinking about variable expenses over a multiyear period, meaning are there more opportunities to save money in places like real estate, doing, I guess, maybe enhanced cost or lower cost to book as less people are [indiscernible]? I realize this all is dependent upon top line, obviously, from a leverage point of view. But have you found a new level of maybe efficiency in some places because of what we've learned from COVID?

Yes. Thanks for the question, obviously one that is close to my heart. And let me segregate it into a short-term and then more mid- and longer-term piece. So certainly, as you know, from the discussion of our updated guideline, we are looking at significant expense savings for 2020, in the right places, I should add. So we will continue to invest in innovation where it really matters, such as in industry cloud, for example. You will see that we will have in R&D more people at SAP at the end of this year than we had as we started the year. But of course, we have significant savings in areas like travel. We have significant savings in areas like facilities. We have significant savings in areas like events and others. So we currently are planning for more than EUR 600 million in expense savings in this respect. And part of it will be sustainable. I think what we have learned very well in the remarkable resilience that our employees have shown in continuing to collaborate via virtual means is that clearly for a lot of the internal alignment processes and internal project work, as much as we are driving this completely remote now for our customers, we don't necessarily always need to get a plane in order to travel cross-continental or internationally in order to have those meetings. So I think those virtual collaboration methods will definitely have a long-term impact and will drive efficiencies for SAP. From a facilities perspective, well, we have always had, since a long time, a quite significant focus on flexible workforce conditions. We have been an early adopter of working from home or working from remote capabilities. But we clearly see now as well that a flexible model that can bring people together in a very appealing environment, such as our app houses, for example, to co-innovate and collaborate together on new products while giving them even greater flexibility to, for example, avoid commuting times while they are working on a regular backlog, for example, in development, will be aspects that we can still further accentuate. And I think they will translate into longer-term sustainable savings. That's why I also continue to be very confident about the further development of our capital expenditure, for example, which we are clearly currently in the process of reevaluating. And I think there is upside in those numbers as opposed to our mid-term ambitions.

Good. Let's take the next question from James Goodman from Barclays.

Yes. The first one was to draw on the significant sustainability focus at the keynote. And it's an area where SAP has been well positioned for some time. But I wondered if you could build on the Climate 21 offering and how that really sits across or integrates with your offerings and how significant that might be from a customer perspective? And then maybe just to build on the conversation around, I guess, the resiliency of SAP's business in light of COVID. You were very early out, as you said, with guidance -- revised guidance. And it was absolutely a clear view at an uncertain time. The situation has evolved since then. I'm thinking, Luka, particularly around some of the very cautious assumptions made in terms of collection and sort of cash behaviors, whether you're seeing some early signs perhaps with the stimulus, et cetera, that was slightly conservative and whether there's any commentary there?

Yes. Let me start with the first question around Climate 21 because the 21 actually doesn't stand for the year '21 but actually for the 21 -- century, 21st century, actually. Because we truly believe that actually climate change is one of the biggest challenges of humanity. And if you think about SAP, I mean we are touching 70% of all world's transactions. We run basically the largest supply chains, value chains, production of our customers. And this is something, if you think about the opportunity we have with not only analyzing the end-to-end CO2 emissions, for instance, as one of the dimensions for sustainability, think about the possibility we get out of the analytics, what we can do with really optimizing the business processes. And that actually goes end-to-end. So if you think about the intelligent enterprise and the promise of fully integrated end-to-end business processes, this is actually what you need in order to really change the CO2 emissions end-to-end, because we follow the Greenhouse Gas Protocol with all the 3 scope layers, which means we really want to have it across the value chain, from the end supplier to the end customer. And that actually spans our portfolio. If you think about it, we procure components. We produce and manufacture different goods, which we then again put through the warehouse, which we transport, which we distribute to our customers, so all these end-to-end cycles. And this is something where SAP is uniquely positioned with our application portfolio to do it, to actually have a huge impact. And also here, we actually prove that we fully run in an agile mode, which means tomorrow, I will, in the keynote, actually, announce not only the first product, which is available already, SAP Product Carbon Footprint Analytics, but also, quite frankly, bring a live customer onstage, which really is already live with that solution with a very complex product portfolio. And I think this is huge. And this is the new mindset also for development. You will see every innovation, every quarter-after-quarter, new applications. And an interesting piece is the sustainability topic, we will actually embrace it in all of our product portfolio, so again, from our procurement portfolio with Ariba, Fieldglass and S/4 to our travel expense portfolio with Concur, the S/4HANA digital supply chain. So basically, we'll become better in all of that. And with that, think about the CO2 which you can see with regards to waste management. If you think about the energy-optimized warehousing, if you think about the procurements, which are again, all of these dimensions. And this is again, unique and showing the breadth and the depth of our portfolio. And that's the reason why we're actually extremely proud about that activities and also in the new spirit of how we want to work. We do that with co-innovation customers, which means for this co-innovation project that I can tell you, after the first minute, we already have 15 customers which directly participated across all the industries, so from chemicals to automotive and the likes, and in all sizes. And we truly believe that this is a sustainable development, what we see in the market, that more and more customers think about sustainability as part of their business success. And the Integrated Reports are just one of those. And Luka, for instance, is also driving the value-balancing analysis activity as well to really drive also the cultural mindset change about that. And to give you one more step actually, we believe that this will be differentiating for the customers who pioneer that. Because the new -- the millennials, the generation set, they think differently about what sustainability means, which means if you are a pioneer in that, you will have a differentiating capability. And this is what we deliver to our customers as well.

Yes. And just quickly on the guidance post Q1, and I think you particularly refer to the cash flow guidance because you were talking about collection topics, yes, we took it down, as you know, after Q1 by about EUR 1 billion. We originally had guided for EUR 6 billion in operating cash flow and EUR 4.5 billion in terms of free cash flow and have updated it to EUR 5 billion, respectively, to EUR 3.5 billion. That basically consisted of EUR 700 million for the reduced operating profit guidance and then an extra EUR 300 million to apply a safety cushion, so to say, for possible collection issues or concessions that we would need to provide. And I have to say, we have applied a very structured approach in close partnership with Adaire and the customer success organization. Because on the one hand, we want to reasonably support our customers, but we want to also do it in a consistent way and in a way that is also reasonable for SAP. So we have essentially tailored corresponding delegations of authority for what the different regions of SAP. And then also globally, we can digest and afford. And I have to say, so far, the progress has been very encouraging. But I would not declare victory here too early because obviously, there will be lots of companies in different industries and also different regions who will be hit by the true cash constraints at a later point versus earlier point, depending on how the pandemic developed. And that might still have in the second half year bearing. But for now, we are in a pretty good and decent spot. So from that perspective, the collection side is really well under control for the time being. The other aspect on which I'm very confident by now is on the free cash flow side. We had originally anticipated a slight increase in CapEx spend in 2020. That's why the increase that we were planning on the free cash flow side from EUR 2.3 billion to originally EUR 4.5 billion and now EUR 3.5 billion, was not as steep as on the operating cash flow side. Now that's where I have really good line of sight that certainly we will not see an increase in CapEx in 2020 for the obvious reasons that we have discussed. And therefore, from a free cash flow perspective, I'm actually very confident that what we have been guiding for is actually very safe.

We take the next question from Keith Bachman from BMO. [Technical Difficulty]

Can you hear me okay?

Yes. Now it works.

Okay. Great. I wanted to ask 2 questions, if I could. The first one relates to, in your prepared remarks, you indicated there may be areas that you don't pursue or areas that you don't need to have a presence in. And I didn't know if you were signaling that perhaps there's some areas that you can shed in terms of what you're currently pursuing. And how do you arrive at those decisions to potentially filter activities? And as part of that, a follow-on from Kirk's question, as you're moving into the industry cloud, is there perhaps opportunities to engage in M&A to fill into some of the white spaces that you're currently not active in? So it's really an in-and-out question. And then I have a follow-up.

Yes. Let me tackle first, Keith, the partnership question and where does SAP play. I mean when we look at our product strategy, SAP clearly needs to play a core role going forward also in all of our core applications. So we have to win HR. We have to win procurement. We have to, of course, continue to win travel expense. And of course, with the integration coming, we also want to win the cloud ERP game. But we also have to question ourselves in places where we are today not the #1 or not the #2, is it really so effective to conquering this market by our own? Or is it not more wise to really bring in good partner solutions or to really also use a co-innovation model to conquer that market? And this is especially now valid, as you mentioned, in the industry cloud. We don't have the thought leadership in all of the industries. And this is why I definitely see us focusing on some key industries but using the power of our ecosystem to really then broaden the coverage in the industries. But of course, the same logic also applies to our LoB solutions. As for me personally, we have to place the right bets, because then we have such a huge total addressable market and then we win -- we need to focus to win and we need the ecosystem to broaden the reach where we don't have the thought leadership in-house.

Yes. And perhaps to just quickly add on top of this. You have also, I think, implied in your question whether there are areas of further divestment for SAP. And as you know, we are just currently in the process and have signed for the divestment of our legacy messaging business that we have sold to Sinch, a Swedish company who specialize in this field. This is we expect going to close sometime in Q4. So that's an area that we are truly divesting. And there are 1 or 2 other smaller areas that we're currently looking into that's nothing earth-shattering. But in all of those cases, we believe that those businesses are not core, to Christian's point. At the same time, we can package them up in a way that it might be appealing for a sale. And third, they typically don't meet our expectations from a profitability profile perspective, so they help our margin increase trajectory that we are planning for. Those would be some of the considerations. But those are not huge areas. It's more about expanding our portfolio in areas where it's better to do so through partnerships in those areas. And perhaps just to quickly add and then also add back to Christian on the M&A side. I think it's very important that we, from a strategic perspective, want to build out our industry cloud portfolio through our extension platform, through the SAP Cloud Platform. So if we do things ourselves, then it's clear that we do it via the platform. If we partner, our partners have to adopt the Cloud Platform in order to provide these extensions. And if we would see suitable tuck-in targets that provide a good vertical coverage that we don't have, that does not overlap with our capabilities and our sweet spots and that architecturally can also be quickly deployed on the platform, then we might consider it. But again, our first priority is really on organic innovation and integration now. And so large-scale acquisitions that would come with their own individual challenges in this respect again are certainly not a core priority at this time.

And we have time for one final question. And this comes from Charlie Brennan from Crédit Suisse.

Perfect. I wanted to circle back to one of the debates we've been having in the stock market for some time over the balance between growth and margins. It feels like you've talked around the issue today. And your slides were pointing to an aspiration for profitable growth. Can we take it from that, that you're still committed to the margin improvement journey? And then if I think more medium term, the current environment has really highlighted the value of IT. It feels like companies are going to be accelerating their digital transformation journeys. It feels like the demand for SAP solutions could end up being bigger in 3 years' time post-COVID than without COVID. And given that the prize is bigger, doesn't it make sense to double down on some investments today to lean into that?

Yes. So thanks a lot, Charlie. That's actually a very good question. And just to start with your last question first. I mean absolutely, we see in the crisis also plenty of opportunities now in our portfolio to actually also accelerate growth. I mean we are very lucky to have a world-class commerce solution. Also, supply chain, suddenly CEOs talk more often about supply chain than I heard talking to them about supply chain before the crisis. And that just shows how parts of our portfolio are increasing relevance. And I'm sure there will be also a surge in demand after the crisis for exactly this kind of solution. And we already see in the crisis a lot of CEOs asking us to really help them to making, for example, their intelligent supply chain now work or switching to new flexible license models with S/4HANA. And of course, when you -- when we talk about growth and profitability and margin, so when we see now that certain parts of our portfolio see an increased demand and we see an acceleration to the cloud, of course, our aspiration stays that we want to see profitable growth in the cloud. So for us, it's very key that we really get both. But the same applies then to all of our other business models like on-prem and services. So for us, it's first -- the first priority is really also then, of course, to capture the growth we see out there in the market. But the second priority has to be still that each business model has to show continuous improvement also on the margin side of the house.

And that's what we will continue -- this is Luka -- that's what we will continue to drive toward. That is ultimately also what our Best Run program that I've been talking about at the last Capital Markets Day in November is all about not about cutting costs, starving the company, it's actually making room for incremental investment in the right places but disciplined investments in those areas that can strategically carry us forward. And now in the Board in the last couple of weeks and months, we have really come together to define what those prioritized growth areas are and we are going to double down into those. I believe that will translate into a great opportunity to continue to scale our cloud business, in particular, very strongly during the crisis but even more so after the crisis. And second, we have defined a number of important levers, both very importantly on the cloud gross margin side and the efficiency of our cloud infrastructure operations, in sales and marketing, in G&A functions that are really no-regret, efficiency-focused activities that are going to give us scope to continue to improve our margin while we stay focused on growth. But let's be very clear, we will certainly not sacrifice our longer-term growth opportunities, in particular in the cloud, just in order to hit a numerical margin number. That was never in the cards. And we will scale through the efficiency gains that we have across each and every one of our business models. And then the math under usual circumstances should add up to the margin increases that we are aspiring towards. But the mantra will always be focused on having healthy growth businesses that we double down into and that we strategically continue to expand on.

Very good. Thank you very much. And this concludes our call for today. Thank you so much for joining us here on this virtual financial analyst call. And you can now disconnect. Thank you, and goodbye.

Thank you. Bye-bye.

Bye-bye.

Good morning, everyone, and good afternoon for those joining us somewhere else in the world and not the European time zone. This is our second Q&A for our Virtual SAPPHIRE. Welcome very much. My name is Nicola. I'm head of comms at SAPPHIRE -- not SAPPHIRE, SAP, my God, I have SAPPHIRE on the brain. So we -- I'm very pleased to have Christian Klein with us today, our CEO. He's here for your questions. Please be so kind, and when you enter your questions in the tool to us, state your name and your media outlet and also your analyst house, if that's the case. So with that, Christian, over to you.

Yes. Thank you, Nicola. I don't know -- I didn't know that you have a new job title, but interesting. Okay. So good morning, good afternoon, everyone. So thanks, first of all, for joining. Thanks for your interest in SAP. And yes, so first of all, before we go into Q&A, and this should be all about Q&A and about your questions you're having, I just wanted to do a quick intro. And as you have seen, we have started SAPPHIRE on Monday, it was actually a huge interest. We had over 150,000 people who actually wanted to log in, and that also brings me to the point, I want to apologize for the technical issues we had. One decision I already regret, we outsourced the platform to a third-party provider. That was honestly not the best decision, but I also want to take here full accountability. And personally, for sure, as I also want to be fair to the teams, it's not acceptable that something like this happens. But we are also, of course, all working in difficult times. The team did actually, before SAPPHIRE, a tremendous job in turning such a massive event into a virtual event, that's required a lot of work. And of course, also our IT team is doing a fantastic job in running our company without any disruption. What has happened is not good. But now we have a new day. We have to look forward. I guess, the content is extremely relevant. And I guess, we are laying out well where we want to go with the company, what is our product strategy, going forward, what do we really want to do around customer success so that we also walk the talk. And as I said, it's actually also a good signal that over 150,000 people wanted to get in, that's by a factor 10 more than we had in previous times. But again, I apologize for the technical issues. And of course, if you missed anything, if you're missing content, then please feel free to reach out to us, and then we will also, of course, provide you with the content, with the sessions you might have missed. So many thanks again for joining, and now let's head into Q&A.

So thank you, Christian. And on that point, we will have all the replays of the sessions on the website so you can follow-up if you are interested and curious. So Christian, we have a whole mix of questions. I'm going to start with -- wow, where do I start? So many. So we'll start with some that came in last night. This is from [ Daniel Pouzet ] [indiscernible] Magazine. He wants -- has 2 questions for you. What are the COVID-9 (sic) [ COVID-19 ] learnings for the leadership team? And do you see potential for renewed focus on regional value chains, including IoT? So maybe start with COVID-19.

Yes. That's a good question. Yes. So first of all, the big lessons learned is, I guess, in these days when the pandemic started beginning of March, I guess, the #1 requirement is really to communicate to your people. I mean there was, of course, a big uncertainty among our employees about the lockdowns, how do we continue to operate the company. Of course, there are also questions about what is the outlook, how will the year to be turn out, what kind of protection measures do we put in place, how will this impact our business there? As I said, a lot of questions. And for us, it was very key to stay close to our employees and to give them the feeling that we care and not only giving them the feeling, but that we also then, of course, also take real action. That's my #1 lesson, which we learned. And of course, then the second focus was all about taking care about our customers. I mean they're running extremely mission-critical processes. And as the question also implies, supply chain is one of that. And then, of course, it was for us of utmost priority to keep the businesses up and running. I mean we have 400,000 customers, they are running the world economy, and it's our obligation, of course, to continue the business also in such a crisis. And this actually worked out extremely well. So we had this week, our issues, but from a broader perspective, actually, our systems are extremely stable. There were no outages. And for us, that was, of course, also another mission-critical item in this crisis. And then to your question on supply chain, absolutely right. I would say the #1 topic when I talk to CEOs these days, it's all about supply chain and how can we avoid disruptions in the supply chain. And it's also absolutely why that in this talkings that a lot of CEOs actually are also thinking about to localize their supply chain, to diversify the supply chain. Honestly, sometimes I have the feeling that the globalization already before the crisis, but especially now in the crisis, is actually moving a little bit backwards. So that now with the lockdowns that, of course, companies now think even more about producing in their own country. And then again, that's all about also the software, which we are running, to avoid disruptions because of that lockdown. So yes, it's a very relevant topic these days.

All right. And we're going to follow-up on that a little bit, what's relevant to customers, because we have some questions from Duncan Jones that came in last night. Duncan Jones, who is at Forrester. He was wondering about the software industry's response to the economic crisis, says, "Many clients are in survival mode right now, right? They're making emergency cuts to their IT budget." And he says, "For some reason, large software companies are refusing to help." For instance, he uses as an example, ServiceNow told its customers changing existing contracts creates unacceptable legal and accounting risk for ServiceNow. His question is: Why isn't SAP doing more to help these customers by letting qualified customers adjust contracts and so on? How do you -- I believe there is -- we have been doing something in that direction, so maybe you can elaborate a little bit?

Sure. Yes, Nicola. At some point of time, actually, because every line of business in SAP came up with another idea, and we actually also launched these ideas at some point of time, just in 3 weeks ago in the Board meeting, we said we need to package this up because we did so much. That I said, "Hey, before the customers really lose oversight, let's package this up," and we are now also offering a reopening solution software. And this is the bundle of our solutions where we also give software for free for a certain time to just help our customers to get their employees back to the office in a controlled way. But that's not the only one what we are doing. And by the way, there Qualtrics is, for example, extremely relevant, as there you can track the sentiment. So how do the employees feel about going back to the office? What do they need? What do they also need during the time at the home office? How is the ability to work to keep the employees, of course, not only safe but also productive? Ariba Network is another element of that. I mean suppliers have issues to deliver what is now the right supplier, and there were -- all around that, there were special offerings. And we are also, as we clearly said, we don't want to leave a customer and a partner behind. So when a customer, for example, had liquidity issues, severe liquidity issues, we, of course, were open to talk and to find another financing options to also change contracts, to make deals work, which under normal circumstances wouldn't have worked out. So we are looking at this. But just also understand, we are doing this on a case-by-case basis. We cannot do this for everyone. There are others coming, who just had a very strong quarter in an industry actually who is not actually suffering. So there, please understand, we cannot do this to everyone. But especially to small or mid-sized customers who are really suffering, and I include their partners as well, SAP is, of course, reaching out with a helping hand as we don't want to leave someone behind. We want to build these relationships for life and it also doesn't help us if the customer and the partner is really completely going down. So that's why we're actually helping on a case-by-case basis also on the -- from a deal perspective.

Okay. And Duncan had another question yesterday that we couldn't get to at the end because we came to the end of our Q&A. And he was obviously listening to the Investor Relations call on Monday and says, "Could you talk a little bit more about the changes in sales incentives to reward long-term loyalty rather than just making the deal?"

Yes. It's not only in sales, actually. A lot of people in SAP figured out this year that we changed the bonus plans, and this will continue. That was just the first step. As in the cloud, it's extremely important that everyone understands in SAP that this is a customer for life. It doesn't help us if the customer signs a contract and is leaving SAP after 1 year. And this is why we have put -- we put in different measures. One of that is also compensation. And what we did is we are looking at the adoption of our customers, when they are live, how many users are locked in, how often do they come back, what do they use? And we are measuring that. And we are putting target against that. And that's actually a metric now in the sales bonus plans, but also in the plans of many developers, many support people, many operations people. And right now, we are just also evaluating what could be the next step, because this is for SAP, clearly, the way to go. We need to have on a long term this high adoption, because then, when our customers are successful, it also pays out for SAP. That's the name of the game in the cloud. And for us, this is of utmost importance. And by the way, I'm now talking cloud, but it wasn't so much different in on-prem. But of course, now in a subscription-based model, in a model where customers are renting our software, I mean it's easy to explain that this is, of course, now even more important.

Okay. Let's move on to some questions that have been coming in this morning. So we have one from our friends nearby from e3zine Magazine. Question is: The end of support deadline for Business Suite 7 has been extended to 2027, 2030, but what about AnyDB? Has SAP come to an agreement with IBM, Microsoft and Oracle, so that customers can leverage any database in AnyDB even after the former deadline 2025? Which measures is SAP taking to support its customers in reopening their business in the wake of COVID-19 crisis? That's the second part.

Yes. So we actually, as we also communicated, we extended our maintenance deadlines. And I guess this is also another sign that we really want to support our customers to the cloud. Of course, some customers are already in the cloud. And some are still in the process of doing it. And now actually, in the crisis, I feel that the move to the cloud will accelerate as customers just feel that sometimes how vulnerable they are to operate their own data center, now becoming more resilient is also outsourcing some of that, so also by moving it to the cloud. Now to the question. So we, again, showed that we care and we extended our maintenance deadline, so to give our customers the necessary time. And of course, also with all the database vendors who are still in our installed base on older -- running older ERP releases, there we are also currently in negotiations to also give there the same kind of time line as we have now given our customers. And there, we are on a good track, and there will be also some announcement soon about that. But as I said at the beginning, the customers don't have to worry. We will do this, and we will make that work. And -- but the good thing is also actually that we see now a huge traction, especially in S/4HANA, we have now, in the meantime, over 14,000 customers, especially on the cloud, we see now huge progress. And oftentimes, I, of course, also get a question, why is this not going faster? In all fairness, I mean the customers are doing a business transformation. It's not only about shifting to the cloud, a technical migration. Because SAP is actually in the heart of any business transformation of our customers. So you have to adapt your business processes. And everyone who did that once, in supply chain, in logistics, in finance, knows that this is not so easy. It's also about changing the way how people work. It's not only about the software. And this sometimes takes time. The technical migration, there are so many good tools out there. So many well-educated consultants out there. The point is about changing your business to be ready for the digital world. And this is, I guess, the key part where I also recommend to our customers, let's really rethink your business model to make you competitive in a digital world. And that's sometimes the pillar that takes the most time.

All right. That makes sense. Now we have -- we had 1 more question about measures taken for COVID-19 to help businesses reopen?

Yes. So as I said, we have now a whole bundle of solutions where we are helping. We have Qualtrics; we have the business network on the Ariba side; and we have some offerings around procurement. We also have certain offerings around the services business of our customers. And we will also do, once again, a broader announcement, as I feel that, also as the questions here show, maybe we need to re-communicate some of that so that everyone is really aware about what is SAP offering to safeguard the employees of our customers. And the other thing is, of course, and I just got the information this morning, and of course, we're also helping the public sector. I mean yesterday, we went live with the Corona-Warn-App. And everyone who is saying it takes some time to get a SAP software live, this was a project, which is for me, also a reflection of the new SAP. We developed an app within 6 weeks actually, real development time. Yesterday, we had 2 million users. Today, actually, we already have 6.5 million downloads. It's the app, which -- with the broadest coverage already now. It's a big success. It scales. It's user-friendly, from my perspective. It also helps the society. And I'm very proud about the team who did that together with Deutsche Telekom, with other partners out there. And this is also how I would like to see SAP going forward: Building apps who really help solving problems in our society in the crisis, but of course, also helping to solve business problems. We have built it in a modular way, built it integrated and put some innovative features in there, help our customers to transform into an intelligent enterprise. And this is what we are doing in the crisis, also helping the public sector, our society, but of course, also big time, our customers in the private sector.

Okay. Let's move into the next one. And this is from our colleagues from Japan, from ZDNet. There's a whole bunch of questions in here. So let's just walk through that, okay? So in your keynote, you said SAP owns a business platform and application layer, would you explain what that means?

Yes. So first of all, good afternoon to Japan or good evening already. Actually, it was a little bit earlier. So last year, I was in Japan, I actually have experienced the cherry blossom season there. It's no better time to come to Japan. I'm looking forward to, hopefully, next year, experience that again. Yes. So look, the business application platform. When you're an application provider and you have to have a platform which, first of all, integrates your apps. I mean SAP's DNA is about running business processes. We are running mission-critical business processes in procurement, in finance, in HR and a company doesn't run in silos. It runs -- you have to make a value chain work. Supply chain needs to connect it to a commerce shop and a procurement system needs to integrate it into a finance system. And there, you need a platform. And that's our SAP platform, which is our business application platform as it offers the data models to harmonize the data across our apps so that you talk about one customer, one employee, that the data is coming along in a semantic way, in the right way. But of course, it's also providing the business services. You need workflows to make business processes run. You only want to log in once when you're working with several SAP apps within a business process. And of course, the partners and the ecosystem, they need a platform to extend the SAP portfolio to build new innovative apps. We also launched the industry cloud which is my conviction that this will be the next big growth lever for SAP. In the industries, we cannot only conquer by our own, we need our partners, we need the ecosystems, and they need a platform. So they will use the same business application platform, the SAP Cloud Platform, which is the B2B platform then in our industry to build new industry apps and to build extensions to our LoB apps. And this is what the business application platform is all about. And of course, owning the application layer. When you are SAP, we want to win in ERP, we still want to win in HR, in procurement, in travel expense, in experience management, in supply chain. So we also have to place our bets where we put our R&D investments in and, of course, in other parts of the portfolio, but then also partner to give our customers a really comprehensive, compelling portfolio with solutions developed by our own where SAP has a right to win, but also using partners where we don't have the thought leadership and where we can really also make use of our strong ecosystem.

All right. And let's build on that. So the second part of the question is: Also in your keynote, you mentioned about modularizing the stack. What exactly is SAP doing? And what is the benefit for the customer?

Yes. So in the cloud, and for us, it's very important when you look at the way how customers want to consume our software. For them, it's very important that they get every 4 weeks new release cycles with innovations, without any disruption to their business. And what they also want to have is, of course, the highest security standards. Still, they also want to have it in an integrated way. So what we are doing is now when we are talking, for example, about our cloud ERP, the customer can decide, do I start now with HR? So they are implementing SuccessFactors. We have different modules there. When they then want to go next to finance, they can go to finance. And for us, it's very important that the customer can do this on a step-by-step basis. Oftentimes, the customer doesn't want to do it all at once. And this is why you need such modulars because also that provides you more speed, more agility and also the ability to put more innovations out there in a shorter time frame. This is why we are building the intelligent enterprise on a modular way on our SAP Cloud Platform so that the customers can move step by step to the cloud based on their business priorities and not SAP saying, "You have to really implement the whole thing before you go live." And that's, I guess, for us, very important. And this is why in the ERP and on-premise days, it was one big system, and now in the cloud, we are cutting it in some modules to, as I just explained, also allow our customers to move in a granular step. It's also so that a lot of customers say, "Hey, I don't want to give everything to the cloud, as there are parts of my business which should stay on-prem in my data center." And we respect that, and we want to support that. That's why we are saying there can -- we as SAP can also run hybrid landscapes, leaving some parts of your ERP on-prem, and then you can, again, move other parts of your ERP to the cloud in a modular way. And we put it together so that we can also run hybrid landscapes. It's all about giving choice. And for us, this is also a key part of our strategy.

Okay. Two more questions here. Compared to last year, experience management has been less mentioned. What is going on around the integration on X-Data and O-Data?

I wouldn't say that it's less mentioned. I mean the -- Ryan has a whole day to talk only about experience management. I mentioned it in my keynote. We showed what Qualtrics can do. If it's also embedded in our portfolio, how it can drive experience with -- for our customers, for their end users, for their end customers. So Qualtrics is a key pillar. It's actually one of the most strategic pillars we have in our portfolio. And also, let me explain you why. I mean when you talk about the intelligent enterprise, we have a lot of old data. We know how to run a company. SAP knows that. We are doing that for now 48 years. And now we have a complete new category. I always saying, Qualtrics brings the emotions into the intelligent enterprise. Because beforehand, we were not able to track how are the feelings of the customers. What does an employee feel if he is going through the different steps of a life cycle within the enterprise? How does he feel when he's getting recruited when -- how does he feel when he's getting onboarded? How happy is when he is inside the company? And now we embed Qualtrics, for example, within SuccessFactors and now customers are able to track that. And that, of course, helps big time to retain the people, to lower the attrition. And the same is, of course, also on the customer side. So what we are currently doing, and there will be also more announcements around that, we're just looking for places in our portfolio where we can infuse the sentiment data, this X-Data even more to really give our customers the ability to measure the sentiment of customers, suppliers, about the brand; of the employee. And then of course, but also then to take action in our core applications. And so this is a key part of our strategy and Ryan will talk about that, and we are heavily working on that to expanding Qualtrics even more inside our portfolio. And we also, of course, see this as a major growth lever for SAP going forward.

Good. I think that will resolve all the concerns. So Christian, I just realized with a shock, we only have like 20 minutes left. So you're going to have to have shorter answers, and I'm going to try to make these questions a little shorter, okay? So let's work together on this.

Yes. I got the memo.

All right. Here's one from Den, Dennis Howlett, Diginomica: Since SAP will not directly support all -- someone just switched this on me, sorry -- will not directly support all industries and rely on partner solutions, how will SAP help customers navigate indirect access costs across potentially multiple apps and process touch points, such as third-party solutions and so on?

Yes. I should have expected this question from Den, honestly. Yes. So look, I mean in the cloud, as we now want to go, especially in industries, we need partners. We cannot do this all by our own. I mean when you look in certain industries like media, of course, we are running media companies with our core applications, but there are now some very specific processes where we want to expand this with partners. So when partners are now coming, and want to codevelop with us, of course, they are doing this on our platform. And with that, there is no indirect access issue, as we, of course, want to make sure that we also find an attractive commercial model for the partner. They need to make money as we need -- as we want to make money, and we need to also treat our partners in this part very fair. And of course, when they are also expanding our solution portfolio with existing solutions on their side, that's the same. I mean we are just, of course, making sure that via the API hub on the platform, they can seamlessly integrate. We have a strong data model in the future on the platform so that this works, but then again, this comes with our platform and with that, there is also then no concern around indirect access. As for all the other companies out there, we will use our API hub. We will put a lot of effort in there to make it for partners even more easier to connect. And with that, with the platform, the API hub, there is then also -- there should be no concerns around indirect access.

All right. Den, I hope you listened. So let's go to the next question. And you're going to like this a lot because this is totally in your wheelhouse. So let's keep it short because I know you can say a lot about this. What are among the challenges companies would face in becoming an intelligent enterprise? What aspects of the business that they need to change, transform to become an intelligent entity? And then we'll see -- let's see if we get to the second question, too. Let's go with intelligent enterprise first.

Yes. Yes, it's actually -- it's also a question when I did my keynote actually, and the team told me the first 10 minutes, you have to talk about the why and sometimes I actually figure out that the why is absolutely clear in the meantime. In the crisis, it's about using new technologies, new ways of doing business to get more resilient. You can also, of course, increase productivity a lot by adapting ML, AI to your business processes. And of course, finally, we also talked about sustainability because this is a big challenge of our society. And we as SAP want to go 1 step further. As I also mentioned in my keynote, that we also want to help to drive sustainability. Now the question about the how is really close to my heart because I see many customers, they are struggling with their business transformation. I, of course, have done it inside SAP. And as I also mentioned it before, it's not -- the hardest part is for sure not implementing our software. The hardest part, when you really talk about the business transformation, it's about coming from the end users, changing the way how they are working since many years, and adapting this to a new reality, a new reality how customers want to be served in the digital age and there are new ways. There are new license models out there. There's new ways of selling. There's new ways of doing marketing. The software can do that. But again, the hardest part is always about changing the business processes. And I mentioned it yesterday, we as SAP also have to do a better job in guiding our customers to tell them. I mean we are running 400,000 customers. We know what are the best practices for the business processes in the digital age, and we need to guide them, to show them, look, for this business process, what we have figured out in our installed base, for your industry, this is the process which gives you the maximum outcome. And then let's implement it. Let's do the change management. Let's bring your people behind. Let's also educate your customers about the change which is coming and then do the technical migration. And the technical migration, as I'm saying, there, you have to have a lot of focus on data, because when your data is messed up, you can have the fanciest digital boardroom, you can have the best analytics solution in the world, your data sources, they need to be clean, they need to be governed. And this is also something where, on the services side, we will put an even stronger emphasis on. Once a customer is doing with us his IT project, supply chain, ERP, HR, we also want to make sure that there are also people in the project who are helping our customers to put the right data architecture in place. You don't solve a data problem just by putting all of your data in the data lake because the semantics won't match also afterwards. So this is a key point for me in every transformation of our customers. And yes, this is about the how and indeed, that's for me, for many customers out there, the most difficult part, where we as SAP want to do an even better job going forward. Was this short enough or too long?

Yes, it was good. I think we'll say -- we're going to say it was just right, okay?

I did my best. Yes, yes.

Considering that you can talk about this for hours, I think, well done. All right. So let's go to the next question. Naushad from TechRadar Middle East wants to know: When will all of SAP's acquired products, Ariba, Fieldglass, SuccessFactors, Hybris and CallidusCloud, have a single code line, a single product architecture and a single data model? Not all have been rewritten to take advantage of the HANA database in memory architecture. And I'll get to the second question in a second.

Yes. That's a question which we also heavily discussed now for many years within SAP and I also had -- just had a call with Larry Ellison actually 4 weeks ago, and we talked about several things, of course, about the business, but we also talked about that one. And there are different perspectives. Look, for us, for our customers, what is the best way of doing -- at the end, what do our customers want? Our customers want to implement our software, and we need to solve their business challenges. We need to run their enterprise in a better way. And for that, our applications need to talk to each other. Is it, therefore, the most important thing that they are all written with the same programming language? For me, no. But what is very important is that all of our applications having the same -- using the same data model, that they are using the same business services, so that these processes can work and not only putting data from left to right; it's about the same user experience. You don't want to work in 4 screens within one business process no matter how many apps are being below these business processes. And these are the integration qualities which we defined. I already mentioned it yesterday, 50% of these integration qualities are already delivered for all of our cloud products around the core. And by the end of the year, it will be 90%. And then there is the SAP Cloud Platform, who is the integration and extension layer, are talking about the business application platform holding our -- the pieces then together. Underneath, yes, all of our core cloud applications are already running on HANA. That was the first step we did. And now we are harmonizing the business processes with our SAP Cloud Platform. Will we rewrite every single code line of our cloud applications? No, because we don't see any benefits out of that, neither in the cost of running this application nor for the customers who actually, they want to make -- just want to make sure that they can run our businesses -- their businesses in a seamless way. So this is the way how we're going to tackle it. And I hear extreme good positive feedback. Just this week, last week, we got a survey from the user groups. They asked now, how is your experience now with SAP cloud apps working? How do they work? And the survey was actually really positive saying, we see now clear progress on how to run this application. It doesn't feel anymore that they got acquired and left in isolation. It's getting better. We know there's more work to do. We are on it.

All right. Good. Second part, the other topic that he wants to know about. I think it's a he, I'm not sure. SAP has said that several of its cloud computing products do not meet the company's cybersecurity standards. What is the update?

Yes. On that one, we did a total reorg at the beginning of the year. And of course, SAP has very high security standards, which all of our products have to meet. And we are also benchmarking that, by the way, with the NIST, that's a benchmark, that's an index, who is also then telling you how secure your solutions are against a market average. And we have really a high level we want to reach for all of our applications. We did a reorg at the beginning of the year. We left -- some of the LoBs did their own work on security. I'm now not saying that they did not a good job, but they clearly were not on the same level what we expect from a SAP corporate perspective as some others in our portfolio. And look, then you have the choice. Do you want to be honest to your customers? Do you want to communicate? And for us, it was clear, yes, because we, on our own, expect from us this high standard. And then we said, "Okay, first, we're going to communicate." We told the customers which apps they are, they are by far, not all of the apps. I mean many apps are highly secure. And for those ones where we saw some gaps, and by the way, there were no security incidents, so we didn't communicate because we saw incidents, but we just wanted to be transparent. And now actually, we are fixing that. In the next 3 to 4 weeks, everything will be closed and then all of our apps are running on the same high standard for security as we have given it, also as a clear requirement now, to all of our engineers, to all of our products, as cybersecurity is, of course, extremely -- very important topic for all of our customers.

Okay. I think that answers that. We have another question from Japan, from Nikkei. This is about transformation. Let me see. In terms of recovery from the new coronavirus and social responsibility for environmental issues, the transformation will be important, Klein stressed in his keynote. Meanwhile, SAP recently announced that Business Suite support expires from 2025 to 2027. Actually, it has been extended. Will this slow down the transformation of companies?

Absolutely not. Actually, currently, we are just discussing on how the crisis will now accelerate the move to the cloud. This is actually what we are expecting for some of the reasons I just explained early on. And no, again, I mean when you look at our installed base, I mean the installed base of SAP on these ERP systems, they are running supply chains. And everyone who was walking into a factory of an automotive company, there you see how complex these processes are. And then you multiply that across 100 factories. And the customer left all of these factories complete freedom on how the processes work within each factory. Now imagine you have to move that to the cloud where standardization is required. And this takes time. And this is not a point about the software. But when you move to the cloud, this is about going also back into a certain standard, and this actually just takes time. And these are bigger companies who are already on the move. They are moving, to my point, of modular. They moved already certain parts. HR is easier to move. I mean HR processes, are not, from a complexity perspective, not that, so complex as processes in supply chain. And this is the reason why, and we want to give our customers enough time and we want to treat them in a fair way, and this is why we extended the standard support for that or the mainframe support, yes.

So there's another question here on transformation, it seems to be on everyone's mind here. We have a question from Christine Wahlmüller, COMPUTERWELT, Austria: Many companies are struggling with the big topic, digital transformation, as you very well know. How do you want to support these companies in detail?

Yes. So in many of the projects I'm supporting, it's first important to understand where does the customer stand today? And then the second question is, in which industry is the customer working in? What kind of new business models has the customer to serve? And then when you know -- when you have a picture around what is the 'to be', where the customer needs to go to be competitive in the digital age, and what is the 'as is', then you can decide, do you do a complete greenfield project? So are you moving into a plain vanilla, a new ERP, new supply chain, new HR system? Or do you do some customers and some consultants call this a brownfield approach, to more do like a technical migration and only adjusting the business process to a certain sense, because the change is not that big enough, the customer has already in the 'as is', standardized the processes in a very good way. So it really depends on where the customer is as of today, how big is the change in the business model and of course, how clean is the system as of today? And this really depends on the customer situation. And then, of course, once you have defined the 'to be', it's also then the question how to get there? So for me, it's always the combination, again, of putting projects in place where you, first of all, involve the end user. I mean they need to understand what is going to change. Oftentimes, they also can tell you in design thinking sessions, "Hey, for 20 years now, I'm working in this process. Can someone please remove these manual steps? Can someone please design this process in that?" And then finally, you talk and then you go to a white paper that don't need to have highly sophisticated software for that and say, "Here, these are the process steps which consume a lot of my time. This is actually the process that we have no freaking clue about how to get the data to make the right decisions." Okay. So let's go deep and see what is actually the problem here. Then you design that coming from the end user talking about the business process, here comes SAP. This is why I'm always saying SAP is extremely relevant in that, because we are running this layer, which, at the end decides is your transformation business-wise successful or not. And then involves IT and do data. And as we also will know, teach our development teams, agile is actually a good step because you then find out early enough, is it going into the right direction? You are delivering in sprints. You do the checks with the end users, is this what you actually had envisioned? And then you go back and forth, back and forth, and you can show also quick wins, yes? So the eyes of our people opened up when we showed them first, the Digital Boardroom and said, "Look, this is the analytics of the future." And then everyone said, "Oh, can I have that, please, tomorrow?" And I said, "Tomorrow is maybe too fast, but we can get there, yes, but we have to work together." It's a strong combination of business. And the business has to accept that this also needs investment time. We need to understand the end user. And then it's, of course, IT, data and analytics. And when you get this well together, our software can do incredible things, believe it or not. Believe it or not.

All right. Okay, we've got 4 more minutes. So let's see what we can get in. We've got Alberto Iglesias from La Razón from Spain: Can you please tell us details about your strategy about industry cloud and the ERP cloud, especially in these moments that other providers are especially aggressive in pricing and the commercial approach, i.e., Oracle?

The topic around the industry cloud actually came, I would say, even 1 year ago, when we -- again, it always helps to talk to customers and then many CEOs told me -- take again, an example of manufacturing. A lot of these customers really want to make use now of predictive maintenance, yes. So you have a lot of data about the machine. You can put sensors on the machine, and then you -- just from the sound of the machine, you can actually, in the meantime, figure out does the machine need maintenance, before actually the machine breaks. You can also use other kinds of measuring types to figure out does the machine need help, support before it breaks. And this is saving a ton of money. I mean when you have huge production sites, there we are talking about hundreds of millions of euros savings when you get that one right. Now a lot of customers now have this data from the machine. But again, you have to bring this data back to an SAP ERP system because the ERP system says, "Oh, let's open up a service order because this machine needs help. Please send a technical guy and fix it before actually it breaks." So -- and a lot of customers struggled with these industry-related processes here, bringing it back to our SAP ERP system. And we always talked about industries. But now we really want to make it sure to really drive these vertical processes, to not only run the processes horizontally, but also verticalize it. And again, industry cloud, same as for retail, same as for utilities. You have new business models, and they all need data and processes, which tie back to our ERP or other LoB SAP system. And this is why it's so logic that customers are also reaching out and said, "Christian, can you not help us here? Can you not invest? Because this would be from -- in my transformation, it is so mission-critical, again, to make this one." Got it. We now went into it. The point is only when you are then sitting here, and actually, we were sitting in this room, I guess, for the first time. And I said, "Guys, but it will take forever." I mean we are now going out and said, we are running 25 industries. I mean this is not -- we never ever can do that. I mean this is an extremely big market. So I told our industry heads, "Okay, come back also with partners." I want to understand where do we want to go in and where is the partner play? Because we won't conquer this market fast enough for all of our customers. So industry cloud is a big part also going together with partners. And there's nothing wrong with that. Actually, I like it a lot because this also just strengthen our ecosystem and also helps, again, the industry cloud can also help to get a push into our ERP, because when customers are now seeing, "Hey, I can even do more with the ERP in conjunction with these industry processes." I see this as a winning strategy.

All right. We have 1 minute left. So yes, time flies with you, Christian. What can I say? We have 3 more questions. I would suggest we take these questions into the Board Q&A to be answered.

Yes.

All right?

Yes, yes. Or we do it at least in a written form, yes.

All right. So thank you, everybody, for joining. Thank you, Christian, for joining us early in the morning. I know you've still got a long, busy day ahead of you. As I said, we have another Board -- we have an entire Board Q&A at the end of the week. Join us for that, and we have more sessions this week in regards to SAPPHIRE. Thank you, everybody. And again, next year, maybe we'll be -- hopefully, we'll be doing this in person.

Yes. I hope so as well. Thanks a lot for joining. Again, thanks also for your interest. And yes, take care. Stay healthy.