SAP SE (SAP) Earnings Call Transcript & Summary

Hi. Welcome, everybody. My name is Adam Wood. I look after European Tech Research for Morgan Stanley. Good morning, good afternoon, depending on where you're based. It's a great privilege to welcome Luka Mucic, the CFO of SAP to our TMT conference. Luka, thank you very much for taking the time to join us.

Thanks for having us -- me.

It's a pleasure. So we'll get the boring stuff out of the way to kick off with. We've got a couple of disclaimers. The disclaimers multiply each year. We're on to 2. So hopefully, we'll leave it there. But from the Morgan Stanley side, for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to our Morgan Stanley sales representative. And then from the SAP side, please note that except for certain information, matters discussed during today's presentation may contain forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from expectations. The factors that could affect SAP's future financial results are discussed more fully in SAP's most recent filings with the Securities and Exchange Commission. So with that out of the way, Luka, we can move on to more interesting things and discuss some of the stuff that's been going on recently for SAP.

So maybe just to start off with. When I discussed with investors, I think the question I get most frequently is to try to distinguish between what's happening on the cloud transition side and what's happening on product demand. So at the core, investors are asking, the change in guidance out to 2023 with an uplift in the later years, is that due to a demand problem in the short-term for your products? Or is it really due to this change of the economics of the move to a cloud subscription model. So maybe we could start there, and you could help us out a little bit with what's going on from that point of view.

Sure. Let me try to reassure everybody we really feel very positive about the business momentum and the competitiveness of our product portfolio. But I can nevertheless understand the question, given that in 2020 not only did we change our guidance framework for the coming years, but we also saw a slowdown in our cloud growth to 18%. However, when you dissect this, then you will quickly find out that this deceleration of growth really came out of one area, and which is our Intelligent Spend Group and there, in particular, our Concur T&E Cloud solution. Actually, it held up very well against other T&E software companies with a relatively moderate decline in revenues. So even there we have been actually gaining market share, and we believe that Concur has the by far market-leading asset in that space. With actually coming out of the pandemic, have a great opportunity to take further share as it reaccelerates outside of this area. The SaaS, PaaS portfolio of SAP has actually been growing by 27% at constant currencies, which I would argue is a very strong growth rate also measured against other peers that we see in the market. So solutions like S/4HANA, in the cloud, the supply chain management platform and analytics solutions, e-commerce, quite a few others did extremely well. SuccessFactors, which is our largest SaaS, PaaS solution outside of that space, obviously, growing more slowly, but had a great reacceleration, in particular, in Q4 from a bookings perspective, which should set it up for quite nice growth going into 2021. And then also when you look at S/4HANA, we had great competitive wins, great brand names that we added in 2020; just to name a few: in pharma and biotech, we had Gilead, we had BioNTech, we had [indiscernible] in consumer goods, we had Unilever, L'Oréal; In oil and gas, Shell and Saudi Aramco; in media, ViacomCBS, so you name it. So we really feel strongly about the momentum. And what we have guided for in the next 2 years in terms of more muted total revenue growth is really a function of the business model transformation from more on-premise business that we thought we would do earlier on to now a more accelerated move to the cloud in core ERP. That, I think, from a long-term perspective is very positive for the company. We see great momentum with our new offering RISE with SAP. We have a tremendous pipeline buildup across the company, and we feel very strongly about our bookings momentum as well as we enter the new year. So I'm extremely confident that in terms of cloud growth you will see the trough of our cloud growth rates in Q1, and then based on the strong bookings performance in Q4 as well as the additional growth that we see coming our way, we should definitely see a reacceleration again. And then soon, I think, nobody will argue about the market momentum of SAP any longer.

So quite relaxed from the positioning in line of business cloud and relaxed about the pace at which that S/4 migration is taking place and the customer wins on that side as well.

Yes, absolutely. And I mean, we are not planning for 2021 for a tremendous resurgence of Concur. So we plan this conservatively given that we're obviously still operating in lockdown mode in the largest parts of the world. But at least, we are seeing signs of stabilization. And then certainly, we believe as of next year, Concur will also start to contribute again to the growth across the company. So we have enough solutions that we can play out even without the accelerated core ERP transformation. But with that on top, of course, we believe that growth rates will actually accelerate further out as we exit 2021 and then move into the coming years. Already 2022 should have a much higher growth rate.

So maybe we've talked there about the top line impacts, and you've described what's happening there quite clearly. On the margin side of things, could you maybe talk a little bit about how much of the margin impact out to '23 is driven by just that change in top line? And how much is driven by investments that you need to make in the products? And maybe talk a little bit about where that investment's going.

Yes, absolutely, happy to do so. I don't think that the lion's share of the margin impact really comes from the revenue mix shift effect. There are essentially 2 types of investments that we are making that were not entirely reflected in the previous guidance framework. One is the accelerated harmonization of our cloud delivery infrastructure that in the past plans, as I explained at our 2019 Capital Markets Day would have been stretched out in terms of the long tail harmonization a bit further. We have decided to pull that forward. Why? Because our cloud business is expected to be a much larger share. And therefore, in order to make sure that we deliver superior cloud gross margins and a much greater contribution of our cloud business to the overall contributions, we wanted to accelerate this work as it is setting us up for totally different levels of efficiency. So that's a triple-digit million euro figure that we did not have entirely in our plan in the past, that was more kind of spread over a larger number of years. The second area of lesser importance is additional investments in R&D. So we are planning to go to an R&D ratio of roundabout 16% for this year and the next few years. That's not a function of us having to invest on top of the previous plan in order to fix things as it is sometimes suggested. It's more a function that we are now really doubling down on a predominantly organic growth strategy. And we have -- we see great opportunities in adjacent areas of our portfolio where we can leapfrog. And for example, we are investing significantly in building out an industry cloud applications portfolio that is going to be built natively on the SAP cloud platform. We are investing in areas like business process intelligence, where we've just made a tuck-in acquisition, but also building out our own organic portfolio in terms of business automation tools like RPA, in terms of low-code -- no-code applications as well as in terms of user behavior mining and benchmarking solutions. And a few others like Business Networks, for example, where we're running already the largest procurement network, obviously, with Ariba where we are expanding now into logistics and supply chain networks as well. You may have seen our announcement together with BMW and some other large automotive -- corporates around the automotive alliance that we are building. So these types of network investments are another area. That's basically it. The rest of the impact is really the revenue mix shift I think.

Okay. That's clear. So we understand now a little bit more around the revenue mix shift, the investments you're making in some of the technologies that you've talked about. But maybe just coming back to that revenue change, again, one of the questions I get quite regularly is you mentioned some of the great customers you have, Unilever, Shell, Nestlé, they're the biggest companies on the planet. When they look at it, they know that over time when they move to S/4, that's not a 2, 3-year commitment, that's a 10, maybe even 15, 20-year commitment that they're going to make to SAP. What's the motivation for them to move to a subscription model rather than continuing to pay you licenses when they know that the license model over time is going to be a cheaper model for them.

Yes. So first of all, I think even the large customers, they are becoming more and more comfortable actually with the subscription model also for them. And as for transformation license, on-premise is a huge upfront CapEx investment. And taking this on a subscription model, in particular, when with those very complex customers, you're typically looking at a gradual migration to the cloud is actually a great means for them to smoothen the overall investment impact of this. And then, of course, with RISE with SAP, we are adding to that the simplification that we can drive for our customers when we really come with our holistic commercial offering, bundling the software with infrastructure, with additional tools like the business technology platform like BPI as well as migration tools. It's actually a value proposition that allows them to also greatly simplify their IT governance and have basically one responsible transformation partner as opposed to just simply procuring the license from us and then working with others across the spec, so to say, to contribute the remaining capabilities that they need. And we have done extensive field testing, obviously, to validate that this is going to be a model that is also extremely attractive for customers of all sizes, both in the mid-market or smal or large enterprises, up to the very largest one. Actually, one of those customers that you are mentioning here has actually already made the shift to a subscription contract. And there is another one of our top 10 customers worldwide that is about to make the same move. So I would say it is a proven model, and we see definitely the demand and the great pickup in the pipeline that we are currently observing, where we are basically on a weekly basis seeing a pipeline build up in the tens of millions.

And Luka, how do you manage that from a financial communication point of view because you're still, to some extent, the agreement, customers, how quickly they want to change, you can influence it with sales force remuneration, increased discounts on a lot of different products. I mean, if customers were happy to move more quickly in that direction, would you be happy to accommodate it, even if it had more impact on the model. And I think if you maybe help us a little bit with what you're thinking about in terms of the rate of cannibalization in the business over the next 5 years?

Yes, absolutely. I mean, of course, we would be extremely happy if everybody will be moving as swiftly as possible because that would ease, so to say, the journey of the transformation. And the sooner we are actually able to convert a significant part of our overall book of business to cloud subscriptions, the sooner we, of course, will return to double-digit growth rates, both on the top line as well as on the bottom line, by the way. But I think we have kind of taken a reasonable and appropriately conservative set of assumptions for the pace of this transformation. We certainly expect already in 2021 a 4-digit number of customers taking advantage of RISE with SAP and moving their ERP estate with us to S/4HANA in the cloud, with then a further pickup in 2022 and 2023, in particular. And in terms of the kind of cannibalization assumptions, if you will and that are behind that, we are roughly calculating that over the course of the next 5 years, we will probably see roundabout EUR 2.5 billion in software support revenues migrating to cloud subscriptions and probably a similar amount over the next 5 years of software licenses that otherwise would have been signed in the traditional license model moving to subscription. That basically translates, if you want to peel the onion back to our cloud growth guidance would basically translate back to roundabout 6% of the CAGR that we are expecting in roundabout the mid- 20s in the next coming years. And that leaves then basically the rest for the portfolio to deliver high-teens growth on top of that. That's kind of how we look at it. But of course, this still assumes that we would have a number of customers left to further work down by 2025. And to the extent this is not necessary any longer because we have already moved everybody over before, I will certainly not apologize for that, but extremely -- we're extremely happy about it.

That's very clear. You mentioned a couple of times the new product that you launched at the beginning of this year, there was a big global launch of customers. I think you've been kind of pre testing it and premarketing with customers already in Q4 RISE with SAP. Could you maybe just talk a little bit about what's in that product offering? What are you bundling together to bring to customers? And why should that be an attractive offer for customers as we look forward this year?

Yes. Well, in short, because we truly believe that it's a holistic offering that helps our customers transform and not only shift and lift from on-premise to the cloud, it includes all of the components that you need for a true business transformation in the cloud. So we offer a public cloud infrastructure, either from hyperscalers or from SAP, dependent on the customer preferences. On top of this, we offer the S/4HANA cloud subscription licenses. We offer the Business Technology Platform which we are bundling with S/4HANA so that customers can build extensions and integrate to additional applications basically out of the box as part of the solution. On top of that, we give them access to a starter kit of our business process intelligence suite to where we swiftly find out when I move to S/4HANA from, let's say, a legacy ECC systems where are the biggest opportunities to double down in terms of speed, agility, effectiveness and efficiency of processes and where are the highest areas of return. And last but not least, we're giving also starter access to our business network to Ariba so that you can actually extend from your digital core to your supplier ecosystem as well. On top of this, we bundle with the offering a couple of tools that help during the migration process. So for example, a custom code analyzer tool and the migration planning tool as well as a basic entitlement to our learning hub to conduct trainings basically for the employees as part of the migration. So that's the software offering. On top of that, and separately, we've also worked with our ecosystem to define standardized service packages that need to be contracted by the customer separately. But according to very clear T-shirt sizes that are predictable for the customers to then do the actual migration work. Those would be not showing up under the subscription line, but they would be separate service revenues partially for SAP, but to a much higher extent for our ecosystem. And for our customers, the assumption is, and we have tested this during the field test, as you have said and through commercial service, that one, we are actually able, on average, to reduce the TCO of our customers up to 20% due to the shift to public cloud infrastructure and due to the benefits of taking advantage of the bundled offering. Then you have the simplified IT governance who if you want one throat to choke, so to say. And last but not least, you have the transformational benefits that you can utilize those tools as well as best practices from SAP, like the model company content in S/4HANA to really transform your business process capabilities, which is particularly important for customers and that are really seeing a change in their business models and business environment where a pure move to a public cloud infrastructure without changing the fundamentals of the process change would not really give them any benefits with RISE they get this on top, and that makes it attractive.

So could you maybe talk a little bit about financial point of view, what the financial implications are for a customer? What are the metrics around if they're paying maintenance of x today, what does that translate into on RISE subscription payments? How's that going to work from a customer point of view? What's the opportunity for you with them?

Yes. Yes. For our installed base customers, we apply basically a concept, which we call the cloud extension policy, which has been in place at SAP for quite a long time. The customers can retire their on-premise maintenance when they move with us to cloud solutions. We ultimately are expecting that a customer that has finalized their migration completely of the entire on-prem estate tool RISE will roughly pay twice the amount of the existing maintenance. However, the pace at which this is happening will be different from customer to customer. For a straightforward, let's say, upper mid-market or lower LE customer with perhaps less than a handful of ERP systems to be converted, this can be a quickly -- quite a fast-paced move perhaps within a year. The maintenance would be retired and the cloud subscription would fully take effect. For very, very large and complex customers that have sometimes dozens of systems to be migrated, this might be a more gradual move. But on average, the end state is kind of this twice the amount of maintenance expectation that we have set. And with those cases where we have gained experiences already that actually has held through quite nicely. So I believe it's a robust assumption.

So maybe we could dig in a little bit to that assumption around that doubling of maintenance. So a number of kind of conversations, again, with investors, there's been a little bit of skepticism about, I think people can see there's easily enough opportunity to double the revenue base, but can you do that while maintaining the 80% gross margin that you want to get on cloud subscription? Is that possible that you're not going to have to bundle services and other revenues that come in at much lower gross margins and drag the margin down?

Yes, I think you make an important point, and let me clarify this. Our expectation that we are arriving in 2025 in the ballpark of an 80% cloud gross margin is a statement across the entire portfolio of our cloud applications. Within it, we have, of course, solutions that are already today operating at an extremely high gross margin. Think about Qualtrics, which obviously will continue to grow probably as fast, if not faster than the rest of the portfolio. And therefore, their 90% gross margins, of course, will continue to have a greater weight on our full company performance. Concur is a similar example, operating already in the high 80s. So you will always have a mix. And within RISE with SAP, you will have a mixture of cases as well. There are going to be the straightforward ones that will go to -- for public cloud right away where we have very comparable cloud margins. And then you will have the very complex ones which will be for quite some time operating on a hybrid landscape of private cloud deployments. There, of course, the cloud margin will be lower than the 80%. However, it will be much higher than a pure infrastructure as a service business like our HANA enterprise cloud business, where you're seeing that we're operating at roundabout 35% margin. So it will probably be somewhere in the middle between those 2 [indiscernible] And then the only question which remains is what is the mix going to be? And there, again, we have applied the same assumptions that are behind our growth trajectory as assumptions and have extrapolated them to the mix. And by that, we have come up with the blended cloud gross margin targets. So from that perspective, we don't need to reach 80% cloud margins with RISE in order to keep the statement being true in 2025.

That's fair. That's helpful to understand there's going to be a mix of gross margins in there. Can maybe just we then dig in onto the TCO discussion. I think everyone can understand the benefits of having as you described one throat choked from a vendor point of view. But again, if we look at some of the bigger customers that SAP has, they're going to believe that they can negotiate quite well with vendors themselves, and why do we need SAP as the middleman in between negotiating contracts. So how can you negotiate with vendors, able to make a margin that's appropriate for you, particularly on the infrastructure side and then also not only kind of keep the costs the same but actually take TCO down by the 20% that you described with those customers?

Well, a couple of points with regards to this. First of all, on the services side, of course, we will remain open to our ecosystem. And actually, we believe that the lion's share of application management services and migration services will be delivered by our partners like Deloitte, Accenture, and all of the other folks. So let's leave that aside for the moment. If you just focus on the software solution and the infrastructure, first of all, not even the largest companies on a -- probably on an individual internal use case for their landscape could negotiate exactly the same terms that we are able to negotiate because just the volume of us procuring infrastructure to run thousands of companies, including all of those largest companies means that we certainly have access to terms that should be preferential versus what an individual customer could get. So we are going to be able to earn a margin also on the infrastructure. These can still deliver some savings back to our customers. But that's not actually the biggest effect. The biggest effect is that we are able to bundle actually all of those components on top of it in an attractive total bundle price that takes advantage of synergies, so to say, across the total amount of components. So assuming that our customers are interested in the transformational benefits, in particular, changing their business process landscapes in a more agile way with this offering. And then if they went with bits and pieces, then actually, from a commercial perspective, that bundling will make a ton of sense to them because we are able to offer a more attractive price for this than for the individual bits and pieces, in particular, if they went on to procure the infrastructure from someone as well. But I get the point, of course, customers will also, in their assessment of the validity of RISE as an offering, they will, of course, carefully compare this to the traditional way of doing business. And I certainly don't expect that we will be able to win over 100% of our customer base for this. But the interest that we are seeing and the level of attention to details that we see with customers going through the offering, I think, tells me that the transformational benefits of the offering are extremely well understood. And therefore, we are having a ton of very serious conversations and great momentum, and an actual fact, I believe, we will probably in the first quarter already do more business than what we have done in the entire pilot phase in the second half year.

That sounds encouraging. Just as we come into the back end of the presentation, I'll remind investors that if they'd like to submit questions, we can definitely go on to those. So please put questions up, and I'll try and ask them as time allows. Maybe just to come on, I think it's really interesting, you talked about the whole business transformation change, the tuck-in acquisition you made around business process management and an out focus on business process optimization. That's always been a very kind of SI-focused activity in terms of changed managements and going into companies and helping them with that. Could you maybe talk a little bit about the SI partners? They've obviously been critical in SAP's success in go-to-market historically. How do they feel about -- does that relationship change that SAP is taking more of a lead in how the discussion around transformation happens with companies? Or -- are SIs happy with that? Or is that just not the case, but I'm misunderstanding that change?

I think that strategy is actually extremely complementary to the business that our partners want to drive. When you think about it, if you are able to accelerate the move to S/4 as part of this more attractive value proposition for customers, that essentially means that for them, they can pull forward a larger share of this multi-year opportunity to an earlier period of time. And so from that perspective, this migration services business will be there to grab. We will certainly see a share of engagements that our customers will wish SAP to lead, but it's certainly not going to be the largest share. So from that perspective, actually, this is very attractive to customers. And then all of the SIs have built a quite sizable business, which is also for them very predictable around recurring application management services. And that's also a great opportunity for them to own these services while we focus on delivering the software. When it comes to business process intelligence, it's actually particularly exciting for me to see because I within SAP responsible in the Executive Board for this business area. That there is a great deal of partner interest in BPI in basically doubling down on utilizing the output that customers can get from those business process modeling as well as benchmarking solutions and then drive actually the actual transformation programs. This is not something that the software will do automatically for customers. It will pinpoint the areas where they can double down on opportunities to improve and optimize, but then they would still have a transformation partner to help them redesign the processes, roll them out, driving the change management with the actual users, and that's a natural playing field on the strategic level for strategy consultants at the operational level for the SIs. So we are already having a number of very high-profile partnering discussions with very important ecosystem partners for how to actually combine those strengths and for them to build a business on top of the BPI solutions. Actually Signavio and that we acquired has a partner ecosystem that is almost the same as our traditional partner ecosystem. So we have all of the big names in there. So this will be highly complementary.

And maybe just moving on to another group of partners that you're obviously working with hyperscalers to deliver the infrastructure underneath. What we've talked in the past around how there's obviously a kind of competition relationship there that they are the infrastructure layers today, but they're obviously moving up the stack. Could you talk a little bit about which areas of the software stack SAP has to own, and SAP has to protect relative to the hyperscalers? And how should we judge you on that success over the next 5 years in terms of you keeping that within SAP versus it going to other players?

Yes. So first of all, I mean, I still am absolutely clear that the hyperscalers, all of them, actually are more partners than competitors. And we are united by a common interest and that interest is for the hyperscalers to drive consumption on their infrastructure as fast as possible. And by us joining forces with a compelling offering and is fronted by SAP, while SAP has the application customer relationship. Actually, we can achieve that aim more quickly to get up. Of course, the hyperscalers all to different extents are also competitors to SAP, probably for Amazon and Google, that is more the case on the analytics side. Microsoft has, of course, also more of an application footprint, but the advantages of working together and accepting that the application and platform levels of the stack as far as they relate to the SAP centric landscapes of customers are provided by SAP also makes sense for the hyperscalers. When you think about it with what we announced with Microsoft, the fact that we are now working together on the engineering front to embed Microsoft Teams with various areas of our application portfolio to just amplify for the benefit of both companies, the value that we can bring with those solutions with a seamless interaction. When it comes to the application layer, look, thinking about dynamics, it's more a solution that is geared towards the mid-market. Microsoft itself is actually running on SAP for their own internal operations. And I think that there is a much bigger fish to fry here with the accelerated move to S/4HANA utilizing the infrastructure than it would be to battle out on the software or platform level. And from that perspective, I think I continue to expect that we will have very productive and positive relationships with the hyperscalers, who are all in to support this move and have also formed partnerships with us around it.

So we're turning up to the end of time. I'll maybe just kind of get a few investor questions in and to finish off with Luka. So on the sales force side, you've obviously had some senior changes there. But specifically in the U.S., are there any changes that you've made for U.S. sales force and any metrics there that you're tracking to ensure that there's success in that market?

No, not really. I mean, we have -- we still have DJ Paoni in place there since quite a few years, actually, as our regional President in North America, extremely successful. We have seen actually quite a strong performance, in particular, in cloud in North America in the last year, and we continue to see great momentum also going into the new year. So there are no fundamental changes from an organizational perspective. What we have done, obviously, last year already is we have brought in all of the previously disparate cloud line of business sales forces into one customer success organization. That's the case in North America, but also elsewhere in the world, and so it's not specific to North America. What we are also doing as of this year is indeed from an incentive perspective to even further double down on driving a healthy business in the cloud. So for many years we had agnostic incentives between on-premise and cloud. We have changed that to give our sales force a stronger bias towards driving for cloud growth. And very importantly, we have increased significantly the amount of incentivization or share of incentivization that can only be earned when you drive for healthy renewals and for a healthy adoption of the solutions. Those are the main changes that we have done there. But from a structural perspective, North America is actually quite stable.

Then there is a little question around the kind of technical conversion of licenses and maintenance into subscription. And the question is the company used to expect -- used to discuss a cloud multiplier of 2.25x, and now you're saying double. Has that multiplier come down since you've talked about the transition last year?

No, not really. I mean this is a -- we have actually, as I always said, a bit more than twice and that's exactly actually our calculation was always you take 1 million of licenses and you typically translated into 450,000 of a subscription annuity. That calculation still holds. So it's just a statement of simplification, not a statement of any change that we have seen. And actually, across the entire portfolio, our cloud extension multiplier is -- continues to be higher than this amount. But again, there are different solutions that have a higher multiplier and others that rather end up at the low end. So you should be safe and you don't go wrong by assuming the 1 million to 450,000 calculation, that was always the same.

And then a couple around Microsoft. So the first one is the integration with Microsoft Teams, is that a revamp of the old Duet solution? And if so, how does SAP and Microsoft get better traction with this product than it did with the old Duet integration with Microsoft in the past?

With what integration? I'm sorry, I didn't get the solution?

There was a product called Duet in the past for SAP that integrated with Microsoft. How do you monetize? And how does this Microsoft -- this new kind of partnership with Microsoft work? And how do you monetize that?

With Duet, you're obviously going down very far into the past, that was 20 years ago.

Well, I'm aging myself, Luka. Yes, that's very true.

No, that's very fair. It's different because we are not actually mutually reselling our solutions, we're ensuring the technical migration, and that means it's actually quite simple. We ensure and now from an engineering perspective, the integration with, for example, C4C on the customer experience side. So that sales teams when they do a pipeline review, they don't need to leave the system to go into the teams and then back again. We do the same with other solution areas as for SuccessFactors and others. But it's a technical partnership and therefore, it's very easy to execute, which was simply make sure that the frames support the integrated process flow. And then from a sales perspective, every party does, so to say, their own positioning of the resulting solution. Microsoft will continue to push for their own bundles, including Microsoft Teams, and we will position our solutions. So therefore, we don't need to work around the complicated go-to-market alignment of target accounts and who does the paperwork and so on. So it should be very straightforward, whereas Duet was more complicated in this respect.

And then so one final one to finish off with. Microsoft's obviously looking to do industry cloud solutions as well. You've made a lot of noise and focus around the vertical cloud solutions that SAP wants to come up with. Is that competition? Or can you coexist, again, as you do on other -- in other parts of the business?

I would say, over time, there's certainly going to competition. But I think that's healthy. It keeps us on the tip of our toes. And we just simply need to build a better industry applications. And I would argue that we have probably 2 unfair advantages. First of all, we certainly have a very strong heritage and industry heavy business processes, in particular in industries like manufacturing, like process industries, oil and gas, utilities and others. So we have probably have a head start that we can now basically translate onto cloud-native business applications. And the second advantage is that we obviously know in details the data domain models and the data flows back into the core of S/4HANA and therefore, can build actually industry cloud applications on the business technology platform that have a very seamless end-to-end process interaction with the S/4HANA back-end processes. So those are certainly 2 advantages that I would say are pretty unique for SAP. But we will have to stretch for the ceiling and make sure that our applications provide the greatest value, and that's the good thing about competition that I think it keeps the industry going for greater heights and greater quality solutions. And I'm sure, ultimately, we both will have our wins in the market, but we remain very confident that we will be able to build superior industry cloud solutions.

I suppose that's a very important point, the ability to take the insight, but then you may have to got to flow it back into the process. And if you own the process, that's a big differentiation against people that are just delivering data information.

Exactly. And that's why it was very important also to do the structural change across SAP on the engineering front, where we have also since last year brought all of the engineering teams together under one application development leadership. And from that perspective, there is now a clear mandate and not only a strong recommendation to converge on the business technology platform exactly for that reason so that one really has a huge advantage of -- as a customer to build on the business technology platform or consume industry apps from SAP on the business technology platform because now all of the applications are basically integrated through the business technology platform. And that was one of the reasons why we have seen a significant pickup in the platform in 2020. And while we see -- continue to see great momentum under the previous structure, there was actually not too much differentiation for business technology platform because not all of the applications were converting on.

We're running up against time, Luka. That was a very interesting discussion. Once again, thank you very much for joining us. Thank you for taking time. And also thanks to all the investors out there who've joined us for the presentation. Luka, thank you.

Thanks a lot, Adam. Thanks, everybody.