SAP SE (SAP) Earnings Call Transcript & Summary

Good afternoon, and good evening. My name is Stefan Gruber, Head of Investor Relations. A warm welcome from my side to our SAPPHIRE NOW Financial Analyst Conference, usually from Orlando, and I would prefer to be meeting with you in person in Orlando, but we are holding the event virtually once again due to the ongoing pandemic. If you didn't have a chance to listen to the SAPPHIRE NOW keynote on June 2, I encourage you to take the time to watch the replay as it laid out as a holistic basis for what we are discussing today. I can also highly recommend viewing the additional SAPPHIRE NOW content available on sap.com. Now for today, we have prepared a rich agenda for you. This is the first financial analyst conference since November 2019 we are hosting. We'll kick it off with our CEO, Christian Klein, who will discuss the latest strategic developments. We will then hold 2 moderated discussions. First, Executive Board members, Juergen Müller and Thomas Saueressig, will discuss how SAP develops the solutions needed to build the Intelligent Enterprise. Then Executive Board members, Scott Russell and Julia White, will talk about the customer perspective and the need for the Intelligent Enterprise. And our CFO, Luka Mucic, will wrap up with a look at the financials in the context of our growth strategy. We'll then have a short break before we move to a live Q&A session with the entire Executive Board of SAP. In this Q&A session, you will have the opportunity to ask questions. [Operator Instructions] So before we get started, as usual, the famous housekeeping item. I would like to say a few words about forward-looking statements and our use of non-IFRS financial measures. Any statements made during this conference 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 similar 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. 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 2020 filed with the SEC on March 4, 2021. Participants of this conference are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. On the SAP Investor Relations website, you will find the slide deck intended to supplement today's conference available for download after the event. For those of you following the webcast, the slides will be shown as we proceed through the presentations. And unless otherwise noted, all SAP financial numbers referred to today are non-IFRS, and growth rates and percentage point changes are non-IFRS at constant currencies year-over-year. The non-IFRS financial measures we provide should not be considered as a substitute for or superior to the measures of financial performance we prepared in accordance with IFRS. And with that, I'd like to turn things over to our CEO, Christian Klein.

Thank you, Stefan, and welcome, everyone, to our SAP Financial Analyst Conference. We had a great start into SAPPHIRE where we laid out our bold plans to reinvent how the world runs with our technology. Building on my keynote today I'm excited to share how SAP's vision and strategy will translate into our financial ambition. We will share how our innovations across our compelling portfolio deliver great customer success and accelerate SAP's cloud growth. Let's kick it off. First, there is no doubt that businesses will continue to invest in new technology for their business transformation, leading to a $6.8 trillion investment by 2023, growing at strong 16% per annum. But the business disruption caused by the pandemic has shown us that enterprises don't achieve the resilience they need if you only migrate their IT landscape to a cloud infrastructure. This is why SAP is in the pole position to lead the business transformation of our customers by connecting the business processes with data and our technology. In fact, the crisis allowed us to build a lot of market momentum. We are the perfect partner for the necessary transformation of our customers. There is no other vendor who can drive a holistic business transformation like SAP. With RISE with SAP, we launched a new business transformation-as-a-service offering. RISE is the answer for how our customers transform. And our leading SAP Business Technology Platform has become the foundation for our customers' transformation journey. The platform provides differentiating integration and extensibility capabilities like one semantical data model for all our SAP solutions and non-SAP solutions. The BTP, in conjunction with our business applications, enables our customers, first, to have a real-time 360 business view, including structured and unstructured data in one semantical data model; second, to offer a seamless customer and employee experience across the enterprise because a great customer experience doesn't stop with the front office, and consumers deserve a delightful experience also after the point of sale; and third, by embedding artificial intelligence and our market-leading RPA capabilities into our applications, we make sure that the workflows of our customers become more intelligent and automated. But we don't stop here. We continuously drive innovation, enabling companies to turn into communities via Business Networks. And after 50 years of successfully helping companies to achieve productivity and growth, we now also make sustainability a standard dimension of corporate management. No doubt our future is bright, and SAP is clearly set up for success. We offer a holistic business transformation and go beyond a pure technical migration. Our modular cloud suite, together with our leading Business Technology Platform, creates unparalleled business value via one data model and intelligent business processes unmatched by any other third-party platform. And this is exactly what our customers and partners value about SAP. We are the trusted partner for their business transformation journey. They see us as the most strategic cloud SaaS provider globally with our leading, integrated and modular suite, which they clearly prefer over a bunch of best-of-breed solutions. We are playing in large and fast-growing markets with the clear ambition to stay the largest enterprise application company in the world. We are the clear #1 in ERP and continuously expand our lead. Since 16 years, SAP is the global #1 in ERP, supply chain and procurement, showing the unparalleled strength of our modular ERP. In fact, 8 out of the top 10 Fortune 500 manage their supply chains with SAP. In procurement, SAP has more than 6x the revenue of our next largest competitor. Over 5.5 million companies use our new established business network, transacting $3.8 trillion across 190 countries. Over 180 million users work with our HXM solutions every day. And more than 100 customers with more than 100,000 users show the strength of our offering. Supplemented with our market-leading Fieldglass solution, SAP is the only vendor covering the complete employee life cycle, including payroll and total workforce management, in over 200 countries. In CRM, we are leading in B2B commerce and are further going to capture market share. Our new headless commerce B2C solution, SAP Upscale Commerce, makes the shopping experience easy, engaging and personalized for end customers. To net it out, we are the leader in 17 Gartner Magic Quadrant, underpinning the individual strengths of our solutions. Our vision is clear: to get from the intelligent enterprise to the world's largest network of intelligent enterprises to a sustainable world. So let's look into how SAP supports customers across their complete business transformation journey. The first step: becoming an Intelligent Enterprise. Intelligent enterprises are enabled by integrated, digitized, agile business processes powered by data and with embedded AI. This is more relevant than ever. Businesses worldwide need to reimagine their business model. And let's be clear, only SAP can offer the capability to sell everything as a service, tailored to the needs of the consumer with every commercial model like pay-as-you-go or subscription. And the revenue realization finally as well as billing happens real time. Let me emphasize other strong pillars of the Intelligent Enterprise. Like creating the future of work by enabling remote work, a 360 steering of the enterprise with end-to-end planning and predictive analytics capabilities and a world-class platform with one data model, one authorization service and one extensibility layer. These are further strong arguments to join SAP and become an intelligent enterprise. Let me share with you a real live example, Brakes, a B2B food delivery service, catering the foodservice sector in the U.K. Normally, they sell to pubs and restaurants. Now in just 7 days, they completely flipped their business model, switching to online commerce and home delivery for 6,000 grocery products to 7 million homes. Examples like that show how SAP really helps to transform companies. And we do so by continuously expanding our innovative portfolio. For example, at SAPPHIRE, we just announced new S/4HANA capabilities to enable our customers to deliver everything as a service; the integration of SAP SuccessFactors with Qualtrics to provide a seamless employee experience; and we have created an entirely new sustainability portfolio to help companies drive sustainable practices not only inside the organization but across their entire value chain. The example of Brakes shows that to truly change how an enterprise runs, companies need to adopt new business models and automate business processes. Earlier this year, we introduced RISE with SAP to address this need and answer the question how to transform. With RISE with SAP, we're putting together our technology and business process know-how to provide customers with a true business transformation as a service. The benefits are clear. And we have seen incredible customer interest. But we also heard loud and clear that many customers want a holistic and Modular Cloud ERP solution and that while we are expanding our offering, giving our customers even more choice with which part of their business they want to start their transformation journey. We are including HR and procurement capabilities, along with SAP S/4HANA Cloud in our RISE with SAP for Modular Cloud ERP solution. And as business transformation relies on people, we are also launching a dedicated package for human experience management. This is all delivered with one data and security model and the business process intelligence to ensure your processes are fully optimized and running at the industry-best standards. But we are not stopping there because SAP knows best that each industry is different and has unique needs. Therefore, we just introduced RISE with SAP for Industries. We are starting with 5 industry-specific cloud offerings focused on retail, consumer products, automotive, utilities and industrial machinery and components. We are putting together the best of SAP's 50 years of deep industry expertise and the best of our partner ecosystem to provide industry-specific cloud-based solutions as a service. That being said, one intelligent enterprise alone already can achieve great things. But COVID also made clear that we live in an interconnected world. So the second step of our vision is to create a network of intelligent, sustainable enterprises. Many of the issues companies faced during the pandemic were not to be found inside their own business processes but came from their reliance on global supply chains. Over 75% of all companies reported supply chain disruptions as a result of COVID. The reason is simple. Many companies still manage their complex relationships as static one-to-one connections, thus lacking real-time transparency across their entire supply chain. We believe that industries will be revolutionized when businesses turn into communities. That's why we will create the world's largest business network, converging our existing procurement, logistics, asset and industry-specific networks and we re-enable a network economy across every industry. And now let's imagine for a second what we can achieve when we extend this power beyond just accelerated growth and productivity. The third step of our vision: towards a sustainable world. In the past, companies managed towards productivity and growth, the top and bottom line of their business operations. But recent activities underline the importance of the green line. For example, look at the European Union's consideration for charging imports based on their carbon emissions or the judgment from the District Court in The Hague declaring reduction commitments from oil and gas companies as insufficient. As part of our commitment, we will support all sustainability KPIs proposed by the World Economic Forum in our solutions. In collaboration, we must and can work towards making the world more sustainable and chasing zero: zero emissions, zero waste and zero inequality. In addition to driving innovation in and beyond our core, we continuously expand into new markets. By doing so, we increase our total addressable market approaching $600 billion in 2025, growing at a great 11% per year. With our leading suite offering, we are set up for strong growth in each category. Our cloud growth ambition is clear: we will almost triple SAP's 2020 cloud revenue over the next 5 years. We will deliver over 22% growth per year to more than EUR 22 billion cloud revenue in 2025. That means growing twice as fast as our total addressable market. Looking at our opportunity space makes me more confident than ever that we will deliver on our ambition. We are clearly winning in our installed base, leveraging the tremendous cross- and upsell opportunity we have at hand. We have more than EUR 11 billion software support revenue to migrate to the cloud over time, of course, with healthy conversion factors. And our Modular Cloud ERP is already approaching a run rate of EUR 6 billion. We will also continue to win with net new customers. Our flagship product, S/4HANA Cloud, has a net new customer share of over 40%, showing how many new customers choose our ERP for their business transformation journey. And on top of our leading ERP solution, we have several Software-as-a-Service solutions with similar growth potential as Qualtrics. Take, for example, our solutions for Digital Supply Chain, Intelligent Spend, Business Networks, commerce, BPI and many more. We will deliver this cloud growth by executing along our interlocked strategy. Our strategic priorities are clear. First, we accelerate our move to the cloud, drive holistic business innovation and accelerated product innovation. Second, we build the world's largest B2B platform with SAP customer and partner applications. Third, we expand our total addressable market by more than $150 billion in 2025 by entering new markets such as industry cloud, business network and sustainability. Fourth, we are focusing and incentivizing on customer success for high adoption and best-in-class renewals and, of course, a thriving ecosystem. Fifth, finally, we drive growth of our solutions through differentiating value propositions. I very much look forward to discussing all of that with you and our SAP Executive Board during our Q&A session at the end of this event. And with that, let me hand it back to Stefan for the next session. Thank you.

Well, thanks a lot, and I hope you found Christian's presentation as insightful as I did. And what really stood out to me is the strategic imperative SAP has at this moment in time. The innovations we are bringing to market perfectly match our growth opportunities such as industry cloud, business network and, most importantly, sustainability. And the vision of the Intelligent Enterprise has become clearer and clearer as we bring this to life with our solutions. Now let's dive a bit deeper into the key pieces needed to execute on this strategy. We'll discuss our products and innovations and how we are building the Intelligent Enterprise. And for this, I will hand over to my colleague, Oliver Roll, our Chief Communications Officer, who will discuss this in detail with Executive Board members, Thomas Saueressig and Juergen Müller.

Hello, everyone, and thank you for joining us at SAP's Financial Analyst Conference. Thanks, Stefan, for the introduction. I'm Oliver Roll, and I recently joined SAP as our Chief Communications Officer. I'm delighted today to be joined by 2 of our Board members, Juergen Müller, our CTO and member of the Executive Board; and Thomas Saueressig, SAP's Board Member for Product Engineering. So welcome to the 2 of you. We'd love to get some perspectives on our product portfolio from you. And I'm going to kick off right away with a question to you, Thomas. In the keynotes at SAPPHIRE NOW, our customer conference and earlier today, we spoke about this concept of intelligent enterprises. And we think at SAP of intelligent enterprises very simply as companies that are using integrated digital business processes as the fundamental way that they operate with data at the core and powered by AI. So Thomas, why is it so important for customers to become intelligent enterprises?

I think, Oliver, we all have seen, especially in this pandemic, how important it is, actually, to be resilient. And resilience comes from agility, to be able to quickly react on changing market dynamics. And that means, actually, that digitalization is absolutely key to be able to embrace new business models but also to quickly adopt the supply chain, for instance, and that's the reason why Intelligent Enterprise is actually a key notion. And as you rightfully said, the key aspects of Intelligent Enterprise is this integration and innovation. And I think especially the notion around integration is extremely essential because end-to-end integrated business processes like record to recruit, like lead to catch, like design to operate or source to pay are absolutely vital to be able to really succeed in this time.

Resilience is a word you used, Thomas, and it's certainly a good word to describe the last year. And during our SAPPHIRE NOW conference a couple of weeks ago, we heard from a number of customers who've literally reinvented their business models. Talk to us a little bit about why SAP is so well positioned to help customers on this journey to becoming intelligent enterprises.

I think what is, yes, absolutely essential is, as we talked about, it's about business processes and new business models. And that's actually the key aspect. So if you talk about digitalization, it's not just about moving workloads into a cloud infrastructure, it's actually changing how a company works and serves their customers. And that's exactly what we offer with our solution portfolio. And Intelligent Enterprise have 2 key dimensions. It's integration but also innovation, so fully integrated end-to-end processes but also innovations, new processes, embracing artificial intelligence, basically, in every process which we operate. And that's actually how we use the SAP Business Technology Platform as a foundation: to integrate all of our solutions but also to embrace artificial intelligence and building all the new applications of SAP. And that's, for sure, tapped into the opportunity in the broader network of companies which we serve.

I really like how you framed that integration plus innovation with AI at the center of those 2 dynamics. So that's a perfect spot to bring Juergen into the conversation. You mentioned, Thomas, the Business Technology Platform. And it's interesting, SAP is perhaps best known for our enterprise applications, SAP SuccessFactors, SAP Concur, SAP Ariba and many others. But the Business Technology Platform serves as the integration layer for SAP applications, and it also provides the extensibility to our customers and partners so that they can build their own custom applications. But Juergen, talk to us about the Business Technology Platform but, in particular, how it supports the application portfolio that Thomas was talking about.

Yes. We announced the SAP Business Technology Platform roughly 2 years ago, and it is a business-centric technology platform. We serve the applications of SAP and use the Business Technology Platform to integrate the applications, to extend them to create value from data, and we offer this to our partners and customers as well. As Christian recently said at SAPPHIRE NOW, we are building the world's largest B2B Platform-as-a-Service. And you both, Thomas and Oliver, said it well, BTP is the foundation for all our applications here. And as I said, it gives the ecosystem the ability to extend. All customers want to have a clean core, want to be flexible, want to, of course, enjoy all the updates, but they want to extend their applications as well. And this is what they do with the Business Technology Platform. It's always the same challenges customers have: integration, extensions, creating value from data. And the Business Technology Platform has all the technical components necessary to do that: database, data management, planning and analytics, application development and integration from pro code, the real coders, down to no code. Without any line of code, you now, we now can build applications. And then, of course, intelligent technologies, IoT, AI, robotic process automation. And the Business Technology Platform sits on top of hyperscaler data centers or SAP data centers. And from there, we serve our customers wherever they need us. And we do have more than 22,000 partners, 1,300 already actively contributing to the Business Technology Platform.

That's a great way to describe it. It really is the integration layer between the applications we have. And I love the way you talked about that extensibility of the business technology platform. So Thomas, why don't we talk about some of our specific solutions? We talk often about end-to-end processes that we help our customers with. And there are a number of solutions behind that. Perhaps you can start by talking about SAP S/4HANA.

Yes. I mean happy to do so. And SAP S/4HANA is actually the core of the Intelligent Enterprise, connecting all the dots. And I think it's also very important to really describe that as a really agile innovation platform, which we help our customers with in a fully cloud-native fashion. I think that's really important for us to drive that. And quite frankly, we're very proud that we don't only serve the largest companies on earth but actually also the most innovative ones and the most agile ones. If you think about BCG Innovation Index, 92% of the companies actually are SAP S/4HANA customers. And we are very proud that we help our customers with that to really succeed and keep the innovation spirit up. I think that's very important. We use actually SAP HANA natively to really revolutionize the processes, in processes which were not thinkable before. And I think that's really, really important for us that we actually want to create the next generation of best practices, the next best practices. It's about the processes of the future, which we jointly, together with our customers, actually work on. I think that's also why it's so inspirational actually to work in these times because we all see how the world changes, and we have the opportunity together with the customers to change how people work.

Yes. I really like -- you and I, and Juergen and I, have spent a little bit of time together, and I really like how you describe the importance of these end-to-end processes. And you mentioned, lead to catch, recruit to retire, source to pay, design to operate. Could you talk to us a little bit about -- so you touched on S/4HANA, SAP S/4HANA, talk to us a little bit more about some of the other specific innovations behind those end-to-end processes.

I think one of the topics is, for instance, in the area of human experience management, about total workforce management because, for sure, you have internal employees but also you have contingent workers. And especially in this pandemic, we have seen how flexibly we need to be able to manage the total workforce. And this is exactly the intersection of SAP SuccessFactors with SAP Fieldglass, and the integration of this actually enables this total workforce management in all directions. Or if you think about design to operate, if you think about really having a synchronized planning, from the network planning down to the execution in real time which is enabling a total level of different activity for our customers, which is absolutely vital. If you think about customer experience, we all know that the customer experience doesn't stop with the purchase or the purchase experience, but actually it goes further to the delivery in time, in quality, but also for the returns processes. And this is exactly where our solutions bring together front office and the back office to really provide a customer experience, which is stellar.

Yes. One of the really important things with those end-to-end processes is the customer experience. And a big part of that is the user interface. And I know that you've invested very heavily, your teams, on the user interface. Could you tell us a little bit more about basically what we've done and also some of your plans and improving that experience for customers?

I mean the user experience is absolutely strategic for us. That's the reason why we also just launched at SAPPHIRE NOW our new mobile experience, basically bringing the entire Intelligent Enterprise on the fingertips because, fundamentally, we believe that also mobile is actually not a device. Mobile is actually a [ work site ] preference. And this is the reason why we provide it. But we even go one step further. We talk about Mixed Reality, leveraging, for instance, Microsoft HoloLens in the business processes; or augmented reality with iOS and Android to really define how people work in the future, embracing our applications. And for sure, if they are intelligent, they are action-driven, insightful, that you really get the right recommendations, what to do in the specific moment. But also let me add one more very important aspect to user experience. It's actually also about accessibility because, for us, it's super essential that our software provides an inclusive work environment for everybody, where everybody can participate. And with that, I can just ensure you, to provide a delightful and enjoyable user experience is absolutely strategic for us.

That's such a -- I love the work that you're doing there. It's so important. Juergen, let's talk to you a little bit about a topic that I know is really important to our customers' integration. And you and I had the opportunity to talk a little bit about that yesterday. And I know that it's a significant part of our work with the Business Technology Platform. So talk to us a little about how we're ensuring that all of our applications work together and how they connect well with the customers' infrastructure.

Happy to do so. And Thomas and my team, we are really working closely together on this one. SAP-to-SAP integration is one of the topics that our 230 million cloud users really have top of mind. And we promised to deliver these integrations, and we have been delivering on that promise. Last year alone, we delivered close to 350 functional integrations between our SaaS solutions. And now we are just left with a few final experiences to living up to the promise of full SAP-to-SAP application integration along with the defined end-to-end processes that we have. And let me just give you an example. A customer, Orica, went live in Q3 last year with S/4HANA, 12,000 employees, over 60 countries and is now really going all-in in SAP and could sunset now their legacy IT. And actually, a year before that, Thomas and I had the CIO in our Developer Kickoff Meeting. And the CIO, she said, "You need to improve on the integration." And then a couple of quarters later, she saw the result that we are really delivering. And she's not the only one. Our customer in [ PaaS at SAP ] has risen by 10 percentage points over the last year. And then integration, we use the technology ourselves, the SAP Integration Suite, but we are also offering this to our customers. It's a $10 billion market, integration Platform as a Service. SAP is a leader, more than 13,000 companies relying on this, and they actually are using more and more of it. 60% more integrations were deployed last year alone.

Thanks, Juergen, for talking so well about the focus on integration. It was good to hear the customer examples you talked about. Let's talk about a topic that is so important for the future of our planet. And I'd love to touch on this topic with both of you: sustainability. And it's fascinating, when we think about the pandemic, we saw a dramatic decrease in carbon emissions in 2020. And it might be easy to think that, hey, we've taken a step further in terms of reducing carbon emissions overall. But the reality is so much more complex than that. I actually found a couple of stats, which I found frightening. Next year is set to be the second-highest year in history in carbon emissions growth. And in 2022, experts are predicting that actually there'll be a net increase over 2019. So the need to act is even more profound now than it was 2 years ago. Now the wonderful thing about technology, and I think also the approach SAP is taking is that the solution is partly in our hands given the importance of the supply chain in carbon emissions. So Thomas, we'd love to hear from you a little bit about how SAP is building sustainability into our portfolio and, in doing so, helping our customers become more sustainable organizations.

I mean, first of all, I fully agree with you. I mean climate change is certainly the biggest challenge of humanity. And actually, we, as a company, we see our role here and the obligation to help because we're talking about 440,000 customers around the globe, which we can touch and impact with our solutions. And we actually will embrace and embed sustainability as part of our data model that you can track, for instance, the carbon emissions end-to-end along the entire supply chain. And even further, not only between the 4 walls of the company but in the network, end-to-end. Because we also know that, actually, [ factor 5.5 ], the carbon emissions are higher in the supply chain than in their own 4 walls of the company. And that's the reason why we started last year the Climate 21 program. And 21 is not for the year '21 but actually for the 21st century. And with that, we already delivered a lot of innovations like SAP Product Footprint Management, which is giving you this insight, this actionable insight, to really actively reduce the carbon footprint. And that is key for decarbonization of the industries. And as well, to get a low-carbon future, we need to talk about circularity. Circular Economy is a key lever. So what is the output for the one company can be a valuable input for the other company. And again, 440,000 companies in a broad network together, we can optimize it. And that's the reason why we actually embrace Circular Economy with our product like SAP responsible product and design (sic) [ SAP Responsible Design and Production ], which we have, to help our customers there. And we don't stop because sustainability is holistically also about, for instance, HR diversity and inclusion. That's the reason why it's part of our SAP SuccessFactors portfolio. And as we touch all the aspects like including ethical sourcing in our procurement portfolio, in sustainability in our portfolio, we also will provide the SAP Sustainability Control Tower, which is helping to serve all the ESG dimensions. And, with that, give you the information where you are on that journey but also, quite frankly, to continuously optimize it along the way. Because we do believe that, actually, we need to think differently about the success of the company. It's not just about financial metrics like the top line or the bottom line, let's act jointly together, collectively, the green line of sustainability as part of the purpose of every company.

Thomas, it's fascinating to kind of think about how you've described things because you've really talked about how our customers can build sustainability into the very fabric of how they do businesses. And I love the way you talked about full visibility across the supply chain and this ability to turn insights into actions. So it's great to see that in the SAP portfolio. Let's, Juergen, bring you into the conversation and get just some perspective from you. I know both of you think of our innovation and our technology road map from a short-term perspective, a medium perspective and a long-term perspective. Juergen, can you just give us a couple of observations and perspectives on how does SAP think about sustainability in the long term in terms of how we ensure we will continue to build those sort of services that Thomas touched on into our portfolio for the long term?

We really want to work with zero waste, zero emissions and zero inequality. And you will see SAP pushing for that ourselves as a road map model and also enabling our customers and partners. And of course, the technology platform is, again, the foundation for this. As Thomas mentioned, we can extend our data model by, for example, tracking emissions through the supply chain. We can have partners and SAP build solutions. And we have so many customers that, for example, use our embedded analytics capabilities. And here, we already support ESG reporting, for example, with predefined context and content. And that is what we are continuing to do in all processes, in all areas of our technology and application business.

Let's turn to something you touched on earlier, Thomas. You talked about the importance of businesses working together and how we're also seeing the shift from one-to-one connections to kind of networks of companies working together. And I think the supply chain issues that many of us faced over the last 12, 18 months are certainly an example of why those business networks are so important. At SAPPHIRE NOW a couple of weeks ago, SAP announced the Business Network, the world's largest business network. And I think we have more than 550,000 businesses taking part of that. But could you just give us a sense of what's actually new here?

I mean, as you said, we already live in a totally interconnected world. So networks are reality. But we actually bring them together to give them the insights, the visibility but also the flexibility to maneuver through that. And that's the reason why we bring together our assets like the Asset Intelligence Network, Logistics Business Network as well as our procurement network with SAP Ariba under one network. And that's the reason why we launched also the new trading partner portal, bringing all these aspects together, simplifying the onboarding for suppliers and buyers, giving more insights and data visibility into the entire flow of the entire business, which you are running. And that's actually an unprecedented opportunity, which we have here together, talking about more than 5.5 million trading partners, which we already bring together in this open network, which we have available.

It's interesting, actually, because what you've just described is similar to what you were talking about earlier with both the integration and the user experience. So we've brought different networks together. And the example you gave about the trading partner portal, I assume that's a way to very easily access that network and figure out what options there are to move forward. Is that right?

Exactly. It's kind of linked in for a business with certified businesses, which you can tap into and make business with. And that you also can be assured that, actually, whatever you do, it's an ethical business, and it's the right way to do business with. I think that's also a very important notion these days. What we also see actually is that we, for sure, have industry-specific networks. And that's one of the areas where we just together announced with our partners the new Catena-X Automotive Network together with partners like BMW, Volkswagen, Daimler, Schaeffler, Bosch and the likes to really form that industry-specific network. And I think there, you really see the power if you bring together the tier end suppliers of the OEMs what kind of new processes you can actually enable. And that's a total different level of quality management, sustainability and the likes.

That's a great example to actually explore. Can you -- I love the automobile example. Tell us a little bit about how that works in practice.

I mean if you think about quality processes, for sure, the suppliers actually need information and data about the real performance of the car, for instance. And now you want to have specific information for a specific part of the car, and that can be the tier end supplier. But in order to improve that specific bit, you need to have the end-to-end process in mind and the end-to-end chain of the network until it's really the finished good, which the consumer actually drives. And there, we have now collaborative quality management in place. Also, if you think about sustainability management, in order to really judge how sustainable an electronic car, for instance, is, you need to track that down to the raw material in the entire chain. Again, bringing the network of all parties in this network together is an unprecedented opportunity.

Yes. It's interesting. It sounds like we're really focusing in 2 areas. We're bringing existing networks together. But then within those individual communities of industries and companies, sort of in similar industries, we're providing very, very specialist help and abilities to kind of work together more effectively. So let's come to a question that I've been really looking forward to asking you both. I mean you 2 are in 2 of the coolest roles at SAP. And every day, your teams are creating innovations that help our customers do amazing things. And I know you've kind of -- you're experimenting a lot, you're creating, you're innovating, you're bringing our portfolio to customers. But we'd love to get a sense of when you think about our pipeline, what are you most excited about? And what are you working on in your areas? And Juergen, why don't we start with you with the SAP Business Technology Platform and all of the innovations your teams are working around?

There's so much cool stuff going on, Oliver, to be honest. So in the database, data management space, we are creating, with HANA Cloud, a leading cloud database. Last year, already -- end of last year, we were nominated a leader by Gartner in their first cloud database management Magic Quadrant. At SAPPHIRE, we launched a lot of new innovations. A data marketplace for SAP data warehouse logs, for example, data lake services for SAP HANA Cloud. We have a lot going on with business process intelligence to really helping customers to understand how the processes run in reality in their companies and then to improve them. But if you ask me for one, and I see that you are curious for, hey, what do you think...

I do want to ask you to pick one. Go on, pick one, go on.

I have to pick planning. We are announcing a foundation for enterprise planning built on SAP Business Technology Platform. Why is that so important? Now in this pandemic, companies had to change a lot. Now in many countries, the economy is coming back. But companies again are replanning. Why? Commodity price changes. We have chip shortage. We talked about becoming a green company. That really is core for many companies now. And they need synchronized cross-company planning. And I think this really can be one of these huge boosters for our complete economy. If you are, for example, a consumer packaged goods company, you have demand plans. You think what you can sell somewhere, but you need to have the right marketing plan behind. There, you need to have the right production plan behind. There, you need to have the complete supply chain behind and ready with warehouses, transportation management including, of course, the reverse supply chain. And who makes it happen? Employees make it happen. So you need to have workforce planning to find out where you need which employees with which skills and so on and so on. Of course, all of that has impact on your financial plan. SAP is already a leader in financial planning, is already amazing in workforce planning, and this is the foundation for us. So with the lead that we also have in supply chain planning, we think we have the right areas in place to tackle the whole end-to-end synchronous planning challenge of companies not because it's easy but because it has the most impact.

That's such a good example, Juergen. And it also speaks to exactly what Thomas was talking about earlier in terms of integration and innovation. I'd love to just get a couple of perspectives from you, Juergen, on the AI behind what you've just described and how that AI is powering kind of that set of solutions you're working on in enterprise planning.

Yes. It is really the integration and innovation, and AI plays a major role. Thomas also mentions that regularly. We now have -- we stopped counting -- I think 300-plus AI capabilities embedded in our applications. That is the huge difference. AI with SAP comes embedded in SAP applications. And that is also recognized by analysts where they say, "Yes, for planning but also for AI capabilities, SAP is a leader in enterprise applications." Just take the latest example, Concur, Verify. So you have expenses, hopefully soon, more and more again when we continue traveling, you have expenses. And we have an automatic auditing process behind leveraging AI. So that is an add-on to Concur. And it goes back, and it looks at the policies a company has, it looks at what is reasonable, what is not reasonable and then goes back decades of years and tens of millions of data points in order to determine whether there might be a potential problem with that expense report that has been handed in. And this is just one example of how we help. Let me pick one more from the pharma and health care industry. Pharma -- Zuellig Pharma, one of the largest APJ pharma companies, actually had a lot of new requests and sales orders during the pandemic. Actually, they had up to 30x, 3-0 times, more orders. And a lot of them initially needed manual processing. They deployed SAP S/4HANA AI services, workflow services from SAP and more. And now they automated all of that. And not just they can process up to 100,000 orders per day with SAP, so we all get more pharmaceutical products, but also, actually, they could free up people from mundane tasks who now can act strategically with customers and partners to help even more. And that is just what excites me, what excites us at SAP when we can help the society run at its best.

I love seeing the energy just in how you tell the stories, really good customer examples, but I love how it comes back to integration, innovation with embedded AI. So Thomas, you've got an equally cool job as Juergen. So tell us about what you're most excited about when you think about our innovations and our technology road map.

I think what I'm the most excited about is actually the impact we can have with really changing how people work, how companies operate in this interconnected world. And this is actually super exciting for me. And if you think about it, we actually take enterprise software to the next level. We embrace sustainability, make it fully networked and, for sure, include AI in every process. And with that actually, we actually don't want to be the market leader for enterprise software. We actually want to make the market for this next generation of software, which we deliver to our customers, so the next best practices of processes and also the new business models which we actually enable. And this is actually something which excites me the most. And for sure, in a new way, fully all in the cloud, but also in a modular fashion, that customers can consume the innovations, which we continuously deliver, in an easy fashion with a quick time to value. And that is actually something which is driving everything today, how we can help our customers to succeed. And this is something we're really excited about.

Yes. It's fascinating how you describe that because sustainability is so critical for all of us, yet we're at such an embryonic stage in terms of the technology that's been developed. And I love how you talked about, hey, SAP is in this unique position to actually lead a technology wave of development. Tell us -- I'm going to ask you just what we asked Juergen. Give us one example of one technology, perhaps in the sustainability space, that you think is particularly cool and you're very excited about in terms of what we're working on.

I think actually, what I'm super excited is the SAP Sustainability Control Tower, which brings together all aspects of sustainability for ethical sourcing, diversity and inclusion, from the Responsible Design and Production to actually decarbonization, to have this all together. And then this is all fully built on the SAP Business Technology Platform, embracing also AI with recommendations that you know actually where to tap into to improve your sustainability. And this is something -- this is the power which we can have, tapping into all of, again, the 440,000 customers running the end-to-end processes. And I think this is a huge opportunity with which we have. And as we talked earlier, this is all in a network because that's where the most carbon is actually created, and that's the reason why it's so central. And that's also why I'm actually so convinced that this is a unique actually proposition, which we can offer here.

Such a good example and such an important focus area. Thomas Saueressig, Juergen Muller, thank you so much for joining us today at SAP's financial analyst conference.

Thank you.

Thank you.

So thanks a lot. What a wording, embryonic stage. I'm quoting my colleague, Oliver. Now so how are we building the intelligent enterprise? And listening to the conversation, it struck me how we are infusing customer feedback into our development processes to ensure customers know their feedback is being heard. And this is exemplified by the delivery of the broadest integration. Also, how we are recognizing and acting on our responsibility for a better world. Sustainability is the key word, and creating solutions for companies to transition to a circular economy, for example. Now I'm sure you are interested in hearing a fresh perspective about SAP's go-to-market approach and why customers need to become intelligent enterprises. Executive Board members, Julia White and Scott Russell, will now share their insights in a moderated discussion hosted again by Oliver. Over to you, Oliver.

Hello, again, everyone, and welcome back. I hope you enjoyed the conversation with Thomas and Juergen. And I'm delighted now to welcome our 2 newest executive Board members, Julia White, our Chief Marketing and Solutions Officer, and Scott Russell, our Board member for the customer success organization. Scott, Julia, welcome to Investor Day. It's great to have you here. So Julia, let's start with you. You joined in March as SAP's Chief Marketing and Solutions Officer, and you spent nearly 20 years with Microsoft in leadership positions across Office, Azure and the server portfolio. So tell us a little bit about your background and what attracted you to SAP.

Well, absolutely. As you said, I spent a long time at Microsoft primarily focused in key cloud growth and transformation areas, so the transition of the Office business to become Office 365 for many years. And then the past 5, leading the kind of the Azure side of the business. And starting when it was just a few hundred million dollars in revenue to the point where it was the clear #2 cloud with multiple billions of dollars of revenue. So just an amazing opportunity of transformation and also rapid growth. What brought me to SAP is actually the opportunity to work at the business process layer of technology because that's where real transformation happens, and that's where the real business impact happens. So things like sustainability, as Thomas talked about. And working around that layer at Microsoft and the infrastructure layer or the productivity layer is fantastic, but this is where so much happens at the real business impact. And so I love that part of it. I think also just -- it's a fantastic new leadership team at SAP that I honestly just couldn't be more excited to work with, and a really important time of business and cultural transformation. So -- and that's the work I love, and I have a lot of experience doing it. So it's a good match to what I have to bring. And then lastly, it's super clear to me that SAP has so much to offer that the world doesn't really understand yet. And so as a marketing leader, I feel like there's just a phenomenal opportunity to close the gap between what the world knows about us and what we have to tell the world.

Well, yes, it's so interesting. These transformations that companies like SAP were all going through the same transformations. It's good to have you here, Julia. Scott, welcome to you as well. You recently earlier this year took on leadership of our customer success organization. You spent 10 years in the APJ region in multiple roles, but most recently, as President. Before that, you've had a career at IBM. So tell us a little bit about your background and you leading this new customer success organization.

Yes. Thanks, Oliver, and great to be here and with Julia. Look, I guess I would describe my career in very simple terms. It's about creating value for our customers through technology. And one of the best things about my role is I get to listen and learn every day speaking to customers around the world about, as Julia described, their business processes, their key needs of how they drive growth and differentiation of their business and how technology can help them in their journey. The name of our organization, customer success, it just says it all. We know that we're only successful when our customers are successful. And our team is singularly focused on maximizing the success of our customers throughout the lifetime of their relationship with us, which we hope is a very long period of time. And with the customer success board area, we've really unified our identity but also our vision as one team. It leaves no doubt to what the ultimate KPI is, and that is customer success. And at the end of the day, SAP is only successful when our customers are successful, and that's what drives us.

That's such a straight forward way to think about it, value for customers. And I imagine there are 2 parts to customer success, helping customers decide upon the right technical solution and then helping them figure out the best way to adopt it. And Thomas and Juergen talked about the product portfolio, but let's talk a little bit about our GTM approach and what's changed in our sales approach and how we help customers adopt and get most from the portfolio.

Yes. I guess there's 3 things, Oliver, that really describes this journey. The first step was about simplifying the engagement experience with customers. Whether they were small, medium or large, we brought all of our field-facing teams together, including sales, services, customer engagement and partner teams and the ecosystem teams to really ensure every team was aligned to how to best respond and support each customer. But the organization is only 1 part of the solution. The next step was about shifting mindsets, behaviors within the team through a new operating model that really was about putting the customer at the center through a cycle of purchase, adoption, value and renewal, but every step of that engagement being the customer at the very center. And what's different? And I would argue what's really exciting about this is that all of our teams, regardless of the function, are looking at the value and the experience of our customers and how our customers derive that value in a much more holistic perspective. They're not just invested in their part of the phase, but they're also looking at the entire life cycle to ensure that we deliver value at any time at any given point in a much more fluid engagement motion. And I guess, finally and importantly, we've built objectives, compensation, structures, measures that are shared across the entire team. And so when our customer is successful, we -- that reward and that shared success is within SAP and our customer success teams as well.

It's so interesting how you describe that business well because it's so much more of an organization always. I love how you talked about it, it's organization and mindset change and processes. So Julia, back to you, I think you're working hand-in-hand with stock in ensuring the customer has 1 seamless experience when they engage with SAP. And that's one of the reasons we set up your new board area. So tell us a little about your approach.

Absolutely. So the new board area, the marketing and solutions board area, it brings together solution managements or, outside of SAP, medical product management, product marketing and our industry solutions and expertise team, our corporate marketing team, global communications and even our government affairs. So really bringing together from all of those aspects into this new area. And I talk about it as essentially a third leg of the stool that gives us a balance, right? Working between Thomas and Juergen's engineering organization and customer success. And ultimately, why we created this area is to drive new growth for SAP. And a few key ways that we're looking at this and I'm running the team this way. First, partnering with the engineering organizations to make sure as we're innovating and creating our product road maps, we're looking at what's possible from technology and mapping it to the greatest customer need and the largest market opportunity for SAP. So making sure we have that tight alignment. The next is around then translating our technology innovation into customer value and then ensuring the right modern marketing and demand gen tactics so that we know that we're going to hit those growth aspirations. Also, from a business model innovation perspective, making sure we are doing that maximization of revenue and market share and finding that balance. And then working incredibly closely with Scott and his organization, making sure that we're arming the organization with the right tools, the right resources that they can exceed their targets. And if I step back for a second, also, it's really about making sure that the value and the capability that we -- that I know we have inside SAP is clear to the external world. I know many people know the brand of SAP, but not as many people understand what we have to offer. So for me, it's a really big opportunity, as I mentioned. And SAP has this incredible foundation of deep industry understanding, remarkable customer trust. They really build and run the organizations on SAP technology, right? And we're not afraid to do the hard complex work that sometimes intimidates other technology vendors. So we have a lot of wonderful strength and foundation. So it allow us to build and grow from there.

Julia, what was really interesting about how you talked about your new organization is you talked about innovation, not only in the way we market, but in the way that we help customers find the right solution and also those processes that we need to innovate with to bring those three legs of the stool together. So if I may Julia, I'm going to stay with you, and let's talk about RISE with SAP. And Scott, I'd love to get some perspectives from you in a moment on RISE with SAP as well. But we announced RISE with SAP earlier this year in January, and it's a new offering to help customers both transition to the cloud but at the same time, transform their business processes. Simply put, you could say it's business transformation as a service. So Julia, give us a little bit more color on that, if you would.

Absolutely, Oliver. First, it starts with the core ERP technology with our S/4HANA Cloud offering and the migration services to run that on any hyperscaler, and SAP manages this experience for the customer end-to-end. So from a technology stack perspective, the customer has that one hand to shake, right? SAP manages the cloud solution on behalf of the customer. So they know they have best-in-class capabilities around that. But beyond the core element, it's also about, again, that business transformation. So we have our business process intelligence capabilities. And what that does is it discovers and understands our customers' existing business processes to what is called business process mining. And then what we do is you take that once we understand the processes and benchmark them across a large set of real-world industry benchmarks, and to see how they perform and where there's opportunity. And then you can even simulate changes in such that as we're adapting and adjusting those business processes and deploying them with S/4HANA Cloud, we know that the customer is getting those benefits, and that's the transformation aspect of it. It's not just moving to the cloud. It's about getting those new capabilities and best class processes in place as well. And then lastly, we provide access to the business network, right, because increasingly, that's part of doing B2B overall. So it gives all of those capabilities as a single solution for our customers.

It's actually interesting how you describe that in terms of one handshake. It goes back to what Scott was talking about earlier, which is how can SAP simplify its organization so that it's easier for customers to engage us. So Scott, let's turn to you on RISE with SAP. It'd be great to get some perspectives from you about how customers are responding. During our Q1 earnings, we announced some positive momentum. But what are you hearing from customers?

Thanks, Oliver. Well, we're seeing really encouraging momentum. As you heard during our Q1 earnings, we announced over 100 RISE transactions in Q1 despite only launching the offering in the end of January. And we've got interest across all geographies and industries with brands like Carrefour, Kia, Fonterra, choosing RISE with SAP to really drive and be the enabling engine of their strategic transformation. Our S/4HANA current cloud backlog now exceeds over EUR 1 billion, which was up 43%. And we also grew new cloud bookings in triple-digit growth. So really great start and great momentum. You asked about what are we hearing from our customers? Well, I had the opportunity recently to speak at length with 2 leaders from 2 very different industries on their RISE with SAP journey. One was with Sven Krause, who's the CIO of a U.S.-based health care provider at Hillrom. And the other is Tom Pfaff, who I've known for many years, who leads the finance and strategy for Standard Chartered Bank. And even though their businesses are incredibly different, the catalyst for their journey of RISE with SAP was actually very similar. It was about moving not only to the cloud from a technology set, but it was using the cloud as a way to be able to lead and differentiate in their industries. And so in both cases, SAP, we've partnered closely with them in defining, aligning those aspirations, but also not just shifting technology, but driving and enabling that business transformation as a service. And so for all of these companies and many more, this is more than just moving to the cloud or an infrastructure migration. But it's really about business transformation in the cloud. It's more value for them, mission-critical processes in a simplified experience in the cloud with SAP. And it's elements that Julia just spoke to, like our BPI capability, that allows RISE customers to really thoroughly assess their processes, identify changes that can drive the greatest value, including its benchmarks, identifying gaps and also opportunities to design new processes and a new desired state in a really simple, easy way. And we even announced last week as well at how we're extending the core RISE offering in for different industry domains and lines of businesses like procurement, human experience management, for example. So the noise and the feedback from our customers is deafening. They want to transform in the cloud, and they want to do it with SAP.

Lots of great customer momentum, Scott. And what I really liked about the 2 customer examples you spoke about, it was so clear that RISE with SAP is both about helping customers move to the cloud but more importantly, helping them transform their businesses at the same time. So Julia, let's switch to you again and talk about some of the announcements we made at our annual customer conference, SAPPHIRE NOW, a couple of weeks ago. It was virtual again for the second year in a row. We have hope that next year we'll meet in person. But at SAPPHIRE NOW, we announced 5 new RISE with SAP industry solutions in retail, consumer products, automotive, utilities, and industrial machinery and components. So why these verticals? And are there any others in the pipeline?

Yes. Absolutely. So first is some context, essentially, these offerings are there based on our nearly 50 years of deep industry expertise, like everything we do really has this industry orientation. And brings together that from SAP, but also a robust partner ecosystem that has a lot of industry expertise as well. And pulling that together, again, as you mentioned, starting in these 5 areas of industry. And just to make it real for a second, what we're talking about. So like in our retail offering, we have things like SAP omnichannel promotions pricing or retail merchandise management, intelligent returns management. So very specific retail business-specific applications that are really built oftentimes in partnership with customers so that we know we're building the right technology. It's not tech for tech's sake but really grounded in the expertise of that industry. So bringing those together, and then also our partner solutions. And then just to tie it back to what Juergen talked about. All of this is built on the business technology platform, right? So it has the integration, that extensibility, the 1 data model, all of it flowing together. And of course, all natively working with S/4HANA Cloud. Now we have expertise in over 20 industries, right? It was just incredible depth that SAP has. And so this is the beginning. These 5 were our start because we want to be iterative, we want to be agile. We want to start with these. We want to learn. We want to grow from there. And then add more based on real customer demand and where we see the opportunity to grow. So certainly, expect more to come, but also trying to be very thoughtful and really listen to the market as we do that.

So what was really interesting, Julia, about how you describe those industry offerings, it is so much about the specific, specific, specific vertical application and the way that we can help customers in those different sectors. I imagine, Scott, the customers are also asking us about modular solutions. And I know we have many of those in our offerings. There must be a new opportunity for us to upsell and cross-sell. So tell us a little bit about that modular approach, that modular set of offerings and what that means in terms of our ability to sell.

For sure, Oliver. As Thomas and Juergen just discussed, we have invested heavily in integrating end-to-end business processes and experiences across the entire value chain to move to a modular suite offering in the cloud. And what this means is it's a new pre-integrated modular bundles that create value for our customers immediately. Let's take an example, you use S/4, you need to be able to procure and drive your supply, maybe to solve for your employees with human experience management in an industry waiver and being able to provide that rapid time to value from a fully integrated suite right out of the box. And so the modular approach, actually, it creates that flexibility. So for new and existing customers, they can take the entire suite that RISE has to offer or they can prioritize which modules that they will adopt over time according to their priorities. And so RISE is, therefore, it's a huge catalyst to upsell and cross-sell our broader cloud portfolio. If we look at our top strategic customers, about 60% of these customers have 5 or more cloud LoB solutions. And in addition to that, they're co-innovating with us to become intelligent enterprises. So I guess, now it's our opportunity to really scale this approach in the rest of our vast customer base. Maybe I can put it in pretty simple terms that's easy to remember as a rule of thumb. If we earn $1 from a customer running S/4HANA ERP, this should expand to approximately $4 as they adopt our broader cloud portfolio over time. So the economics make sense.

So thank you, both of you. We've talked about RISE with SAP. Julia, you talked to us about the new industry offerings for RISE with SAP. And thanks, Scott, for talking about that modular set of offerings that we offer customers and the ability for us to upsell and cross-sell. Let's switch to a little bit of a conversation on partners who obviously play a huge role in helping our customers adopt these technologies. And I'll stay with you for a moment, Scott. Can you just talk broadly about the role partners are playing with RISE for SAP.

We're not the only ones that are really experiencing the momentum and the positivity that I and Julia have spoken about. Our partners, too, who are and will continue to be just so crucial for our customers in SAP to bring RISE with SAP to the market and help us to build scale with our reach, but also in our partnership that ultimately allows our customers to make the move, plot the part to mass adoption across industries and geographies. So you see names like Accenture, Deloitte, Atos, IBM and many others building incredibly fast momentum in the market with us, and it's exciting to watch the power of our partnerships and industry leaders in their own right, working in concert with us around this offering.

So Julia, over to you. I'd love a couple of perspectives on our hyperscale partnerships. They obviously play a key role in helping our customers shift to SAP cloud services. You actually spent 10 years or 20 years with Microsoft, one of our hyperscale partners. Can you talk about the importance of our relationships with those hyperscalers in helping both existing and new customers?

Absolutely, Oliver. I mean the hyperscalers are critical to our cloud growth. And we've really strengthened these partnerships over the years to benefit our customers. I mean ultimately, customers want the flexibility to build, adapt and implement solutions kind of aligned with their cloud strategy and their provider of choice, and we want to provide that choice. And so we work really closely with all of the big hyperscalers. And that way, we make sure that we can offer best-in-class SAP experiences regardless of which cloud the customer wants to run on ultimately. And we actually see this as a real advantage to giving our customers that choice, right, and giving them the flexibility. And it's -- this means work for us, but it's really valuable because it gives that customer the flexibility.

Well, let's just come to a close, and I've got a question that I'd love to pose to both of you. I mean it certainly has been a very hard year, a difficult year, a challenging year, but we're all coming out of it. And it's interesting. I think there have been extraordinary examples of customers who have literally transformed their businesses to get ahead of everything that the pandemic presented to us. Often, there's been no option but to transform. And you've all both talked eloquently about this combination of needing to help customers shift to the cloud but also, at the same time, helping them transform their businesses. And I think it's interesting, often, the move to the cloud may be easier or the first thing they do and sometimes the business transformation takes a little longer. So Julia, let's start with you. What are you most encouraged about after this fascinating year that we've all gone through and these dynamics that I've just described in terms of what customers are going through?

Yes. If you look at what happened a lot through the past 1.5 years, right, is as you said, everyone needed to pivot and transition to adapt. And what, I think in a large scale happened, people lifted and shifted systems to a cloud infrastructure. So they could get dial up or dial down solutions, right, based on what was happening in the market. And then also, we saw them wrap kind of like real quick and easy, no-code applications, like hospitals standing up at a mobile app to triage hospital bed capacity. Those type of things happen quickly. And it made sense in light of the speed that these people needed to move. And so we saw growth in those 2 categories in the industry. What -- that didn't always happen is actually that true business process transformation, right? But now, as we see over the past really 6 months or so and then increasing from here, is that companies now as they're looking forward and they're out of kind of survive mode, and they're now into drive mode. Obviously, the case for digital transformation has never been more clear. And now they're looking at doing -- I'll call it, the real business transformation work at the business process layer. Again, that is what the heart of what SAP does. And I think is what's underscoring the strength you're seeing in our business right now in our Q1 results, and as we move forward as well is because people are now coming out and saying, now we wrapped it around, we did the band aid. We did the quick things. Now we're going to do the real work and business process player. And so that's what I see, and that's what I'm encouraged about, and the opportunity SAP has ahead because of that.

Scott, what about you? It's certainly a year I don't think any of us will forget, but what are you most encouraged about?

Well, I definitely agree with the comments that Julia made about the opportunity to solve critical business challenges that our customers have. But I guess, I'm also really encouraged about the network opportunity, the networks of companies to form and create far more agility in the supply chain and actually create rich, seamless trade and opportunity for businesses around the planet. I think Christian mentioned in his comments that over 75% of companies have encountered supply chain issues through COVID. And I think that's accurate, if not conservative. But that's where the new business network, it's really designed to solve those types of challenges. And we've been in the business network area for a while, but the ecosystem wasn't necessarily ready. Well, now they are. We see the shift. The industry players are coming together. They need to work together, and they see the urgency and the value of a networked approach. So for me, that's really exciting.

And that was also one of the announcements a couple of weeks ago at SAPPHIRE NOW, our business network. Julia White, Scott Russell, it's been fantastic to have you with us at Investor Day. Thank you for your time.

So that was really insightful, in particular, as we heard from Julia, the steps SAP is taking to ensure customers understand the value of SAP. And then the rule of thumb, as Scott mentioned, moving from $1 to $4 over time as customers use our portfolio in a much, much broader way. So I found it interesting to hear from customers that they are saying, business transformation is becoming even more critical as we move out of the pandemic. And customers, as Julia said, move back into a thrive mode. And of course, I'm happy to hear RISE with SAP resonates well with our customers. So Scott mentioned the Q1 metrics, and we'll provide an update on that in our Q2 earnings call. Julia and Scott also mentioned several announcements made at SAPPHIRE NOW, including industry cloud and business network. And just as a reminder, you can view all SAPPHIRE NOW sessions on sap.com. And now to our final presentation before the Q&A today. Our CFO, Luka Mucic, needs no introduction to this audience. Luka will talk about what our growth means for our financials. And now I say the famous words, over to you, Luka.

Thanks, Stefan, and hello, everybody, from my side as well. Thank you very much for listening in today. This is my ninth SAPPHIRE NOW as a member of SAP's Board. And I can confidently say that as a company, we have never been more on the move. We're making tremendous progress in our business model transformation to the cloud, laying the ground for sustained double-digit top and bottom line growth in the near future. We are co-innovating with our customers and partners at unprecedented speed driving up our customer and partner Net Promoter Score in double digits. And we're doubling down on our commitment to remain the diversity and sustainability leader in our industry. Now today, you've already heard Christian and my other Board colleagues talk about implementing our cloud vision. In this session, I want to give you now an update on what our accelerated transition to the cloud means from a financial perspective. But before I do that, I wanted to give you a brief recap of Q1 and highlight our great start to the year. This Q1 was my 29th quarter as SAP's CFO and during that time, we had many very good quarters, but this one clearly was the single best quarter I ever experienced in my present role. Since we introduced our 2025 ambition last October, and made some bold strategic decisions, we have seen tremendous momentum. This is reflected in our strong finish to 2020 and also in our stellar Q1 results. Our road map with new innovations, as you have heard from my Board colleagues, is clearly resonating with our customers. Earlier this year, we expanded our already very transparent financial disclosures to report on the momentum of our accelerated core ERP to cloud transition. We now disclose S/4HANA current cloud backlog and S/4HANA Cloud revenue, both up 43% at constant currencies in Q1, which sets us up for significant cloud revenue growth reacceleration. In fact, almost all of our cloud solutions saw significant double-digit order entry growth in the quarter. Paired with strong renewals, our stellar new cloud business performance allowed us to deliver 19% growth in our current cloud backlog at constant currencies. This is a quite sharp sequential reacceleration, which is quite remarkable since Q1 usually has seasonally smaller current cloud backlog growth rates. Also, after a record prior year, our free cash flow was up double digits in Q1. Our cloud revenue grew by 13% in Q1. But keep in mind that cloud revenue is a lagging indicator and also includes transactional revenues, which suffered in the crisis. Looking ahead, our strong new cloud business performance in Q1, actually the best that we have seen in 5 years, in conjunction with our healthy renewal rates, as well as the expected recovery of our transactional revenue, where we are starting to see first moderate improvements in Concur's transaction volumes and the strong start of RISE with SAP makes us very confident that we can grow our cloud business by up to 18% in 2021. Our outperformance in cloud and software revenue in Q1 was also supported by double-digit software licenses revenue growth at constant currencies, however, clearly against the easiest prior year compare. And given the increasing impact of our RISE with SAP offering, we continue to expect a decline in software licenses revenue for the full year. Our operating profit expanded strongly by 24% in Q1, but this is likewise not entirely reflective of what we continue to expect for the full year due to, first of all, revenue mix shift effects. Since as previously mentioned, our high-margin software licenses performance was much better than what we expect for the rest of the year. While on the other hand, our lower-margin services business was down double digits in Q1, but is expected to improve for the rest of the year. And second, we had significant COVID-related savings in relation to events and travel compared to Q1 last year. These effects will diminish as of Q2. That being said, we continue to push towards a larger share of more predictable revenue. In Q1, even with the strong software license this quarter, our more predictable revenue base was already at 78% of total revenues, which is approximately 10 percentage points higher than 5 years ago. And finally, I'd like to briefly talk about currency effects. As you know, while our full year outlook is stated at constant currencies, of course, we are closely monitoring currency developments. Since we provided our last currency expectations 2 months ago, we had further headwinds, translating into an additional dampening effect of 1 percentage point on revenue and operating profit versus our prior assumption for Q2 and the full year, if currencies remain at the May level for the rest of the year. Now that being said, we don't hold a crystal ball. And thus, we stay concentrated on what we can influence and remain very confident about our underlying operational momentum. Let me now take a step back and provide you with an overview of the composition of our holistic cloud portfolio. Now I realize this is a bit of a busy slide, but not everybody may be familiar with the unmatched breadth of our solution portfolio. And so to set us up for a deeper dive into our cloud transition, here's a brief refresher of our 3 cloud models, since this is how we break out our cloud revenue as well as our cloud gross margins. First, there is intelligence spend. This group's procurement solutions with a network aspect, so indirect and direct materials, travel and external workforce management. These are already fully scaled businesses, which grew by 3 percentage points at constant currencies to EUR 2.7 billion in 2020. They were temporarily dampened by the impact of the COVID-19 crisis on our transactional revenue. This impacted all 3 solutions. But I have to say, mainly Concur's business due to the global travel restrictions. However, the good news is that Concur is starting to see first green shoots of stabilization and moderate growth in transaction volume since April as the COVID impact begins to moderate in North America and Europe, which should start to contribute much more to growth as of 2022. Overall, intelligence spend is already extremely efficient and has the highest margin profile of our cloud business models. Second, the other public cloud solutions make up the SaaS/PaaS bucket, where we have a broader mix of maturities and sizes of both acquired and organically developed solutions. This is our fastest-growing cloud business model with 27% growth at constant currencies, contributing more than 50% to our overall cloud revenue in 2020. We are already seeing accelerated growth in SaaS/PaaS, and we expect this to continue to contribute overproportionally to our strong cloud momentum driven by particularly high growth in S/4HANA Cloud, the business technology platform and Qualtrics, complemented by continued solid growth across the other solutions within this category. In terms of gross margins, we already took a big step forward by replacing a third-party database with HANA in our cloud delivery. This initiative helped to increase the SaaS/PaaS gross margin by more than 10 percentage points in the past 2 years, and we expect a continued material increase in the next years to come. Third, we have our infrastructure as a service, or IaaS category. This is our smallest cloud business. It basically includes our HANA enterprise cloud offering, where we typically host the customers on-premise solution and provide application management services on top of that. Now naturally, the gross margin is lower for this business as this is a pure infrastructure business without any high-margin software elements. Nevertheless, in 2020, its gross margin increased by almost 5 percentage points. Going forward, we expect the share of this business to decline as it will largely be substituted by the full SaaS RISE with SAP offering, which has a significantly higher gross margin. The T-shirt sizes that you see on the right-hand side indicate the solutions and their contributions to cloud revenue. Today, Ariba, Concur and human experience management are still the biggest cloud revenue contributors, which I would characterize as extra-large cloud assets, each running at a cloud run rate of more than EUR 1 billion. However, based on Q1 results, S/4HANA Cloud is already close to an annual run rate of EUR 1 billion as well and growing extremely fast. So it is safe to assume that when we get together for our next SAPPHIRE NOW, S/4HANA Cloud will wear an XL T-shirt too. So I highly recommend you to closely watch this T-shirt size develop. As frankly, I have to closely watch my own T-shirt size to develop too. And then in the L category, we have an exciting set of assets that are quickly scaling and are operating at more than a mid-triple-digit million euro run rate, like the business technology platform, Qualtrics and customer experience. So as we have now gained a detailed understanding of the composition of our cloud portfolio, let me turn to the future development of our cloud business. On our path to 2025, we expect to more than triple our cloud gross profit. 2 factors contribute to this. First of all, cloud revenue is expected to grow to more than EUR 22 billion by 2025. And secondly, our cloud gross margin should expand by 10 percentage points to approximately 80% over the same time frame. So simply put, our cloud business is the prime source of our expected double-digit growth in operating profit from 2023 to 2025 and beyond. So what is driving this? Let me first explain how our cloud revenue is expected to grow to more than EUR 22 billion at a CAGR of 22% through, 2025. Now I have occasionally heard from some of you some concerns about how realistic this accelerated growth expectation is. But first of all, the clear customer preference for cloud is very supportive of our journey. And then we have various powerful levers ensuring that we will continue to grow rapidly. By first of all, moving significant on-premise ERP workloads to the cloud with our RISE with SAP offering, including our business technology platform as the basis for a successful business transformation to the cloud, as discussed by Scott. This implies moving a significant part from the upfront software licensing model to the ratable subscription model. Furthermore, we will deliver innovative solutions together with our ecosystem in new markets like industry cloud, business networks, business process intelligence and our sustainability portfolio, as you have heard from Julia, Juergen and Thomas in their respective sessions. Besides that, with regards to our remaining portfolio, you also heard from Scott how we will continue to have a strong focus on our customer success by ensuring adoption, renewal and ultimately, increasing the lifetime value from our solutions. Also, the completed deep level integration between our cloud line of business applications, and S/4HANA Cloud, will catalyze our modular suite up-sell opportunities. And last but not least, we also expect our transactional revenue to reaccelerate as of 2022, and again, contribute to cloud growth, as mentioned earlier. Now let's take a look at the cloud gross margin trajectory. As you will remember, as we rapidly grew our cloud business earlier in the last decade, we saw very material negative revenue mix effects on margins, simply because of the lower margin profile of those cloud businesses, in contrast to our high-margin on-premise business. Eventually, by the end of 2018, our cloud business had reached a scale that allowed us to significantly expand cloud margins, both in 2019 and also in 2020, despite the impacts from the pandemic. Now it is important to understand what will drive the significant further improvement that we expect to deliver through 2025. First, as you know, we decided to accelerate the harmonization of cloud delivery, together with our 4 plus 1 strategy with the hyperscalers. This requires an incremental investment of a mid-triple-digit million euro amount over the course of this and next year, which will first have a dampening effect and lead to an only moderate cloud gross margin improvement in those 2 years. Once we have completed the migration, end of 2022 though, we will see a significant step-up in cloud margins from the more elastic and cost-effective harmonized cloud infrastructure. Our fastest-growing SaaS/PaaS cloud solutions category will actually benefit most from the step up in efficiency, which will also lead to a favorable mix effect. The expected recovery of our high margin transactional revenue as of 2022 and going forward will positively contribute to the cloud gross margin expansion through 2025 as well. We also expect our highest margin cloud assets such as business technology platform, including SAP Analytics Cloud and Qualtrics to become a bigger part of our total cloud business. And of course, not to forget our latest offering, RISE with SAP, where we are now bundling high-margin SaaS/PaaS subscription elements as opposed to before where we were simply selling lower margin infrastructure as a service to be used with a bring-your-own-license model. So let me recap how this all then comes together in our midterm ambition as communicated last year. Over the next 2 years, we continue to expect to see muted growth of total revenue, accompanied by a flat to slightly lower operating profit due to the short-term impact of our accelerated business model transformation from licenses to cloud. As of 2023, though, momentum should pick up considerably. The initial headwinds of the accelerated cloud transaction will start to turn into tailwinds for revenue and profit. In addition, we will also have completed our increased investment into the accelerated cloud delivery harmonization. And that then, in combination, will translate into accelerated total revenue growth and double-digit operating profit growth from 2023 onwards. By 2025, we expect this trajectory to take us to a total revenue greater than EUR 36 billion and an operating profit greater than EUR 11.5 billion. This 2025 ambition also means that we will significantly increase our share of cloud revenue, making it the primary revenue stream of SAP. And with that, we will also significantly increase our share of more predictable revenue to about 85% of total revenues. And we will also continue to focus on bottom line efficiency while we go through our transformation. Now I also wanted to briefly update you on capital allocation at SAP. Our capital allocation policy remains consistent and unchanged. We, first of all, focused on organic business expansion, repayment of debt and tuck-in acquisitions. We plan to spend a roughly similar amount of capital expenditure in 2021 compared to 2020. We have significantly improved our net debt position in the last 15 months from EUR 8.3 billion of net debt to EUR 2.7 billion until the end of Q1. And we have made 3 very complementary tuck-in acquisitions of Emarsys, Signavio and AppGyver over the course of the past 12 months, all with a strong momentum as new members of the SAP family. We have also just paid a dividend of EUR 1.85 per share, representing a 17% year-over-year increase, and we remain committed to a progressive dividend policy also in the future. And last but not least, we also keep our promise to evaluate share buybacks on an annual basis when we have reached sufficient visibility with regards to our other capital priorities. Now before closing, let me emphasize our vision of chasing zero. With regards to zero emissions, we aim to become carbon neutral in our own operations by the end of 2023, that is 2 years earlier than previously stated. On zero waste, we plan to continue our journey towards 100% single-use plastics free where we are in constant communication with our suppliers and partners to lead by example. We have already made significant progress. And we are nearly 90% single-use plastics free. As a global organization with employees from over 150 nationalities, our aspiration remains that our workforce mirrors the diversity in society, including gender parity and demographics of all of the regions where we have employees in order to ensure zero inequality. We continue to aim for 30% women in management by end of 2022 and are making great progress towards this target. Also among many other efforts across the globe, we aim to double the share of black and African-American employees in our workforce in the United States within the next 3 years. So let me wrap it up by saying that our strategic priorities are clear. As Juergen and Thomas demonstrated, we have a strong product road map with new innovations while building the world's largest B2B platform for integration and extensibility. With Julia and Scott driving best-in-class cloud sales and marketing, we expect to increase our TAM by expanding our offerings, for example, in industries, business networks and sustainability solutions. This will provide multiple cross and upsell opportunities while nurturing a thriving ecosystem. And finally, RISE with SAP brings together our technology and business process know-how to provide our customers with a true business transformation as a service. All of this makes me extremely confident to deliver on our 2025 ambition. And so with that, let me hand it back to Stefan. Thank you.

Thank you, Luka. So beyond the comments on the T-shirt sizes, I think you provided details on not only our momentum, but also the financial mechanics of the cloud transition. And maybe the most important message of the day, as of 2023, we anticipate the accelerated cloud transition to really pay off as the initial headwinds turn into tailwinds for revenue and profit growth. So there was a lot to digest today, and we have now a short approximately 15-minute break. And we reconvene at 5 p.m. CET, 11:00 a.m. Eastern, for the live Q&A with the entire SAP Executive Board. Stay tuned. [Break]

So welcome back, and hello again from Walldorf. I'm pleased to have the entire SAP Executive Board here to take your questions. And joining me here in Walldorf are: our CEO, Christian Klein; our Chief Financial Officer, Luka Mucic; Sabine Bendiek, our Chief People Officer; Juergen Muller, Chief Technology Officer; and Thomas Saueressig, SAP Product Engineering. We also have virtual guests joining virtually from Seattle in the United States is Julia White, Chief Marketing and Solutions Officer. And I believe late in the evening or early in the morning from Melbourne, Australia, Scott Russell, who runs customer success at SAP. So welcome, everybody. Thanks for taking the time. I always have a housekeeping item.

[Operator Instructions] So let's get started. And we heard a number of presentations really rich in content today, and I think that's a great basis to drill deeper now in the Q&A. But before we kick it off, there is 1 statistic I'd like to share. And that's the result of a customer survey just carried out by one of our investors -- institutional investors, AKO Capital in London. And they do a lot of work around SAP. They surveyed 75 CIOs of SAP customers with at least $2.5 billion in revenue. So fairly large customers. I think we can show the chart. And they asked them how their perception of SAP has changed over the last 12 months for 4 key attributes. Now we can see the chart. And these are the results. It says here, brief pause, so I'm pausing briefly. And well, as you can tell, we wanted to give you an easy start before we move into the really tough questions from the financial analysts and the investors. But seriously, this is obviously a great endorsement of our updated strategy and execution. And I think this survey shows, it echoes the 10-point improvement in Net Promoter Score we have seen in 2020. So it seems Juergen and Thomas have earned the most gold stars stickers here or maybe you just had the easier comparables, like in the financial statements. But anyway, Christian, over to you now. Any thoughts from your perspective on this AKO survey work?

Yes. Thank you, Stefan, and also first, let me also welcome everyone here worldwide around the globe. I see very far distance, I guess I can see Adam Wood. And I can only tell you I really much like this virtual settings because they are time efficient, but I'm also very much looking forward to also want to meet you again in person and talk live face-to-face about SAP's strategy. Obviously, I mean -- Stefan, I mean, what can I not like about that slide? Probably, I have to put it in my office. So just to look at it and see that, first of all, it's a proof point that the strategy is working. But instead of talking the numbers, and we also shared in Q1 that the customer satisfaction is on an all-time high since many years. So we are getting this feedback on a constant basis. But maybe I just share a little anecdote. Yesterday, I was actually in Switzerland. We talked about a Q2 deal, and we were sitting together with a big Swiss retailer. And there were -- the room was -- in the room was the CEO of the customer, the CIO, the business people. And on our side, it was sales, it was the architect, there were people from the industries. And at the end of the meeting, the customer told me, "You know what, Christian, we really would like to drive the transformation with you. We would like to move our complete system landscape to the cloud, but we want to do much more, and we want to do it with SAP." And why? Because we talked about replenishment. We are called -- we talked about new ways of selling, commerce, connecting it to the supply chain. We talked about optimizing the inventory, matching demand and supply real time, doing predictive analytics to really better predict what is coming. And there is no other software vendor who can do that. There is no -- other talk about the industries. We have the knowledge, and we have the product. And they said, "Of course, I mean, I want to get rid of the modifications. I want to move to S/4HANA. I want to use RISE. You need to help us to implement the best practices for this industry. You know how to do it with BPI, you have it." But there's also now this platform. And this 1 data model to connect and to not have [ this space ] between the front office and the supply chain. There's this 1 security layer, which the CIO very much liked in the room. So he was bought in after 10 minutes when we show the capabilities of the platform. And this is how we show that our strategy is working. And finally, the CEO also told me, "Christian, your team is really fantastic because with regard to customer success or Julia's team on the industry, they really care. They don't just call anymore when there is a deal coming. They're going with us the last mile. They are caring about us and they drive adoption." And this is for me a customer meeting, where I see, yes, we are absolutely on the right track, and then the numbers are just an output of that.

Okay. Fantastic. Thanks a lot. So there was a nice easy warm-up question, so to say, now let's move on to the more sophisticated questions from our financial analyst community. Again, as a reminder, we take questions from the Zoom webinar, but we also take questions by e-mail. So please send your questions to [email protected]. The first question now comes out of the Zoom session, and it comes, let me just look here, from Adam Wood, Morgan Stanley. Adam, please go ahead.

Perfect. Thanks, Stefan, and thanks, Christian. Yes. So what I'd like to ask is around the competitive landscape. I think a lot of competitors would like -- they look at your -- that breadth that you have around business processes, the industry depth. But also as it is a system of record, and I think what they'd like to do is to reduce SAP to be more of that system of record and have the business transformation and optimization discussions happen with them. I think one of the risks we see there is probably mainly with the hyperscalers limiting SAP to that role. Could you talk a little bit about what you're trying to drive? What the most important things are that you want to achieve over the next 1, 2 years to ensure that SAP really stays relevant in those business transformation discussions? And when it comes to investors, what would you encourage us to look at to ensure that we can see that, that change is happening, and that you're driving the right things to keep yourselves relevant with the customers and to keep those discussions happening with you?

Yes. So thanks a lot, Adam. So let me start. And then, Luka, you can build on that when it comes also to the metrics. I mean first of all -- I mean when you look at Wise with SAP, great start in Q1. And actually, when we designed this offering, it's not a new product, but it's a response to the needs of our customers because there were many of those customers who told us, "Christian, I moved now my system landscape to the cloud. But I actually have no business model change. There is no new way of selling. There is no process automation. There is no 360 of the supplier and the customer." and this is something what we said, "Okay. SAP can do more. It's not only a technical migration." And then when you see with Wise, we are taking the customer by the hand, sharing our best practices, sharing our knowledge, having now the tools to benchmark, to analyze and to reconfigure the business process in a way that we provide a maximum outcome, the business outcome, not only the TCO of running the system. And then when you see how the portfolio is coming together, we are now coding since 3 years on one platform. That's a major advantage. Because, again, you cannot just claim you have a 360 of the business when you only have one office there. And you also cannot just claim that you can secure the landscape end-to-end when you have a bunch of best-of-breed solutions. And this is the clear advantage of SAP. And then on top, with the industry cloud, like I just shared -- I mean everyone is talking about industry cloud and I see these articles also out there. But when you really look under the hood, I can tell you that it's only one software vendor in that space, who really understands how to reinvent industries from a business process perspective, and this is our whole focus. And with that, we, of course, also enable our businesses to one end-to-end with our core applications, with our industry applications, of course, data, AI plays a huge part. We are embedding that, more and more into business processes, and that's our response. So I don't see the threat. Our customers, of course, want choice on the infrastructure side. But when it comes now to the platform, when it comes to the business know-how, the business processes, our application. I don't see anyone out there who has the expertise, the depth of our portfolio. Luka, with regard to the metrics?

Yes. Thank you. Let me start with the soft metrics, the nonfinancial metrics. I think you already mentioned the great increase that we saw in our customer Net Promoter Score, and actually also our partner Net Promoter Score. This is extremely important because I think it signifies the relevance that our customers ascribe to us, both as a partner to their transformation as well as on the partner side as a relevant partner who can help them to grow. A company that is relegated to a system of record status will not enjoy this type of progress. Now when it comes to the financial metrics, I really encourage everyone to have a strong focus and attention to the progression on our current cloud backlog because that truly is a holistic measure of the health of our business, not only in terms of the new order entry, but also in our renewal success. And as you have seen in Q1, we had a great resurgence of growth in this respect. And that also does not happen if your customers don't see a prime investment case in you. In particular, in a quarter where normally there should be seasonally smaller growth rates in current cloud backlog. And last but not least, we have always been extremely transparent in how we break out the performance of our different cloud businesses. In SaaS/PaaS, you can track our growth performance. This does not only come from one solution, S/4HANA, as great as its growth was. It actually comes from the entire strength of the portfolio, and you should see that strength coming through in a much greater upsell and cross-sell opportunities as we bring now S/4HANA together with the rest of the portfolio in a true modular cloud ERP approach. In spend, we will definitely see a resurgence of growth. These businesses were dampened by the impact pandemic, in particular, in Concur, but they are great and competitively strong assets that command an extremely high market share and will definitely show acceleration from here as well, in particular, as we move into 2022. So I think we give you a lot of transparency around the progress that we're making. Cloud revenues, of course, are a lagging indicator. But as we have highlighted, we had tremendous order entry momentum and have an extremely healthy current cloud backlog, stay focused on this, and we will stay focused on continuing to execute with reliability against bringing those metrics into the great shape that we expect.

We already -- the next question here. Now we move from London to the United States. Next question comes from Kirk Materne at Evercore. Kirk?

Great. A lot of great new information out there. I guess just maybe for me. Julia, you made one statement around sort of helping to close the perception gap, I believe, sort of the way you put it between sort of the capabilities of SAP, maybe the perception in the marketplace. SAP is a big company, and I was just kind of curious, what are some of the technologies that you think SAP has. And I love for your Juergen and Thomas to weigh in on this as well. What is SAP doing that you think the market isn't aware of already? And then I just have one other follow-up for you, again, Thomas.

Sure. I'll start, and then Thomas and Juergen can certainly jump in. I would say, a couple of things that are really obvious to me and I'm putting focus on right away, is our industry depth. Christian already spoke to some of that. But I think a lot of other vendors are making claims around industry capability when we are delivering it at a level that is just remarkable and very much unmatched in my experience working closely with lots of the other big tech vendors. And so bringing that forward and helping people understand the depth and the capability we have to really transform within industries, is certainly a big one. I think the business network, bringing together the capabilities across our different networks into a single, integrated capability. I think that's a space where there's been innovation for a while, but the market and the ecosystem is really ready in a way that maybe hasn't been in the past. Based on COVID, based on the presence of an importance of a resilient supply chain, certainly, that part of it. And then I would say beyond that, it's just the platform. Again, I don't necessarily think SAP is known for a platform, but it's so foundational, and it's what lights up and gets the greater capabilities across the suite. And so helping people see and understand the value of our platform and the role it plays in the line of business applications is also very essential.

Yes. And I think to add to that, to your question, I mean what is very important for us. Actually, we want to make the market for enterprise software. And if we talk about business transformation, this is actually where we focus. So if you think about all the new business models, subscription-based businesses, consumption-based businesses. And here, we have the clear market-leading solutions without building revenue innovation management solutions, which actually run all of the largest companies on earth, actually, to make that possible. Until you already see how important it is to have end-to-end processes. Because if you talk about this high volume, which this company needs to perform, for showing the deep integration from the quoting system to the billing system and the revenue recognition in all of this. And this is something what we can provide to really enable the future. And if you talk about the future of what should be already today is that we actually make the market. For instance with sustainability. So we embed sustainability dimensions in all of our products from ethical sourcing, diversity and inclusion with regards to success factors and HR, but also think about for sure decarbonization and circular economy, and this is something where we focus to solve the world's biggest challenges, actually we have. And if you talk about circularity. A key aspect is the network, we bring together more than 5.5 million trading partners, actually, to get the agility they need for resiliency. But also think about, again, coming back to sustainability, where you can really ensure that this end-to-end value chain is running in an optimized fashion. And this is something -- these are the topics we touch. And for sure, adding to that, actually. And I'm very happy actually now that we launched it actually at our mobile activities. And I broke my fingers actually just on the weekend. So I'm very happy that I can perform all of my tasks on the fingertips on a mobile device. This is our new SAP mobile, it's not applications. But I think...

Thomas, Thomas, it's good that you shared that. Otherwise, there would be rumors that this happened in a budget meeting with you coming up in July. You still have a left-hand to break.

That's true. No, but what you see is really a firework of innovation. And I think what is a key, and that's where I want to hand over also to Juergen, actually. All of that is based on the foundation of the SAP Business Technology Platform, really embedding AI in all of the activities for integration, also extensibility, leveraging that platform. And we don't use AI just for automation like other vendors do. When we talk about the next best practices, how people work, we need to think differently how we use our data treasure, which we have in our systems, with new smart applications which actually guide and help the end users to fulfill their job. And this is something totally certainly is different than just a pure automation because, again, thinking about the next best practices. And instead, I think Juergen, from a technology perspective? [indiscernible]...

Yes. And Thomas, it's good that you still have 8 fingers left for having things on your fingertips. Let me put an emphasis on the platform, and Julia and Thomas mentioned it already. So we are using the SAP Business Technology Platform. That's the foundation for everything we are building. We're also using it to integrate our different applications that we have, and we made tremendous progress on this one. And then let me only, to keep it short, put in emphasis on data. Adam, you also mentioned hyperscalers. They open up a better ground around data. And many companies say, "Hey, the hyperscalers are actually having an interesting offering regarding data intake to hyperscaler." So customers ask, "Hey, I have so much data stored on a hyperscaler natively. But when we enter a discussion around industry, around business, around processes, they say my most important data is stored in SAP." And this is where we have this one semantical data model. Everything is building up on. And yes, we did have customers that try to go another route. They say, "I rebuild everything on a hyperscaler. I rebuild the whole SAP data model, but all of them failed because it is very, very complex." It is not an easy walk in the park. And they came back because also, for example, security reasons. So yes, you can take data out of an ERP. But if as a CIO you want to have that risk, then of course, you have to deal with the consequences or mitigate that. So in the end, SAP is the go-to place for the most important data of companies. And this is also where we, as future innovations coming, which we are doubling down on. Business planning, for example. I'm super excited about that. I mentioned it in my talk, so I will not repeat it, but that is an area where I think we, as a company, for the society can really have another huge impact.

Okay. Thanks a lot, Kirk. Now we move to the next question, and we go back to London, actually. James Goodman from Barclays. James, over to you.

Great. Yes. Perhaps, first, a follow-up on the encouraging progress that we've seen in the customer perception of SAP. And Julia, when you were talking about rise with SAP, I think you talked about one hand to shake, which makes a lot of sense. Can you talk about how SAP is managing any additional responsibility that comes alongside that? So I know you've ramped up partners to support in this. But is it fair to say that customers are seeing SAP as increasingly responsible for project success? And if everything doesn't go smoothly, how do you protect that improving perception of SAP? And maybe if I can ask another one to Christian. It was on a comment in your opening session around the fact that SAP is set to gain share in CRM. We saw the C/4HANA launch a couple of years ago. What's been right? What's been wrong with that kind of product approach? And what gives you the confidence that SAP set to gain share, specifically in CRM?

Julia, you go first. Yes.

I'll start but I think I'll -- yes, I'll quickly hand to Scott in terms of the customer success, since you manage that end-to-end. But again, as we said, with RISE, from a technology stack perspective, we're giving the customers that combined capability across SAP and the hyperscaler versus having them to manage the 2 and see which works best and have that best practice understanding. We offer that. Of course, we have our systems integrator partners around that to working with the customers on the implementation. But Scott, why don't you give more color since this is what you do every day?

Yes, sure. So -- but I think you said it well, Julia. So first of all, for all of our cloud offerings, including RISE, but all of the capabilities, we will continue to leverage the hyperscalers in terms of the underlying infrastructure, together with our own cloud capability and the systems integrators to ensure that we drive that transformation. And I think -- just coming back to one of the earlier questions that was asked about why we're so we're confident about the growth and the looking forward. If you look at the feedback from our customers, they don't just want to move a workload into the cloud, it actually drives limited to no value. They don't get to transform their processes, and they're operating in very competitive spaces that are transforming and are dynamically moving on them, which means they need the agility of a business model that is able to cater for those changes. They need to be able to change and optimize and understand their processes. So when you look at the BPI labs, to be able to understand which processes are driving the highest return or the highest improvement for them and then be able to fine tune that, but still have the flexibility of a platform that is able to take that modern capability that Thomas and Juergen spoke about. So they need the transformation to be able to meet the competitive needs of their business going forward. Just moving workloads, honestly gives them maybe some TCO in the short term, but in the long term, actually acts as a barrier to their competitive strength. And so when they look at us from a customer point of view, the customer is basically saying, "Help us transform our mission-critical applications simply, seamlessly in the cloud." And if I take Q1 as the indication and I look at the outlook in terms of the discussions that we've had, the pipeline and the outlook, clearly, that is expected to continue. Just on the partner side. The expectation is our partners. We've already got all of our global systems integration partners that are already enabled, certified working on their enablement to be able to serve all of their customers around the world. But now going to the next generation and the more local partners around the planet to be able to make sure that they're able to serve local markets wherever we operate. And so their ability to be able to drive the innovation on the business technology platform, help the customers be able to understand how they can drive that value using S/4 and the network and the process intelligence on the Business Technology Platform. That's why we feel that now, the customers' feedback has been very strong.

Yes, and on the question on the CX side, I guess, here, focus is key. I mean I would say, a strategy where we say we want to compete with everyone in this huge market. It's not a winning strategy. And now we have a clear focus. Just to give you 3 examples on commerce, we have the world's leading B2B commerce solution with Hybris. Now we launched a new headless commerce solution with Upscale, where we lightweight solution, where customers can open up shops on social media on the fly and really also be live on a new -- with new commerce shop within a few days, and also connect it, again, seamlessly to the supply chain side of the house. And then, of course, CPQ is a big focus. I mean in many industries, we see the trend to more personalized offerings. So it's good when a salesperson can figure price quote that you have immediately the integration to the manufacturing to the factory, to the supply chain that you can immediately personalize the car next day. We know the OEM is actually start to manufacture it. And then you have really a seamless integration. End-to-end, of course, with a lot of intelligence embedded. And last but not least, with the customer data platform, with the masses, we actually provide this 360 view. Yes, we have content management in for data privacy, very important these days. And then, of course, also with the masses, we can drive personalized actions to really engage with the consumers on their way through the whole life cycle. And these are our bets, and this is where we are investing in, and this is where we also see high growth.

Thank you. I think if we move to the next question. Again, from London, I see here in the queue, Stefan Slowinski, Exane BNP. Stefan?

Great. Two short ones. Just one for Luka. Firstly, just on cash flow and the cash flow outlook beyond 2021. As we look at 2023, when margins and revenues should scale, should we see cash flow grow sort of in line with non-IFRS profit growth? And then just a second one for Scott around SAPPHIRE. Traditionally, it's been an important sales event to build the pipeline, and that's got to be a bit more challenging in a digital format. So I'm just saying, how would you characterize this year's SAPPHIRE NOW event? Has it helped build that pipeline? And are customers actually going through with converting those intentions to accelerate the move to cloud ERP or cloud supply chain into actual commitments?

Yes, Stefan, thanks for the question. Let me start quickly on the cash flow front. So absolutely, as I shared, when we unveiled our revamped strategy, we expect to reach the roughly EUR 8 billion in free cash flow that we had under the previous profit plan expected in 2023. In 2025, we're currently planning for this year to stay above EUR 4.5 billion. So that's a big step up. And of course, a significant share of that will come in the years 2023 to 2025 for various reasons, not only the increase in profitability, but also, to a lesser extent, that we will have completed our cloud harmonization project by then, which in 2021 and 2022 will again lead to a slightly increased CapEx need -- on IT CapEx in order to build up, in particular, the Converged Cloud structure that we need for the pieces of the workloads that we will not migrate to hyperscalers but to our own Converged Cloud. So other than that, definitely, free cash flow will follow very closely the profitability levels that we expect. And I have to say, I'm extremely pleased about the cash collection efficiency that we have gained in 2020. We had a record performance in this respect. And 2021 has continued to be extremely efficient with 10% free cash flow increase. So the underlying efficiency in terms of collections and customer cash inflows has dramatically stepped up over the course of the next -- last 2 years, and I expect this to continue to underpin a very healthy development that it will then definitely get a big boost from 2023 onwards.

And on the second question, I will hand to Julia and our tag team of -- because the SAPPHIRE event, which was fantastic, was something that Julia and the team had LED. But maybe just from a sales angle, which I can talk to, there's a couple of -- 2 data points that are worth sharing. The first is that because we were able to run into our second year of doing so in a virtual format, in a very targeted way, we were able to bring SAPPHIRE, I think it's to over 90% of our top accounts, where actually we're able to interact with, were through SAPPHIRE. So we had a high coverage because we weren't limited to the physical event only. And it really broke down into regional events that were tailored to the industries and to the context of their business in their markets because, obviously, in this environment, different countries and industries are operating in very different ways. And then the second is, we still got a great launch, and Julia can talk to the details of what we launched. But we -- through RISE through BTP, through our industry focus, through Upscale that Christian mentioned earlier, those launches and being able to then crystallize that into customer stories that we could then replicate and then share around the world. Our reach was far broader. So exciting for us from a sales point of view because we'd rather use it to be able to then really accelerate and progress customer conversations. But Julia, maybe you can add a few comments just on what else was covered at SAPPHIRE?

Yes, absolutely. And I think as Scott mentioned, it's a high-performance vehicle now that we've learned how to master virtual events. And what we did -- I mean SAP this year took a very, I'll call it, aggressive approach around delivering to a very tailored audience, by audience, by region. And so -- and again, my experience across the industry, we've kind of outdone ourselves in terms of doing over the course of the month. In language. And again, for whether you're financed in APJ, we had a conversation and a set of customers and a set of capabilities for you. And so from an overall customer reach perspective, far exceeded both last year's virtual event, but far, far exceeded our in-person events of the past. And so again, knowing how to use that virtual reach to have very tailored content that's more relevant, frankly, right? In the old world on -- when we're all together in person, it's a one size fits all, whereas at this way, we can really go to the customer with something that's very relevant to them and also represents our broad portfolio better, frankly, right? We can talk to people particularly around HR, particularly around customer experience, particularly around ERP, versus feeling like we have to do all of those things. So in terms of overall customer numbers reached and depth and time spent and relevance, I think we're up across the board in all of those. And we're still underway, we still have a few more weeks to go in some of the APJ regions in Japanese and Chinese still underway today.

Good. Thank you. Now we move to the next question. I see here in the queue, I would say from Israel, but he is back to the United States now. Mark Moerdler from Bernstein. Mark, over to you.

I was originally going to ask this question for Christian, Julia, but given the breadth of people both in the room and on the video, maybe I'll get some additional color from others. Initially, in every cloud transition, there's a portion of the customer base, where simply a shift to the cloud adds enough value to drive adoption. But much of the customer base is going to need incremental and increasing differentiation and value from cloud over staying on-premise or having the customer use a hyperscaler to move it. Can you explain how the product road map is going to unfold? And how your marketing is going to tell the story to add more and more differentiation to drive not just the early adopters, but the rest of the customer base to shift to the cloud?

Yes. Who wants to start? So I'll start. So hey, Mark, nice to see you again. And I mean -- 2 things. I mean after the launch of Wise, obviously, we looked very carefully in our installed base. And we looked into, okay, what are the customers using, who's sitting on procurement, on-prem, who's still also working with HCM on-prem, obviously, finance, logistics. And then we made these customers very targeted offers. So we talked the language of the industry, is this is how we would like to transform you. These are all the new technology, which we really help you to adapt to a new business model, new financing options, whatever. Our supply chain Industry 4.0 for the. We made this in a very targeted way. Now of course, we also have seen that we have a high net new customer share because also some of the competitors who are doing some claims. Actually, they have customers who would like to come over. That's the reality. And there also, Wise is very good, because we do a greenfield approach. We show them how the best ERP in the world wants for their industry. And then we are moving them over. So we are having a good pipeline both for the installed base and for net new. And Julia, on the marketing side, please add your comments on what we are driving -- what we are doing to drive additional demand?

Yes absolutely. As you mentioned, with the cloud, it is it's now and always on innovation, right? And so part of making sure people understand the value of that is about -- we're communicating our road map. We have a very detailed road map of all the new capabilities coming so customers can see there is a constant stream of innovation. It's not something like every 3 years or the past that I got some new capabilities and it was disruptive to deploy them. Now it's just coming as a natural course of being part of our cloud business and our cloud base on that front. And then the flexibility to add new modules. We talked about the modular ERP. And so customers get with the cloud model, you can deploy pieces of it and then add more as you need, inclusive of our industry capabilities. But again, now part of our industry cloud solutions, you can add those from both SAP and our customers as you need using that same platform, those same consistent API. So knowing you can keep getting that new innovation without things breaking or having disruptive changes is part of that. So those aspects and those benefits of cloud are certainly something we need to bring forward. We tend to talk about just one thing we've done versus this constant stream of new innovation, new capability, new flexibility you get both from SAP and our ecosystem building on the platform.

Yes. And I think to add to that is actually an important notion for us is for cloud. As we have this possibility to continuously deliver innovation, we also can continuously listen to our customers. And that's why we actually embedded Qualtrics in all of our applications to get straightaway the end user feedback. And this is, for sure, something our product management teams take entirely seriously. And then they see the feedback and it can include it in the next delivery already. So that also the end users feel the change on a continuous basis. And that's for sure, building up trust. And we talked about the NPS increase. So also this notion is very important that we are way closer to the customers. We know in detail with the telemetry about what they actually use and adopt, and we can help them better. So when Scott and the teams on customer success, they look at the numbers and help our customers in a way different, the more intimate fashion in the cloud. And I think we also should not forget those kind of aspects of cloud and advantages. We can help our customers on the business transformation and to really embrace the innovations we deliver on a really regular basis, and I think that's also very important.

Yes, maybe only to add one more point from my side. We also help customers make that transition. So we are building the services and tools they need in order to get from where they are on-premise to the cloud. This is also included in Rise. This is true for the ERP side, but it's also true for the technology side. I think innovation -- integration technologies that are today on-premise. We actually help customers to go to the cloud and take their content with them where it makes sense. And the same is also, for example, for analytics because in analytics, also in BW, data warehousing, customers invested tens of millions often in services to build their models, to have their semantical model. And we help them to bring this to our cloud solutions as well.

Great. It was a really broad question. Almost everybody onstage was involved. Thanks, Mark. Now going to the next person in the queue. I see Michael Briest, UBS. Michael, over to you.

Great. So 2 for me as well. Probably one for Christian or Thomas to begin with. You talked about industry cloud. And I guess Julia mentioned nearly 50 years of development, 27 industry verticals. Could you say how important that was to revenues in the sort of pre S/4 days? And how much of that capability is available today? So I think [indiscernible] was suggesting there was still some issues there in his keynotes. And I guess historically, partners would have often developed and delivered add-ons on their own behalf to clients. To what extent does Rise allow you to be more of a gatekeeper to those add-ons? And perhaps monetize them in a way that you weren't able to before? And then a question for Luka. On the cloud gross margins, in 2023, I think the previous target was 75%, you're still expecting to get back to that or get to that level? And then by 2025, what proportion of your S/4HANA cloud installed base do you expect to be multi-tenant as opposed to single tenant? How important is that in getting that final 5 points of margin? And does Rise actually require customers to move to multi-tenant at some point in the future?

Yes. So let me start, Michael, on the industry cloud and also the opportunity for SAP, but also for our partners. I mean first of all, when you think back before as far S/4HANA on-prem, I mean a lot of industry capability were developed around the ERP in a very monolithic architecture. And of course, we sometimes also developed different versions of industry capabilities because customers wanted to personalize, wanted to modify that. And that was, on the one hand side, good because our ERP definitely had the industry flavor, and we learned how this industry is won. But now in the cloud, it has much more potential, not only for SAP, but also for partners because now we are building it on a modular way on the platform. And when you build it once, you can put it to the digital marketplace, and then you can resell it and then you can put standard in place for the whole industry. And there is a big installed base of SAP. And that, of course, gives you now a much better opportunity, not only to deliver faster innovations in the cloud and the customers feel that, but also to scale all developments you are having across the industry and not only doing these one offs. And last but not least, the industry cloud was also for us, very important because when we then talk about S/4HANA and the customers want to move back to the standard to have a more agile system landscape going forward, a lot of the extensions modifications were actually in the industry camp. And now we are putting this side-by-side, and they can still use the same data model. And this is why I'm so convinced the essentials, the Deloittes, the PwCs, everyone, will also follow this movement. Because it makes a big difference if you are now developing on the SAP platform, replenishment for retail, if you can use the same data model, if you can use the same authorization service as S-4, and you don't need to have expensive integration technologies to somehow connect the dots. And this movement is already happening, just had today, our platform review. And I was really excited to see how much is already happening on Business Technology Platform industry Wise versus NetWeaver. And that -- this is, of course, also a key aspect of our strategy.

And perhaps to add a bit the numbers to this, Michael. When you take a look at our legacy industry solution add-ons, they represent an on-premise maintenance base of roughly EUR 4 billion, right? But many of those functionalities have with the launch of S/4HANA been actually integrated with S/4. So we have a great opportunity with S/4, of course, to capitalize on this in the new architecture. On top of this, and that's an add-on opportunity in the best sense, we have now these new capabilities that we built as part of industry cloud. That's a massive total addressable market in its own right on top of the opportunity that we have with the industry capabilities in S/4HANA. It's a sizable double-digit TAM as we measure it up. So by 2025 talking about EUR 16 million, EUR 16.5 billion of TAM. And we, obviously, as a leader in industries, want to capitalize on this over proportionally. Now on your questions around the gross margins. As you know, we have -- and I have mentioned this also in my remarks previously, given the investment that we are taking into the harmonized cloud delivery, we expect continued improvements in terms of cloud gross margins in 2021 and 2022, but at a lesser -- to a lesser extent because of the impact of the investments. Then in 2023, we should see a similar impact to the one that we saw when we concluded the migration away from third-party databases to HANA for some of our applications. So I absolutely expect that in 2023, we should arrive somewhere in the neighborhood of the previous 2023 targets of around 75%. And from there on, we will then obviously scale with the increasing scale of the business as well as with the advantageous mix shift that we expect, given that the SaaS/PaaS area that is the fastest is actually going to benefit most from those investments into the harmonized cloud delivery. And also some of the highest margin assets like Qualtrics, like the BTP, like SAC, will actually also be among the fastest-growing assets and have already a very, very high gross margin. Now in terms of the question around S/4HANA and multi-tenant versus single-tenant and the share. I cannot give you an exact share, but I can alleviate the concerns that I think you have with your question, that there is not going to be an advantage in pursuing S/4HANA across all of the deployment models. In actual fact, the Rise movement is going to accelerate the dissemination of previously infrastructure as a service consumption with the HANA Enterprise Cloud with a bring-your-own-license model to a full SaaS model with Rise, which has a higher gross margin. So whether we are talking a single-tenant addition for a super large customer where we are anyway enjoying already the economies of scale and are, as part of Rise, simplifying those landscapes so that they can be operated by us very efficiently. We, on top of this, have the impact from the higher share of SaaS/PaaS and that in combination with the multi-tenant version, where I believe in terms of the share, it will probably be a wave. At the moment, volumes in the recent past have been higher on the public cloud side. The value, of course, per transaction tends to be higher in private cloud. Now we will see in the next 2, 3 years, an increasing share of private cloud deals because of the big customers starting to make the move and their share will be higher until it then moderates out again. So by 2025, I expect more and more customers also to adopt for larger parts of their estate, the public cloud version, and that should level out. But that's all with a sufficient buffer modeled into our gross margin ambitions. And again, it's all accretive because we're bringing down the Infrastructure-as-a-Service ratio.

And Michael, maybe just because this question comes so often and I see there are some concerns in the market. There's another customer opportunity just out a large customer of an ERP solution of one of our competitors or the one competitor. And they are actually looking for new modern ERP solution, not heavy because they now they want to move. Now we did the features and functions benchmark, and we went through them for the new business models. They need to drive. They are coming from the technology sector. And we tick marked everything is there. You can run your different business models, we can standardize your business processes. So we are good on that one. Now the only question is, if they are now multi-tenant or single-tenant is then also the question, how far can they standardize their 80 countries they're operating in? How far can they standardize the 5 business divisions they are in? So it's not about the product, it's also about the discipline of the customer to really standardize business processes therapy. And then sometimes, the customer goes the 2-step approach. They say, "Hey, in finance I'm ready. In procurement, I'm ready. Guess what? In order management I'm not ready yet, but we want to work on that." And then won certain parts multi-tenancy, but I don't even want to talk about that. And then other parts in single-tenant, but we're putting it together and over time, we move all of our customers if they wanted to the standard solution. But the capabilities are there also for the very large customers, I would say.

I think just to add to that with regards to the industry cloud -- and you mentioned also the partner importance. And absolutely, partners are super critical for us in the industry cloud. And if you think about the number of innovations we deliver, it's more than 30 applications from SAP, more than 70 from partners. So it's a huge partner play as well. And the interesting piece is also that we actually evolved in that -- with this regard. To really think about the next-generation of processes which are required. Let's take the process for returns management. For sure, you can do returns management with our solutions. But think about the intelligent return management in the new world where everything is in omnichannel online where you order way more and send way more back like the clothes, the shoes, whatever you order online. What do you do? It's actually very complex process if you have -- if you sell it -- resell it as second-hand, as first-hand again. If you even need to -- don't do that process because the process cost is too expensive, and there we can help. And also what we should not forget in industries specifically that the lines of industries are blurring. For instance, I mentioned the billing and revenue innovation management solution, market leading. Because in telco and utilities, this was the key aspect already 20 years ago. Now if you think about media, high-tech, all actually need this capability for the new business models for subscription and consumption-based billing. And there, we have the capability. So with the modularity we have, we can basically, in a modular fashion, bring together the right capabilities to solve the customers' problems. And this is actually what is a huge advantage as well. And to add to the notion around S/4HANA cloud, I mean, it's absolutely clear that S/4HANA cloud is the market-leading deepest and -- solution in the market. But exactly what Christian mentioned, we need also to provide the choice for the customers to get there. And we see, especially also in the net new names, a huge push for public cloud solutions. So we're very happy about the progress.

Great. Well, it's really in-depth discussion. So we'll see more and more questions here in the queue. And the next 2 questions. First, we have Mo Moawalla from Goldman Sachs and then Knut Woller, sorry, from Baader Bank. Please go ahead, Mo.

I had 2 questions. The first one was just as we think about the customers starting their journey around migration. I know there's a lot of legacy that sort of now needs to be moved, and I guess simplified to the new world. When -- first question is, when do you expect kind of the bulk of the big migrations to really commence? Are we talking sort of 2022? And then secondly, as we think of the road map of the different products, particularly around industry cloud, when do you expect some of these industry clouds to be sort of fully ready so that the sort of customers have that sort of run rate for the migration? And the second question, one for Sabine was maybe as we think of a post pandemic world, we've seen many of the tech companies already starting to shift kind of the way they work. So Apple mandated employees to come back to the office 3 days a week, which probably yielded some controversy. But others like Google and Facebook have taken a more flexible approach. Where does SAP sit on this? And then maybe as a follow-up, Luka, will this have any implications for sort of OpEx and CapEx as you think of that kind of midterm guidance that you've laid out?

Okay. So I orchestrate. So the first question, Mo, I would say, on the migration, I would also like to get Scott's perspective as he's closest to the customers. I mean look, the migrations, also big ones, large, small ones, they are already happening now. I would say there are certain industries where it's the biggest transformation need. I mean look at us. SAP would be nowhere's land if we wouldn't have changed our -- completely our business model, and really also offering new commercials model, subscription pay-as-you-go, now we launched free tier. Trust me, without S/4HANA, impossible. Without Primo, impossible. By the way, leading capabilities, which you don't find a second time in the market. So we had a pressure. We had the business pressure. We have people from sales standing here and said, "Christian, in my -- back in the days when I was the CEO, they said, Christian, I mean this is not going to work at the close, if you are not now transforming this business processes and operating with new technology." And now I see with the pandemic, obviously, I mean everyone talks about it. I mean we see it. I mean when I see the vaccine, when I see now some of the supply chain disruptions, there were so many CEOs, Mo, reaching out and said, "Hey, can you help me better demand and supply? Can you help me on the commerce side?" And we had endless opportunities now and the customers definitely accelerate their move and they need intelligent software for that. A cloud infrastructure alone is not enough. Scott, anything to add from your side?

Oh, I think you said it very well, Christian. I mean I certainly see, based on not only our Q1 performance, but the outlook and the discussions that we're having with the customers. To Christian's point, we -- and I think I mentioned in the -- I spoke to clients like [indiscernible] and Tom [indiscernible] from Standard Chartered and [indiscernible] from Hillrom. That need to be able to transform just as SAP did but also the way that they need to in their industries, as I mentioned before. So that transformation, that migration that you asked me, that's already starting in 2021, and I think it will continue going forward because it's not just about moving to a product, it's about bringing their capabilities where they get the benefits of standardization where it makes sense, but they also get the benefits of innovation in a singular platform that gives them both capabilities. That's really what will drive their ability to compete and win in their relative industry going forward. So we definitely see that. And I think on the overall numbers you've seen on the S/4HANA move in terms of -- we're up to about 6,500 customers. We're over 9,800, I think it is in terms of customers who are live in migration. So we see that move to that modern innovation platform continue to accelerate together with, obviously, our bookings and sales performance, which has been strong.

Sabine?

Sure. Let me take the question around where we stand and our ways of working coming out of the pandemic. So first of all, I think we've always championed a very sort of flexible work style. We've always been capable in terms of our technologies and willing in terms of our culture and the trust we put in our people to have them work as it is best fit for them. And obviously, within the pandemic, we've stayed close to our people. We've talked to them, we surveyed them. And what they told us around sort of the future work sale was very loud around wanting to have a hybrid work approach, so it's not about fully remote. It's not about all back to the office. It's truly about hybrid work, they value that. But actually, there is a lot of differences when you look at the different functions, when you look at the different regions. And obviously, we have to come up with kind of like global guideline around how do we make this work. And looking at legacy, looking at the culture we have hand actually looking at our technologies. I mean we've come up with what we call the pledge to flex, which we've recently announced, which is basically saying, we empower our people to 100% flexibility. Work from home, work so remote somewhere along the business requirements or work from the office. But actually, we trust you that you know what's best, and we provide it with the tools, and we enable all of us in terms of the culture and the leadership to make sure that we're doing the right thing for our customers, for our business and for our people. And actually, that's been greeted very well. And the thing for us is that we are seeing as sort of moving ahead with this or let's, let say, pushing ahead with this, we're landing a lot of great things around sort of the future vision of human experience management of how do you truly support your people with the right set of technology suites. So we're integrating Microsoft teams. And obviously, we're employing Qualtrics, a survey management tool, to really stay close to our people, their experiences and what they need. And it's been working really well for us.

Yes, absolutely. And let me complement what Sabine has been saying. So Sabine has been talking about our corporate culture that was always very accommodating of flexibility. Indeed in Germany before the pandemic, we had our employees working 2.6 days a week on average from -- away from the office. But of course, this is overlaid by local cultures, right? And in some of the countries that we are operating in as a global company, there has been in the past more of a presentism culture than perhaps in other places. And here, we clearly see from our surveys that we do, that indeed, that desire to be more flexible and the benefits that our employees have also realized from the phase in which they were actually working entirely from home and that this can actually drive efficiencies as well and productivity, are now coming to bear. And so while I don't expect that this will, at a global level, dramatically change how we think about facility-related CapEx and OpEx, there will be individual changes in some of the places where we are now really consciously looking at remodeling our workspaces for more collaborative spaces, more co-innovation spaces, more flexible workspaces. And at the same time, can actually utilize the opportunity to modernize the spaces in a smaller facility, but at the same time, in a much upgraded experience. I would say, it's for the most part that we really have a chance now to come forward with the next-generation office environment that will provide some savings, but not to a dramatic extent, but we'll make it much more productive for our employees to live up to their roles in innovation, in customer engagement and other fashions, and that should certainly have a positive impact on our business performance.

Thank you. That was really a multi-element question, a long answer. So -- but perfect. So officially, there are only 2 minutes left. I still see 3 questions in the queue. If you agree, if you give us some extra minutes, we take these 3 questions. So the first one would be from Knut Woller, Baader Bank and then the next one then from Stacy Pollard, JPMorgan. Knut?

Yes. Two questions, actually, Stefan. The first one, to your -- you launched the data marketplace for data warehouse cloud, which brings together SAP and non-SAP data. How do you expect this to shape future supply chains and impact SAP's market position in the industry? Then the second question to Julia and Sabine, both of you worked, prior to joining SAP, for Microsoft. And there, you have already gained a lot of insight into a business model transformation to the cloud. What are your lessons learned? And what insights can you transfer to your new employer and your new roles?

Yes. Thanks for the question. Very quickly on the data marketplace announcement. We've got very positive feedback. So what are we doing? We are basically enabling every company to be a data provider and every company to be a data consumer of relevant business data. And we do have initial providers already like PwC and many others in the HR space. But also you mentioned it in the supply chain space. And just to give you one imagination about sustainability, Thomas talked about it already. So now we can have multiple providers in the space of sustainability, actually provide data. And I mean everyone needs data to perform properly. Not all data is provided by any single source, and now we make it easy, because in the past, companies use that data, but that was a month-long -- multiple month-long process to get that data, combine it with SAP data again, because that's the most important data. And now it's really a matter of clicks and third-party data can be consumed as if it was native SAP data.

Sabine or Julia do you want to...

I'll jump in, I guess on the transformation part of it, if that makes sense. So certainly bringing from big fast experience at Microsoft, both on the SaaS transition as well as on the platform transition. I would say the thing that certainly can bring forward and have already done is saying like when you haven't done the change before, it can feel unknown or scary, where it's easier for me to say, "No, this is exactly what it's supposed to look like. This change isn't unknown at all. It's -- we're right on track. And even though it feels different and new, it is exactly where we should be." And in places feels uncomfortable or a little bit less known. But like as an example, many customers, it's not just helping them see the cloud, but really working with them to think differently and how to embrace constant innovation. How to think about more a cloud delivery model, and so as we -- whether it be from a marketing or a sales perspective, our engagement with customers has to adapt to help them educate and learn the experience versus just sell them new capabilities. That's just one example. But whether it be the business model, the product road map or their internal people, having watched and seen the movie a couple of times, it's easier for me to say, "Yes, this is right. This kind of change is different and it feels unknown, but it's actually right on path, and we're exactly where we should be."

Just to add to Julia's words. I think when you look at transformation, if you look at change, I mean transformation has actually changed happening at all levels of the company pretty much at the same time, which kind of like makes it feel uncomfortable and messy to a certain degree. But actually, that's about right, just as Julia said. But if you look at sort of what are the measures of success from -- also from my position specifically. I mean clearly, when you look at sort of getting that clarity and that alignment in terms of sort of this is where we're headed and that understanding at all levels of the organization around sort of how do we want to get -- well, what is it we want to achieve, how do we want to get there and sort of the alignment on the sense of urgency and that sort of we want to get it done and we want to get it done fast. That's one of the things we can really drive through clarity in the objective and sort of regular feedback loops, and really making sure that really the discussions and the coaching sort of between the leadership and the employees actually really works, right? I guess the other piece. Very clearly, culture is huge. Again, going back to transformation happening at all levels of the company pretty much at the same time. It's nothing that you can steer purely top down. It's something that has to sort of emerge in that tight alignment of where we want to get to. But there's going to be a lot of experimentation. There's going to be a lot of sort of learning from stuff that hasn't quite worked. And there's going to be a lot of like personal growth journeys that needs to be enabled. So that culture piece and that sort of leadership development around sort of enabling people to grow, enabling people to learn from stuff that doesn't quite work, I think that's the other piece that I can definitely bring to the table there as well.

So let's move to the next question. And we have Stacy Pollard from JPMorgan.

Firstly, who is Rise with SAP appealing to the most in these early days? So is it the net new customers? Is it your midsized customers? Or your large existing customers who need to convert to the cloud? So where is the most traction coming from? And secondly, if you just look at competition on the application side, when customers are not going with SAP, why is that? Who are they going with? And is it more likely to be a best-of-breed competitor? Or another suite offering? And then do you think that Rise and Business Technology Platform, are these game changers? Are they going to alter that competitive environment?

Okay. I start on Wise. Which kind of customers do we see? I mean when I looked at the order entry now we had in Q1 and the customers behind it, it was actually a very diverse mix between the industry and between geos. We had large ones. So we had -- otherwise, the cloud backlog would have not increased like it has done in Q1 already. But we also had, of course, midsized customers who said, "Hey, this is the offering we are -- waited for to really transform my company end-to-end with you taking me by the hand." So that was really mixed. And then to your other question around when do we lose and for what reason? I mean when you think about that, also a few years back -- I mean we, of course, were -- because we did some acquisitions and when you are not on one platform, then you have to compete in a best of breed. But now that we have brought together all of our applications on that one platform, a shared data model, just to give you an example. You can do indirect procurement with one of best-of-breed competitors there. They do it quite okay. But if it comes to direct procurement, it's game over because no one does direct procurement for heavy manufacturing industries like SAP. And now we have one procurement platform. We have brought it together. And in many, many companies, it's a very fluent process workflow between direct and indirect. You procure, oftentimes, both. And that's one procurement organization. So this is where we are now seeing that we have the mojo back of really also not only competing best-of-breed where we have very strong solutions, but also getting our assets together in a more best of suite modular approach. And these were -- as I mentioned, these were a few reasons in the past that the customers didn't feel that we have our biggest assets together. This is now the case. And this is also where we are now getting the very positive customer feedback we saw at the beginning with the slide Stefan showed. Anything that I missed?

Yes, the -- probably the only other thing that I would add, Christian, is what we are seeing from the customers is multiple pathways to Rise, which is bringing the diversity that you described. So you've got the small or midsized company that are looking to try to catapult their ability to be able to compete. And they've got the capability, the financial capability to do so, and they're moving very, very quickly. Whereas you've got other companies where they're working -- or maybe on a multi geography where they're using parts of their business, they're being able to roll that out, and they'll do that progressively with their public cloud on some of their smaller assets and then maybe then they'll do a broader Rise play for their head office. So we're seeing some diversity in terms of that -- of the routes that they adopt and also the reasons why they're doing so. But the universal mindset is that they need to be able to transform and need that transformation as a service as a way forward. And so whether you're small, medium or large or whether you're doing it for competitive or for reasons to be able to accelerate your growth compared to the competition, it's been pretty interesting to observe those discussions about the outcome being quite consistent.

Thank you. And now we move to the final question. So finally, one question which came in by e-mail. We move now to San Francisco, Pat Walravens at JMP. And he has a question to our CEO, Christian. It's a very simple one. I remember, Pat also had the last question in the Q3 earnings call last year. So what are Christian's top 3 strategic imperatives for the next year, obviously besides making the numbers?

Yes. So thanks a lot, Stefan. Yes. I mean look, first of all, of course, what is now very key is that our customers in the pandemic face a lot of challenges, and they need to feel that our technology helps them to transform their business. And that's, for me, very key. That's always the first. We just had today also another business review and we looked at the adoption numbers, we looked about how far is the transformation done with many for a certain industry, and that's for us very key, so that the customers see the outcome of their investments into SAP. Second, it's about the people. I mean I'm incredibly thankful for our over 100,000 people who have really made it work in such a time to deliver very successful ERP projects not sitting by the customer, in an almost completely remote way. And also to -- for Sabine, I mean for us, it's very important. Just yesterday after I finished my trip to Switzerland, I didn't call it a day, but then I had an interview with one high-caliber senior executive we would like to bring into SAP. And then there was this one famous question, why SAP? And he told me, "Christian, because I like the strategy. I work for a high growth, high-value cloud SaaS company. But our opportunity is limited. We are in one market, and when I look at the sheer potential of SAP and what you are doing with complete industry, this is why I want to join SAP." So our people are very important, getting new talents in, getting new key executives in. Very happy to have Julia and Sabine onboard, but we don't stop there. And then third, it's for me, very about looking at Thomas and Juergen to consistently now deliver innovations. We did some homework on the platform. Now the foundation is there, and you saw it at SAPPHIRE, what we announced. And for me, these are game-changing capabilities to fuel the growth so that Luka and I have a much easier job going forward. And when we look about our numbers and the financial forecast of SAP, these are actually, I mean, for me, the main 3 priorities.

Very good. So driving growth. I think that's always super, super important at SAP. And with that, we come to an end here. Thank you to the SAP Executive Board for joining me here today and answering all the questions from the financial analysts and the informative discussion. And thank you to all the financial analysts for your tough questions. I mean I tried hard at the beginning, but mine was probably too easy. And we'll meet again virtually in our Q2 earnings call, which is scheduled for July '21, 2021, at 2:00 p.m., Central European time. And of course, I hope to be able to meet you personally again soon. Thank you so much, and goodbye.

Thanks a lot.

Thank you.

Bye-bye.

Thank you.

Bye.