At SAP, a head wisely in the clouds

SAP S.E.'s software chief may have one of the toughest jobs in the technology industry: dragging the IT operations of 45,000 businesses into the era of cloud computing.

Bernd Leukert, a 20-year company veteran, was promoted to the executive board after the sudden departure of chief technology officer Vishal Sikka in May. Now, Leukert is breaking with his predecessor's focus on fighting Oracle Corp. in the database market, and is responding to customers of its market-leading enterprise software who want a clear path for moving their applications to cloud-based systems.

SAP has its Americas headquarters in Newtown Square.

"There is confusion," Leukert, 47, said in an interview at SAP's headquarters in Walldorf, Germany. "There's no debate anymore in the IT industry that the cloud will be the preferred consumption model," he said, referring to the shift toward delivering software via the Internet instead of installed on clients' servers. "A road map is something we owe the market."

SAP, projected to report $23 billion in sales in 2014, supplies a sophisticated palette of software - some 400 million lines of code - that lets companies such as BMW, Coca-Cola Co., and Exxon Mobil Corp. manage everything from sales and marketing to manufacturing and finance.

Dubbed the Business Suite, the product is entrenched in global companies' everyday operations and supplies more than 60 percent of SAP's operating profit, estimated at $7.62 billion this year, according to Wells Fargo Securities. SAP has 24.3 percent of the $25.4 billion market for so-called enterprise resource planning software, to Oracle's 12.3 percent, according to the research firm Gartner.

Yet SAP's growth has slowed. Last quarter, its software and support revenue - a measure that excludes acquired cloud-computing tools - grew just 2 percent.

Excluding recurring revenue from support contracts, sales of on-premises software are actually falling as customers build fewer new applications that run on company-owned computers. Instead they're giving more business to cloud-computing providers such as Salesforce.com Inc. and Workday Inc., who deliver software as a service via the Web, freeing users of the need to buy and maintain hardware.

Customers and analysts are eager for Leukert to explain how SAP is addressing that trend.

"What's the timetable for moving core applications to the cloud?" said Jason Maynard, an analyst at Wells Fargo.

The confusion stems from multiple areas of focus within SAP. Sikka had concentrated on promoting the company's Hana database as an alternative to Oracle for storing the reams of data used by SAP applications.

Meanwhile, CEO Bill McDermott and former co-CEO Jim Hagemann Snabe have spent more than $15 billion since 2010 buying suppliers of Web-delivered applications in areas including human resources and purchasing.

Shares of SAP closed down 0.4 percent in Frankfurt to the equivalent of $76.45. The stock has lost 7.8 percent this year.