SAP Plans to Bolster Korean Alliances to Hasten Cloud Switch

SAP AG Headquarters in Walldorf
SAP’s partnership expansion in Asia in areas such as cloud-based programs will help offset slowing demand for its older enterprise applications and counter intensifying market competition. Photographer: Ralph Orlowski/Bloomberg

SAP AG, the biggest maker of business-management software, plans to step up cooperation with Samsung Group to overcome a slump in Asia and speed its transition to cloud computing.

“Cloud is one of the future trends that we are trying to bring into Korea,” co-Chief Executive Officer Jim Hagemann Snabe said in an interview in Seoul today. “Samsung plays an important role in making sure that their handsets are optimized for SAP software.”

The Walldorf, Germany-based software giant is also in talks with local Samsung rival LG Electronics Inc. and mobile operators including SK Telecom Co. and KT Corp. to speed the adoption of its next-generation Hana database technology and cloud service in South Korea.

By expanding partnerships in Asia in areas such as cloud-based programs, SAP hopes to offset slowing demand for its older enterprise applications and counter intensifying competition. Cloud services involve offering access to computing capacity, storage or software via the Web, meaning clients don’t need to maintain their own servers.

SAP shares fell 0.1 percent to 59.33 euros at 2:27 p.m. in Frankfurt trading, taking this year’s decline to 2.2 percent and valuing the software maker at 72.9 billion euros ($99.6 billion).

China Telecom

The company announced a strategic alliance with China Telecom Corp. in November that will let SAP roll out its cloud portfolio in the world’s second-largest economy. Non-Chinese companies aren’t allowed to operate server farms in the country by themselves. Huawei Technologies Co. unveiled a server platform this week designed to run SAP’s fast data-crunching Hana technology.

The moves are also intended to help overcome SAP’s weakness in Asia-Pacific and Japan. That market accounted for 15 percent of SAP’s sales in the first three quarters, and was the only one in which SAP’s revenue from software licenses and cloud subscriptions fell during the period.

The company hasn’t yet determined a successor for Stephen Watts, who oversaw the region for almost four years until stepping down in October, spokesman Jim Dever said by e-mail. Robert Enslin, SAP’s global head of sales, is responsible for these markets in the interim.

‘Connectivity Revolution’

SAP entered a long-term partnership with Samsung Electronics Co., Samsung Group’s flagship electronics unit, in October. Under the agreement, SAP provides its mobile security and management technology to the Suwon, South Korea-based company’s security system for enterprises, called KNOX. That helps address company concerns over Android-powered devices amid increasing demand for smartphones.

SAP expects to benefit from the increasing demand for wearable devices, including sportswear or accessories.

“There will be a revolution of connectivity and the opportunities to individualize service and reduce costs and systems is very significant,” Snabe said.

Snabe is set to step down in May, leaving his co-CEO, Bill McDermott, as SAP’s sole chief executive. Snabe said last month that the company’s plans to accelerate growth in the cloud would affect its 2015 targets. The company aims for revenue exceeding 20 billion euros and an adjusted operating margin of 35 percent by that time.

Competitors include Redwood City, California-based Oracle Corp. and Inc., headquartered in San Francisco.

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