SAP Refreshes Flagship Software for Speedier Data Management

SAP SE released the biggest update to its flagship software in a decade, seeking to keep longtime customers in the fold by helping them make sense of the flood of data coming from the Web.

S4Hana is an overhaul of SAP’s Business Suite, which is used by about 45,000 companies to manage finances, sales and manufacturing. The new software includes the ability to pull data from online maps, social media and other sources to speed decision-making, executives said at a meeting with analysts in New York on Tuesday. It’s also designed to look better and be easier to use, Chairman Hasso Plattner said.

“Users told us, ‘Your user interface sucks,’” he said. “It’s getting much more dramatic in coming years with the volume of data in large companies.” The update is the most significant to SAP’s main product since 2004, he said.

Chief Executive Officer Bill McDermott is steering the Walldorf, Germany-based company toward growth from cloud-computing software it has acquired, which is squeezing its profit margin. SAP shares have gained about 6 percent in the past year, compared with a 20 percent gain for rival Oracle Corp. S4Hana is SAP’s bid to convince customers to upgrade -- technical advances may be delivered to users of the new programs first, McDermott said in an interview last month.

“They’re overhauling the suite,” said Michael Briest, an analyst at UBS AG who has a neutral recommendation on the shares. “The long-term vision of SAP is everything running on Hana.”

Data Centers

For companies that may have used SAP in their data centers for decades, S4Hana offers a path to new capabilities for analyzing so-called unstructured data from the Web. SAP’s Hana database, which competes with products from Oracle, stores information in computer memory instead of slower magnetic discs. Applications can also process transactions and analyze data in the same database, speeding results.

SAP shares have risen 8 percent percent since Jan. 20, when the company said it may add almost 10 billion euros ($11.3 billion) in sales by 2020, even as margins get slimmer. Executives on Tuesday said companies in industries including banking, oil and gas exploration, and health care still prefer to buy enterprise software that runs in their own data centers, a need S4Hana is designed to serve. Still, future growth will come from moving computing tasks to the Web.

“Cloud has become the growth strategy for SAP,” McDermott said at the meeting.

Database Options

Two years ago, SAP shipped a version of its flagship software called Business Suite on Hana that now has about 2,000 customers, said Bernd Leukert, a member of the executive board in charge of products. Those clients have the right to use S4Hana, which is written expressly to take advantage of the Hana database’s capabilities.

Most SAP customers run database software from Oracle, and others use databases from Microsoft Corp. and International Business Machines Corp.

SAP is putting a renewed focus on developing its own software as it takes a step back from acquisitions. The company has said it doesn’t expect to make large takeovers for the next several years, and McDermott said he views many cloud-computing applications companies as “overvalued, not making any money.”

That leaves some heavy work for SAP’s engineers. Leukert said SAP would manage its Business Suite, which supplies an estimated 60 percent of SAP’s operating profit, with two different lines of source code -- one for older versions written in SAP’s ABAP programming language and one for its newer database and user-interface software.

Cloud-only competitors including Salesforce.com Inc. and Workday Inc., which operate without the burden of a traditional software businesses to support, are emphasizing this aspect to differentiate themselves from SAP.

“Workday has one code line to develop and sell -- you’re more efficient than companies with many code lines,” said Mike Stankey, president and chief operating officer at Workday.

(An earlier version of this story was corrected in the seventh paragraph to fix Leukert’s title.)

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