SAP sees procurement services as the cloud's silver lining
1:45pm ET, 03/17/2015 - Reuters
(Refiled to delete repetition of word "corporate" in second paragraph)
* Beyond cloud software sales, SAP eyes second revenue stream
* Sights set on corporate procurement, a $75 bln market, it says
* Analysts say subscription fees can shore up cloud margins
By Harro Ten Wolde
HANOVER, Germany, March 17 (Reuters) - Business software maker SAP is betting its development of online corporate purchasing services for its multinational customers can boost revenue and profits as it shifts its core business onto the cloud.
Steve Singh, head of SAP's recently created Business Network division for cloud-based procurement services, says that by making a dent in the several trillions of dollars in total which big companies spend each year on purchasing goods and services, his company stands to take in billions of fees.
"There is a $75 billion opportunity," Singh says of the overall market that SAP is targeting.
Analysts also say subscription fees for providing such procurement and vendor management services could give SAP the buffer on margins it needs as it shifts to deliver more of its software from the cloud, a move that brings higher upfront costs on each sale than older localised software installations.