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SAP, Accenture Partner for Oil & Gas Industry's Digital Overhaul

Zacks Equity Research

SAP SE SAP recently rolled out a solution co-developed with Accenture ACN to aid upstream oil and gas companies to improve business processes.

The new solution, SAP S/4HANA Cloud for upstream oil and gas, utilizes SAP S/4HANA Cloud’s robust artificial intelligence (AI) and machine learning (ML) capabilities.

The cloud-based solution is aimed at enabling the oil and gas companies to simplify operations with data-driven business insights in real time and drive business value. The users can avail the solution to reduce total cost of ownership (TCO) and devise tools to generate revenues.

Markedly, the latest solution comprises contributions from companies including ConocoPhillips, Equinor, BP, Chevron and Shell.

We believe this deal encourages SAP S/4HANA Cloud’s prospects in the energy industry and, is anticipated to aid SAP expand presence in the cloud computing market against companies including Oracle ORCL and IBM IBM.

SAP SE Price and Consensus

SAP SE Price and Consensus

SAP SE price-consensus-chart | SAP SE Quote

Increasing adoption of SAP’s S/4 HANA to support ML and AI-driven solutions for energy sector is expected to provide exposure to its cloud platform in this domain, which is a positive.

Immense Scope of AI & Cloud Computing in Energy Vertical

Growing clout of robotics and industrial automation technologies in the energy sector is fueling adoption of ML and AI based techniques.

Advanced AI-based solutions are enabling companies to optimize costs as it facilitates use of reliable maintenance and prediction systems with comparatively lower investments and reduced risk of failure.

Per Technavio, AI in energy market is projected to witness a CAGR of over 49%, between 2019 and 2023. Moreover, per MarketsandMarkets, oil and gas cloud applications market is envisioned to hit $9.4 billion by 2024 from $4.9 billion in 2019, at a CAGR of 14.2% between 2019 and 2024.

The development and deployment of these advanced energy solutions on cloud-based SAP S/4HANA platform holds promise for SAP in the longer haul.

Markedly, competition is intensifying as SAP’s cloud peers including Microsoft, IBM Cloud are leaving no stone unturned to make the most of prospects of AI and cloud computing in the energy sector.

For instance, robust capabilities of IBM Cloud, Watson, AI, IoT and blockchain solutions pertaining to the energy sector are enabling companies to effectively boost efficiency and minimize expenditure.

Nonetheless, SAP is well poised to benefit from strong adoption, which is expected to generate incremental cloud and software revenues in the days ahead. Markedly, in fourth-quarter 2019, S/4HANA adoption grew 24% year over year to around 13,800 customers. In the reported quarter, net new customers comprised approximately 40% of total customers.

Moreover, S/4HANA clientele continues to expand with the addition of Ford Motor Group, Decathlon, and Lockheed Martin, among others. Notably, Vodafone, Deutsche Telekom, ARAMEX, and Mercedes Benz Formula E have gone live with S/4HANA solution in part or entirely in the cloud during the fourth quarter.

Zacks Rank

SAP currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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