Buried within the celebratory pronouncements of SAP's Q1 2024 earnings call lies a fascinating, almost unassuming shift that signals a potentially explosive post-2025 reality for the software giant. While everyone fixates on the impressive CCB growth and the dazzling promises of Business AI, a subtle change in SAP's migration incentive strategy reveals a much larger play, one that could dramatically alter its revenue trajectory.

During the call, Christian Klein, SAP's CEO, casually mentions a 'major change' in their migration incentives. No longer confined to S/4HANA finance, the incentives now encompass the entire Cloud ERP Suite. This seemingly innocuous tweak represents a significant strategic shift. SAP is essentially throwing open the doors to a holistic cloud migration, encouraging customers to embrace the entire suite of integrated cloud solutions rather than just dipping their toes into S/4HANA finance.

Why is this a big deal? Because it sets the stage for an unprecedented wave of cross-selling opportunities, turning the much-hyped 'land and expand' strategy into a potentially explosive revenue driver beyond 2025. Think of it as a chain reaction. Once a customer lands within the Cloud ERP suite, SAP can systematically introduce them to a cascade of interconnected solutions, each adding a new layer of value and revenue.

The numbers speak for themselves. Klein proudly highlights that their top 1,000 customers now use an average of 4 SAP cloud solutions, up from 3 last year. The trend is even more pronounced among their top 100 customers, who now leverage an average of 5 solutions, up from 4 in 2022. This organic cross-selling momentum, combined with the newly broadened migration incentives, paints a compelling picture for sustained revenue acceleration beyond 2025, a reality not fully captured in their current guidance.

Cloud Solution Adoption by Top SAP Customers

The chart below visualizes the growth in the average number of cloud solutions adopted by SAP's top customers.

Let's consider a hypothetical scenario. If even half of the remaining €11 billion support revenue were to be converted to cloud revenue through this incentivized holistic migration, we're looking at a potential uplift of €5.5 billion. Now factor in the cross-selling momentum, let's conservatively assume an additional 20% revenue uplift driven by customers adopting an average of one more cloud solution. That translates to an additional €1.1 billion. Combined, this represents a potential €6.6 billion revenue surge above and beyond the converted support revenue.

The implications are staggering. This unassuming shift in migration strategy, coupled with a well-executed cross-selling strategy, positions SAP to significantly outperform its current 2025 guidance and achieve a far more aggressive growth trajectory beyond 2025.

Of course, the success of this strategy hinges on seamless execution. SAP must effectively navigate the complexities of large-scale migrations while simultaneously building a robust ecosystem of partners capable of handling the increased demand. However, the early signs are promising. As Klein points out, their partners, including giants like Microsoft and NVIDIA, are enthusiastically ramping up their SAP practices, recognizing the lucrative potential of this cloud-driven transformation.

Adding an extra layer of intrigue is the fact that this quiet, almost understated shift is occurring against the backdrop of the Business AI revolution. While AI undoubtedly holds transformative potential for SAP, this broader migration strategy could arguably be a more potent revenue driver in the long run. After all, the power of AI is magnified when it operates on a unified, interconnected data model, precisely what the Cloud ERP Suite delivers. This convergence of AI and holistic cloud migration could create a powerful synergy, further amplifying SAP's post-2025 growth.

"Fun Fact: SAP, often regarded as a behemoth in the enterprise software realm, has a fascinating history of disruption. Founded in 1972 by five former IBM engineers, the company, originally called System Analysis Program Development, later shortened to SAP, started with a vision to build real-time enterprise software. Their first financial accounting system, known as RF, revolutionized business processes, paving the way for SAP's dominance in the enterprise software market."

This historical context sheds light on SAP's present ambition. Just as they disrupted the software landscape with real-time enterprise solutions, they now aim to lead the Business AI revolution. And perhaps, hidden in plain sight, their stealthy shift towards holistic cloud migration could be the key to unlocking their most disruptive chapter yet.