SAP and Microsoft team up on 3-year cloud deal, strengthening relationship between tech giants

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SAP and Microsoft struck a three-year partnership to help companies move their data to the cloud, a move that tightens the already close relationship between the two tech giants.

SAP disclosed the deal in its third quarter financial update Monday morning, adding that the alliance with Microsoft contributed 18 percentage points to 39 percent year-over-year growth for cloud bookings. The deal aims to solve a common customer complaint that it is challenging to move from SAP’s on-premise model to remote servers.

“Microsoft will bundle SAP cloud services into a bundle we call Embrace, and they’ll sell these directly through their field organization to their customers who will run SAP the in Azure cloud,” Jennifer Morgan, SAP co-CEO said on a call with investors Monday.

While the deal brings Microsoft and SAP closer than ever, it is not exclusive. SAP will continue to work with other top cloud providers like Amazon and Google.

“As always, choice will prevail as we recognize that many of our customers also run SAP on AWS and GCP, for example,” Morgan said. “Customers will still have benefits of the best-run SAP in their public cloud of choice.”

Last year, Microsoft, SAP and Adobe announced a partnership to take the wealth of data generated by customers and bring it together into one package running on Azure. In 2016, the two companies struck a deal to integrate software and bring SAP business databases to Azure.

The deal comes at an important time for SAP, following a major leadership change. CEO Bill McDermott stepped down earlier this month, replaced by co-CEOs Morgan and Christian Klein.

SAP has a major presence in the Seattle area. It owns experience management company Qualtrics and expense management company Concur, and it has an office of its own in the region. Between SAP itself, Concur and Qualtrics, the company will have a combined headcount of more than 5,000 in the Seattle area in a few years, following a huge new office lease for Qualtrics.

Morgan called out Qualtrics as a major contributor to SAP’s performance in the third quarter. She referred to the $8 billion deal to acquire the company as a “bold move” that has received rave reviews from customers. Qualtrics customer wins in the quarter include Dish Network, Stanley Black Decker, U-Haul and more.

“Clearly our experience management vision powered by Qualtrics is resonating with customers as a key differentiator across all aspects of the intelligent enterprise,” Morgan said.

Overall, SAP reported nearly $7.6 billion in revenue in the quarter, up 13 percent over a year ago. SAP stock is up approximately 2 percent in early morning trading.

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