SAP & IBM Join Forces to Rev Up Workload Transition to Cloud

SAP SE SAP recently partnered with International Business Machines IBM to secure state-of-the-art technology and consulting expertise forcustomers, making it smoother to adopt a hybrid cloud infrastructure while moving crucial SAP workloads to the cloud.

For clients, workloads and applications form the foundation of their enterprise’s operations. Thus, clients looking to switch to hybrid cloud strategies need to resort to a highly trustworthy and reliable cloud environment for moving their workload. Amid this scenario, this recently-launched supplier option with IBM for RISE with SAP offerings will give clients access to tools, enabling them to expedite the transition of their on-premise SAP software workloads to IBM Cloud, supported by best-in-class security capabilities.

IBM has also launched a new program called “BREAKTHROUGH with IBM for RISE with SAP”. This is essentially a portfolio of solutions and consulting services that will help augment the drive to SAP S/4HANA Cloud. These services are developed on a flexible platform and use intelligent workflows to optimize operations and support comprehensive business transformation. Additionally, highlighting its commitment to SAP S/4HANA, IBM has made a significant investment in RISE with SAP to help transform its infrastructure.

With this rollout, IBM has become the first cloud provider to offer infrastructure and technical management services as part of the RISE with SAP solutions. IBM's premium supplier title will help steer SAP's deep-rooted efforts to provide flexibility to customers who prefer their RISE with the SAP package to run on IBM Cloud.

SAP is highly optimistic that the combined expertise and experience of the companies will deliver accelerated cloud adoption for customers worldwide. Per a study by research firm IDC, sponsored by IBM, transition to SAP S/4HANA on IBM Cloud from on-premise data centers can potentially deliver numerous benefits, including enhanced revenues, reduced costs and greater productivity.

SAP unveiled Rise With SAP offering in first-quarter 2021 and now has a 1,300-robust customer base since the rollout. In fact, this Germany-based software vendor’s last quarter performance gained from strength in its cloud business, especially the Rise with SAP solution.

Shares of SAP have dropped 8.8% in the past year against the industry’s rise of 11.6%.

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For 2022, SAP anticipates cloud revenues in the range of €11.55-€11.85 billion, suggesting an increase of 23-26%. Cloud and software revenues are expected between €25 billion and €25.5 billion, calling for a 4-6% rise. Further, the company projects free cash flow to be above €4.5 billion.

Zacks Rank & Key Picks

SAP carries a Zacks Rank of 5 (Strong Sell) while IBM carries a Zacks Rank of 4 (Sell), currently. 

Some better-ranked stocks from the broader technology space include Progress Software PRGS  and Cadence Design Systems CDNS. While Progress Software sports a Zacks Rank #1 (Strong Buy), Cadence carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Progress Software has a projected earnings growth rate of 3.62% for fiscal 2022. The Zacks Consensus Estimate for Progress Software’s fiscal 2022 earnings has been revised upward by 6 cents in the past 60 days. The long-term earnings growth rate of the company is pegged at 2%.

Progress Software’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 26.8%. Shares of PRGS have rallied 3.7% in the past year.

Cadence has a projected earnings growth rate of 9.11% for 2022. The Zacks Consensus Estimate for Cadence 2022 earnings has been unchanged in the past 90 days. The long-term earnings growth rate of the company is pegged at 18.2%.

Cadence’s earnings beat the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 11%. Shares of CDNS have lost 2.1% in the past year.

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