Has SAP gotten cloud religion?

Last Friday, when SAP(s sap) pre-announced better-than-expected earnings for its 2011 fiscal year, there was no mention of cloud computing. But, there’s a feeling the company, as it completes its buyout of SuccessFactors and closes more Business ByDesign deals, just might be able to put its reputation of cloud cluelessness behind it.
SAP is the leader in enterprise resource planning (ERP): the software brains behind most companies’ inventory and accounting systems. But in the tough transition from client-server to cloud computing, SAP lost its way. It launched a subscription-based Business ByDesign ERP offering in 2007, boldly predicting it would attract 10,000 customers and contribute €1 billion in revenue by 2010. It came in just a little bit short — only 100 companies signed up.
Since then, SAP re-launched Business ByDesign and set a target of 1,000 customers for this year. Last fall, it said it was on its way to that goal.  Last month, it ponied up $3.4 billion to buy SuccessFactors, which offers SaaS-based human resources capabilities. That purchase came just weeks after SAP co-CEOs Jim Hagemann Snabe and Bill McDermott (pictured) pledged to push SAP into new markets — by acquisition if need be.
SAP’s preliminary numbers were pretty flashy, especially coming after Oracle(s orcl) announced disappointing earnings. For its fourth quarter ending Dec. 31, SAP software revenue rose 16 percent to €1.74 billion ($2.2 billion USD) compared to €1.51 billion for the year-ago period. Its full-year software revenue was up 22 percent to €3.97 billion from €3.27 billion for the 2010 fiscal year.
But, cloud-related revenue makes up a tiny portion of those earnings, by all accounts. Subscription revenue — one measure of cloudy SaaS implementations — accounts for about €120 million out of  the company’s overall revenue of €14.2 billion, according to Ray Wang, principal analyst of Constellation Research. But he and others expect that mix to change.
There were some positive signs outside of SAP’s legacy ERP business.  SAP’s HANA in-memory database and analytics appliance, available since July, outperformed expectations. The company expected €100 million from HANA this year, but the actual number will be about €160 million. The company also said the €100 million it reaped from mobile solutions came in over target. Those mobile solutions derive from SAP’s $5.8 billion buyout of Sybase two years ago.
In its cloud efforts, SAP is obviously focused on Oracle, its chief rival for enterprise software dollars, but Oracle is only one piece of the competitive puzzle. Perhaps a bigger issue are the new-age cloud companies that are also attacking enterprise applications, like NetSuite (s N) which offers cloud-based ERP applications. And Workday, the brainchild of PeopleSoft founder David Duffield, which offers a range of SaaS-based human resources capabilities. These companies, unlike SAP, don’t have to worry about cannibalizing an on-premises software business.
Workday, which is reportedly eyeing an IPO, isn’t some small-but-feisty startup. In October, it snagged $85 million in new VC funding, bringing total capital raised to an impressive $250 million, according to All Things D.
In other words, while the latest numbers look rosy for SAP, the company still has to navigate this tricky mix of on-premises and cloud-based services and outmaneuver both legacy and new-look competitors before it can put its cloud mis-steps behind it.