‘Conservative’ Mexico now heads public cloud sales for SAP

Initially more “conservative” in cloud than its Latin American peers, Mexico is now leading the region for SAP in adopting public cloud-based software, said Cristina Palmaka, the company’s LatAm president.

SAP has two main cloud-based offerings for software.

Rise with SAP, a program for migration to private cloud launched in January 2021, and Grow with SAP, launched in March 2023 and focused on public cloud ERP.

While Brazil has seen rapid growth in the former in recent years, Mexico has emerged as a driver in the latter.

“[Grow] started to be very strong in Mexico. Mexico has been our flagship in public cloud. Also, because it’s easier to localize products in Mexico,” Palmaka told reporters at the SAP Now event in São Paulo.

By “localize,” the executive refers to adapting solutions to local needs.

In this sense, the slowness of Brazil and other countries in the region in relation to Grow has more to do with complexities in adapting platforms to their tax requirements than to market readiness.

Brazil and Argentina are more complex than Mexico in fiscal terms, said Palmaka.

SAP reports 37 consecutive quarters of double-digit growth in cloud sales in Latin America. The company does not report hard figures or country-specific financials.

Growth has been more intense in the last two or three years and particularly in Brazil. Large corporate clients have also intensified their investment in the cloud, according to Palmaka.

"Where we have seen more conservatism is in Mexico," she said, referring to Rise.

Argentina has seen an acceleration in the adoption of cloud-based software in the last year and a half, “partly out of economic necessity,” she said.

Meanwhile in Chile and Colombia, which have also seen strong migration to the cloud by some clients, the highlight is ESG management and reporting software.

Palmaka said the ESG topic is brought up more by clients in these countries than in others in the region.

GROWING CLOUDY

In the Grow program, SAP customers can choose which datacenters of partner hyperscalers they want to base their solutions on.

SAP works with Microsoft, AWS and Google Cloud.

In the past, the German software giant nurtured plans for developing its own datacenter park around the world.

About 10 years ago, however, SAP pivoted and moved away from infrastructure to instead bet on partnerships with datacenter companies and public cloud providers, focusing on its core business of software.

Among the global sites where SAP hosts its solutions is Digital Realty, which in Latin America the Brazil-based datacenter group Ascenty controls through a JV with Brookfield. 

SAP still maintains a few datacenters of its own but has no plans to build new ones or expand any of the sites.

“Our expertise is in making software,” Palmaka said.