**Legacy Software Firms Reach Record Valuations with Cloud and AI**
The old ones are indeed the best, as legacy software firms are experiencing a surge in valuations, with companies founded decades ago reaching new heights.
SAP's Rise to Fame
Founded in 1972, SAP's valuation has reached an all-time high of $234 billion, a 50% increase in just one year. The Germany-based enterprise software provider's market capitalization has grown significantly, driven by its transition to the cloud and the integration of artificial intelligence (AI) across its cloud suite.
SAP's CEO Christian Klein has overseen the company's turnaround since 2020, focusing on helping customers transition to the cloud while forming partnerships with hyperscalers like Google and Nvidia. The company's rapid rise can be attributed to its transition from an old-school license model, with its Q1 2024 report revealing year-on-year cloud revenue growth of 24%.
Oracle's Cloud Growth
Oracle, the U.S. database and cloud infrastructure company founded in 1977, is valued at more than $385 billion, a 20% increase from last year. The company's cloud growth is driven by its transition away from an on-premises model, with its fiscal 2024 Q3 earnings seeing total cloud revenue surpassing total license support revenue for the first time.
Oracle's CEO Safra Catz projects double-digit cloud revenue growth in the coming financial year, aided by partnerships with companies like Microsoft. The company's cloud revenue growth is expected to continue, driven by its digital business transformation efforts.
Industry Trends
According to Gartner chief forecaster John-David Lovelock, the primary driver of growth for legacy software firms like SAP and Oracle is digital business transformation efforts that started in 2021 and are ongoing. The shift to cloud computing and the integration of AI are key factors contributing to their success.
The valuations of these legacy software firms are expected to continue to rise as they adapt to the changing technology landscape and invest in emerging technologies like AI and cloud computing.
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