Software sales in India grows at 56% YoY, says SAP

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German-based software firm SAP released its results last night, a little earlier than expected. It has reported a 14% growth in revenues on a year-on-year basis and a 20% hike in profit after taxes (PAT). The firm's Co-chief executive officer Bill McDermott tells CNBC-TV18 in an exclusive interview that SAP has seen a 56% growth year-on-year in Indian software sales.

"We remain very bullish on India. We have more employees in India than any other BRIC country" he adds.

Below is a verbatim transcript of his interview with CNBC-TV18's Kritika Saxena. Also watch the accompanying video.

Q: You have seen global revenues jump up by around 14% on a year-on-year basis at around 3.3 billion euros. Aside from that, PAT has also hiked up to around 20% on a year-on-year basis. You have always been bullish about the India growth story, you have been talking to us since four quarters and India has been a strong market for you. Can you run us through the revenue and the PAT growth if you could on a sequential as well as year-on-year basis for India?

A: India continues to be a significant market in SAP's portfolio. As you know, we have focused on BRIC and India is the 'I' in BRIC and we have more employees in India than any other BRIC country. We are developing beautiful software there and of course we are growing 56% on a year over year basis in India in Q2, which is faster than the corporate average by a lot and we remain very bullish on India.

Q: The Asia-Pacific (APAC) and Japan growth has been around 35-36%. Can you break up how the performance has been for APAC on a pricing and a margin point of view as well?

A: What's fascinating about Q2 is all the major theaters in the world - Europe, the America as well as Asia Pacific and Japan average 35% year over year growth in software sales. Japan, inspite of its headwinds and the crisis has nearly doubled on a year over year basis which has lifted the portfolio in APAC Japan considerably. So think of it this way, our software and software related services globally are growing at about 20%. 35% software sales are in Asia-Pacific and Japan. India is anywhere from 56% to nearly a 100% in the first quarter.

So the business is going great everywhere and I think there are three main trends that are driving that. One obviously is mobility. Asia-Pacific as a region in general has really taken the lead in mobile and India knows that best. Of course there is this notion of the real time enterprise. Everybody wants to have a real time view of what's going on with their customer, their supplier, their business network so they can make better decisions to move the needle and grow their business and that's what we do.

Q: Also, there has been a certain amount of pressure on margins. We have seen several Indian IT vendors see pressure in margins. In this particular quarter, in fact even globally, that is something that is a concern. In terms of your numbers, margins are flattish at around 15.5%. What is the reason for this pressure that we are seeing globally across the industries and you could talk of this particular quarter, why is the margin on a flattish level if you compare it to the last year?

A: Our margin in constant currency is on a non-IFRS basis based on our reporting is up 1.4 points and it's up 1.2 points through the first half of the year. The reason our margins are expanding and we are growing faster than any of other sizable business software company in the world by a lot is because there is a structural change going on in the information technology industry. There is a move from pure hardware and services which today consumes about 85 cents on a dollar to innovation. That will now go about 40% investment from companies on their capex budget into software or the brain or the innovation layer so they can be more efficient and they can obviously be more effective in growing their business.

This structural change plays to the beautiful hand of the SAP because we are focused on the customer's customer, we are focused on mobilizing companies, we want companies to be real time and we want companies like Air India who switched from the competition from the SAP or JWS Steel which completed the route in India of 10 out of 10 steel companies standardizing on SAP. These companies are saying - hey, I have got to go with the best. That's why we are growing so well, that's why we are winning and that's why we will keep investing in India.

Q: In terms of the deal pipeline, you have added around six large deals this quarter from APAC and Japan sector. In terms of the deal pipeline going forward, are we actually seeing all those last transformational deals that we have been talking about finally come in? Are we actually seeing the pent up demand that we have been seeing in the IT sector come in?

A: The beauty of our business model now is we had our deal volume up 35% year over year. Our indirect channel business was at 60% year over year and of course there is a healthy balance between big, mid and small deals. The beauty of our model right now is SAP is agile enough to operate enough on volume as well as value. But I do see larger transformational deals in the pipeline. We have real good visibility because we run our business in real time on SAP software and my tablet gives me information everyday as to where the customer is going and that's why we had to up our guidance for the balance of the year because our visibility is clear, our pipelines are healthy and we are executing very well.