SAP Clean Core: Simplify System Management with Standardization

Clean Core is a practice that keeps the core of SAP S/4HANA standardized and "clean" by avoiding heavy customizations directly in the system core. This allows companies to upgrade the system with less effort, reduce maintenance costs, and adopt innovations faster. The philosophy behind Clean Core is to keep standard processes standardized and customize only where it adds competitive advantage. By doing so, companies can stay agile and focus on what creates real market impact.

SAP SE (SAP.DE) has demonstrated robust financial performance and strategic foresight in its Q2 2025 results, positioning itself as a key player in the AI-driven cloud era. The company reported a 24% surge in cloud revenue to €5.13 billion, with gross margins expanding to 75.2% [1]. This growth is driven by the strong performance of SAP's AI-powered ERP solutions and a significant expansion in the cloud backlog [1].

A key strategic move for SAP was its partnership with Alibaba Group, announced in 2023-2025. This collaboration integrates Alibaba's AI model, Qwen, into SAP's cloud ecosystem, targeting both the Chinese and global markets [2]. The partnership aims to provide localized solutions and enhance AI scalability, opening new revenue streams and strengthening SAP's cloud ecosystem.

SAP's commitment to shareholders is evident in its dividend policy. The company raised its 2025 dividend to €2.54 per share, balancing payouts with investments in AI and cloud R&D to sustain growth and shareholder returns [1]. This approach reflects a disciplined capital allocation strategy, with a projected payout ratio of 29% in 2025, down from 88.68% in 2024 [1].

The concept of "Clean Core" is another strategic philosophy that SAP employs to keep the core of SAP S/4HANA standardized and "clean." This practice avoids heavy customizations directly in the system core, allowing for easier upgrades, reduced maintenance costs, and faster adoption of innovations. By focusing on standard processes and customizing only where it adds competitive advantage, companies can stay agile and focus on market impact [3].

In conclusion, SAP's combination of strong financial performance, strategic partnerships, and a disciplined dividend policy makes it a compelling investment in the enterprise software sector. The company's ability to adapt to the digital transformation wave while maintaining a robust dividend growth trajectory positions it as a high-conviction long-term investment.

References:
[1] SAP Announces Q2 and HY 2025 Results [https://news.sap.com/2025/07/sap-announces-q2-and-hy-2025-results/]
[2] SAP and Alibaba Group Partner to Accelerate Cloud Transformation [https://news.sap.com/2025/05/sap-alibaba-group-partner-accelerate-cloud-transformation/]
[3] Clean Core: SAP's Approach to System Standardization and Agility [https://www.sap.com/products/sap-s4hana/clean-core.html]