Understanding the SAP cloud strategy — or lack thereof

SAP has been the darling of enterprise software for many years. The company provides enterprise resource planning (ERP) and other enterprise software modules that offer pre-built business processes that have been the cornerstones of many of the Global 2000 IT shops. This dependency on SAP continues to this day.

However, since the emergence of the SaaS space more than 10 years ago, and with the current rise of IaaS public cloud computing providers, SAP is getting some tough questions from its user base around its cloud-computing strategy. While there has been some movement in the last few years, many SAP users remain confused. Perhaps the company itself does, too.

A good way to determine the strategy of a company is to look at the technology built and purchased in recent years. In 2008, SAP acquired Business Objects, a business intelligence (BI) company. In 2010, SAP acquired the relational database vendor Sybase. In 2011, the company made its first move into the cloud by purchasing human resource management SaaS provider SuccessFactors. And in May 2012, SAP AG announced the acquisition of supply chain network operator Ariba, Inc.

Then came the addition of HANA, a well-regarded, in-memory, SAP-built database and analytics engine. HANA is driving SAP’s movement into the big data market, providing high-speed database operations. HANA went into the cloud last October and SAP has announced that all new SAP applications will be developed for it.

While HANA is a step in the innovative direction, the majority of SAP users are staring at business data within SAP-delivered enterprise applications. Many of these SAP instances have not seen upgrades in many years. HANA is a strong offering, but the fundamentals of SAP are not database-centric. Indeed, they are business process-centric.

This calls into question what role SAP will play in cloud computing. Many SAP-enabled enterprises are counting on SAP to determine their cloud computing strategy for them. That puts SAP in a position to make a real difference in this emerging market. However, it could also cannibalize its own customer base in the process.

Stepping Gingerly to the Cloud

During its movement to the cloud, SAP’s actions have been somewhat confusing. In 2012, SAP placed its all-in-one ERP app on AWS, claiming that this was a public SaaS offering. There was also the recent announcement that HANA is now available from its own cloud, as well as from partner public clouds. The “cloudification” of HANA will be announced at SAP SAPPHIRE this week.

SAP had the public cloud on their radar in the past. In 2011, it certified certain SAP applications to run in production environments on AWS’ public IaaS. Other cloud providers, such as CSC and Virtustream, were already SAP-certified. This means that they are able to leverage the cloud-provider as a platform, such as AWS.  However, a port has not occurred and native features and functions of the cloud-platform exploited.

What’s missing is a more comprehensive and detailed strategy around this enterprise software giant. The strategy should include a move to a true multitenant “designed for the cloud” public cloud-computing offering that provides a clear guide path from the existing install base. It seems that the movement into cloud computing so far is more stopgap measures, and perhaps for good reason.

Like other large enterprise players, cloud computing for SAP is a double-edged sword. While moving to the cloud is a clear demand from the marketplace, by making such moves, the amount of profit from the selling of IP as public cloud services becomes significantly reduced. SAP, along with other large enterprise software players such as Oracle, CA, and IBM, could find that success in the cloud means lagging revenue numbers.

Those most affected by SAP’s cloud dilemma will be loyal SAP users who are looking for their enterprise software strategy, which is tied to SAP, to be more efficient and agile than it is today. SAP has responded by “cloud washing” many of its accomplishments over the last year or so, with a few bright spots such as HANA in the cloud. Perhaps there will be better news from the conference this week.

SAP is in a unique position in the market, and at a crossroads as a company. While the insider strategy could be to the delay cloud adoption as much as possible to harvest what remains from their massive install base, SAP could perhaps better serve their user base by communicating a solid path to cloud-based platforms, including exactly how ERP and other modules will find more modern and efficient platforms beyond HANA.