SAP to trim jobs and redeploy resources

Enterprise software giant SAP could cut up to 2,200 jobs (three percent of its 74,000 employees) in a move to rebalance employment around growth areas. The news was first reported by Bloomberg News.

[company]SAP[/company] CEO Bill McDermott told Bloomberg that the company needs to put jobs where the work is.

 “If I have a great growth opportunity in Middle East and I have excess of capacity in U.S. or Germany, I am gonna offer those employees the opportunity to go to Middle East, to where customers need us … We are not eliminating jobs but lifting and shifting those assets.”

A spokesman confirmed the news but said 2,200 was the upper limit and that many affected employees could end up in other positions in the faster-growing HANA or cloud business segments. Some jobs may go away via attrition. He said the company will end the year with more employees than it started out with: “SAP is hiring.”

Still, the axe will fall for some, in what would be the second set of cutbacks since McDermott assumed the top spot at SAP in 2013. The first round of cuts came in May 2014 in a move that McDermott said would bring total headcount to 67,000 by year’s end, so clearly some hiring took place in the interim.

SAP is hardly the only enterprise IT company struggling with the new sales and cost models of the cloud computing and Software-as-a-Service world. IBM and HP have both announced layoffs and employee reassignments to try to get their cost structures in line. IBM sounded a very similar message to SAP earlier this year, confirming layoffs but also stressing that its hiring in hot areas.

Part of the problem is that [company]IBM[/company], [company]HP[/company] and other older companies have relied on selling on high-end, high-margin software and hardware tied to big up-front purchases. The SaaS revolution, which spread payments out over time and offered less expensive (at least initially) products, took its toll on these players as born-to-SaaS companies like [company]Salesforce.com[/company] started to eat their lunch.

Now, even though those SaaS companies have moved more to an enterprise sales model — requiring up-front payouts for a year or more of use — they are still seen as more cost-effective and more modern than the legacy guys.

Not a shocker: SAP puts HANA at center of new biz apps push

When you hear from SAP these days, the software giant always leads with HANA, its in-memory database. HANA is to SAP what Watson is to IBM — proof that just because a company is getting along in years doesn’t mean it can’t do great stuff.

So it’ s not a huge surprise that SAP’s “next generation” business software suite, S/4, will draw heavily on HANA and sport a single unified interface across the applications. The first of these to be delivered, Simple Finance, was introduced Tuesday with more modules to follow.

At a rollout event in New York on Tuesday, [company]SAP[/company] CEO Bill McDermott characterized this as “the biggest product launch in the last 23 years and perhaps the company’s history.”

No pressure there.

The rewritten S/4HANA applications are now available on-premises across industries and regions. Simple Finance is the first application to be offered via SaaS — it’s also available on premises now, according to a spokeswoman.

Update: An SAP spokesman said these new applications were built from the ground up to run on HANA and will not work with third party databases, which is sort of shocking. (So much for earlier reports that the applications would continue to  work with third-party databases if needed — but would work better, faster, prettier with HANA.)

[company]Oracle[/company] has a similar “better together” story around its database, middleware, analytics, Linux and servers — er, make that engineered systems. All of these vendors talk about being open, but also say they’re more powerful when running with the company’s full array of technologies.

Complicating this particular storyline is that SAP and Oracle used to be more friends than enemies, with the majority of SAP’s business applications running on Oracle databases. Then Oracle decided to dive full on into enterprise applications with its acquisitions of PeopleSoft, Siebel Systems and everything else that wasn’t nailed down, while SAP doubled down in databases, buying Sybase and creating HANA. SAP and Oracle also bulked up their respective SaaS rosters — Oracle buying RightNow, Taleo  and SAP snapping up SuccessFactors.

And of course you know, this means war.

This story was updated at 11:16 a.m. PST to add SAP’s statement that the new applications will not run with third-party databases. 

SAP’s lower profit guidance blamed on “tough” cloud transition

SAP, like its enterprise software competitors, has been talking cloud for years, putting a ton of effort into promoting HANA as a cloud-enabled in-memory database for example.

But early Tuesday, a preliminary earnings report for its fourth quarter 2014 had analysts wondering about just how well it’s executing on the tricky balancing act between on-premises enterprise software sales — with big up-front payments and high maintenance fees — and the more incremental sales model of cloud technologies.

In this game, SAP is competing not only with long-time rivals like [company]Oracle[/company], but newer-look (but not really all that new) companies like [company]NetSuite[/company] and [company]Salesforce.com[/company] that offer enterprise applications in the software-as-a-service model. SAP has had a couple of hiccups in that market

On Tuesday, the Walldorf, Germany-based software giant said it now expects operating profit for fiscal 2017 to come in at about $7.3 billion, on revenue of about $24.3 billion,  down from previous guidance of $7.7 billion. Coming as it did after another profit warning four months ago, Wall Street got restless and SAP shares fell 5.09 percent to $63.71 in pre-market-open trading

Bloomberg News summed up the problem: [company]SAP[/company] revenue from cloud subscription and support will reach $2.26 billion to $2.35 billion this year, but analysts surveyed by the publication had expected them to come in at around $2.41 billion range.

To all of this SAP CEO Bill McDermott took to CNBC to say (paraphrasing here) that the company’s core business is growing, its cloud business is growing faster, so there’s nothing to worry about.

SAP, like rivals Oracle and other legacy enterprise software players, have to convince customers that they truly “get” cloud, or at least SaaS.

Oracle humbly suggests that you try its cloud

Oracle, which was late to cloud, nonetheless has arrived in time for mission-critical apps to make the cloud leap, according to the company’s new top cloud exec Shawn Price. An SAP veteran, Price joined Oracle in October just weeks after the company announced its latest-and-greatest cloud wares.

It takes a lot of work to move serious business apps like Enterprise Resource Planning (ERP) from on-premises servers to a cloud deployment model. In ERP, “the cloud approach of many [vendors] has not evolved the code to be cloud-based. They put a new UI on it, re-batch it and move it to managed services,” Price told a group of reporters after an OracleWorld customer event in Boston on Tuesday.

Heavy lifting: Moving ERP to cloud

In Price’s view, [company]Oracle[/company], has successfully navigated that transition. But he also seems to know the company has some convincing to do. Oracle, in “all humility,” wants customers to try its cloud, Price said, and rolled its “customer 2 cloud” program to help existing Oracle accounts make the move. “Humility” and “Oracle” are not two words you expect to see in the same sentence, but that is what the cloud revolution has done to legacy enterprise software companies.

Amazon Web Services has been in the public cloud business since 2006 and despite what rivals say, it has lots of business accounts and offers more than base-level IaaS. It is now the cloud that everyone else is measured against, for better or worse.

Oracle’s pitch is that it offers all layers of cloud from base Infrastructure as a Service to Platform (IaaS) to Platform-as-a-Service (PaaS) to Software as a Service (SaaS). And Price said Oracle has pricing options for customers who want to pay as they go, as well as those who want to buy the whole stack from soup to nuts, although that is not the public perception.

While Oracle claims that the use of its engineered hardware plus Oracle Linux plus Oracle middleware, etc., offers a more cost-effective solution than even [company]Amazon[/company], many simply don’t believe it. And some fear that the reliance on a full stack from any one company leaves them too closely shackled to a single vendor with little leverage on pricing or support.

Price acknowledged that fear of lock-in is a factor for customers, but customers can run non-Oracle applications on Oracle’s cloud, and the APIs to all layers of its infrastructure are open and available. On the other hand, Oracle’s mantra is that Oracle stuff runs better-faster-prettier with other Oracle stuff.

Shawn Price, SVP of Oracle Cloud.

Shawn Price, SVP of Oracle Cloud

Ray Wang, principal analyst and founder of Constellation Research, sees considerable interest among current Oracle shops — and face it, 90 percent or more of enterprises run some Oracle database, apps and/or middleware — in Oracle cloud products.

“Some [customers] focus on getting database into the cloud, others use Oracle for cloud infrastructure, and of course many apps are being brought to the cloud,” he said via email.

Wang acknowledged that Oracle does not yet offer the same easy spin-up-spin-down experience developers love in AWS, but that’s because Oracle delivers more complexity and thus is a bit more complicated to use. And he noted that Oracle’s cloud products are particularly interesting to Java shops.

Can Oracle compete with AWS? Does it need to?

Pricing elasticity is not a concept that most people associate with Oracle — or with any enterprise software company — for that matter. But whatever the case, given the way Oracle’s been hiring, it’s serious about its cloud effort.

Right around the time it brought on Price, it also hired Peter Magnusson, who guided development of [company]Google[/company] App Engine before joining Snapchat as VP of engineering. Magnusson is now Oracle’s SVP of engineering. And last month Oracle hired Mark Cavage, Joyent’s well-regarded VP of engineering who is now senior director and architect of engineering for Oracle’s public cloud.

What’s interesting here is that while Amazon execs at AWS Re:Invent last month said that most workloads are ready and primed to move to cloud, the legacy IT players — [company]IBM[/company], Oracle, [company]SAP[/company] — paint a picture of a slower, more conservative migration path for companies with existing IT infrastructure. Unlike startups without a lot of existing gear, they are not hell-bent on putting mission critical workloads into the cloud. Yet.

But that’s a matter of time, Price said. Asked if there were any workloads that he did not see destined for cloud, his answer: “No.”

SAP exec behind HANA quits in a hurry

Dr. Vishal Sikka, credited with building the HANA real-time analytics franchise, is leaving the company for personal reasons, SAP said Sunday.