Will 2014 be SAP’s year of the cloud?

By Peter Gothard
01 Feb 2014 View Comments
Concept image of SAP offices

According to SAP CEO Bill McDermott, his firm has “20 times more customers than Workday” and a turnover that makes it “20 times more profitable than Salesforce.com”. The tub can consider itself thumped.

McDermott even went so far as to claim SAP is “going after those line of business cloud companies with everything we have”.

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“Salesforce.com has had a free run of it with cloud sales for some time. No more. We’re winning a lot of transactions and they are big in terms of transaction opportunities,” he added.

Even Jim Hagemann Snabe, ex-CEO and supervisory board member, argued that SAP has “just accelerated to be number one” in the cloud. However, Hagemann Snabe told investors at a Morgan Stanley conference in Barcelona back in November 2013 that he doesn’t expect “enormous impact” for SAP in the cloud, even by 2015. A few days later, vice president of cloud strategy at SAP Sven Denecken told Computing that Hagemann Snabe’s comments had been “picked up maybe a bit weird”, and insisted that SAP has “a margin” in the cloud.

It all feels like mixed messages from a company that seems to be feeling the pressure from cloud players like Salesforce, and also from rival Oracle, which has been snapping at the company’s heels since last September’s Oracleworld conference, when CEO Larry Ellison announced his SAP HANA-rivalling in-memory database product. While SAP immediately launched a video blog bashing the reveal, the bravado seemed forced, and more than a little uncomfortable.

So what is SAP’s strategy for battering its rivals? Computing caught up with SAP’s EMEA president Franck Cohen to look behind the bluster. Did McDermott’s call to arms at the Q4 announcement serve as an update, or even a contradiction, to Hagemann Snabe’s comments back in November?

“I don’t think so,” he replied. “I think we said last year that the objective was for SAP to become the cloud company, and that’s why we made acquisitions to get access to those technologies, including Ariba [the software services company SAP acquired in 2012 for $4.3bn]. So I think the idea is to transition to the cloud, because we believe this is the future of the software industry.”

Like Hagemann Snabe, Cohen admitted he does not believe this will happen “overnight”, and certainly not in Europe – the US is a little further ahead in the cloud shift – but “it’s what customers want”. But change the subject to Salesforce and Workday again, and Cohen echoed McDermott instead.

“There are a few large companies in the cloud that claim they are going to become the leader in their respective domains, and they are going to contest that loud and clear, and get to the battlefield,” said Cohen.

“So we are going to fight very hard, with everything we have, so that we win this cloud battle, whether it’s in CRM, or in HR. SAP doesn’t go to that cloud battle to be number two – we go to be number one in every single way.”

Upsurge in SAP cloud users
SAP is certainly in a strong enough position to speak this way. Acquisitions aside, 2013 saw a 30 per cent year-on-year growth rate in cloud customers, drawing in a reported 33 million users to date. And with “best-of-breed” applications such as the SMB-slanted Business ByDesign ERP and management suite, which Cohen states is SAP’s “NetSuite equivalent”, it should be in a good state to grow its customer base. With Salesforce’s only legitimate announcement at Dreamforce late last year being the mobile app wrapper for its services known as Salesforce1, this could be an opportune moment for SAP.

But it’s often hard to tell what SAP wants to do; as SAP UK User Group chair Philip Adams’ recently told Computing, SAP is “very subtle” when it comes to marketing itself.

But when speaking to Cohen, one thing is for certain: SAP HANA and Oracle in-memory definitely have nothing in common, thank you very much.

“I think it’s a completely different approach,” said Cohen. “We have nothing to defend. We are coming with a brand new approach of how to store data, and we have no database legacy to defend. As a result, we can disrupt the business with HANA, which is a pure in-memory technology, and doesn’t require a relational database underneath, and doesn’t require any discs as part of the process.”

Oracle in-memory, said Cohen, can be passed off as “an add-on on top that they will sell to their customers”.

SAP clearly has a lot of fire on a lot of topics. Never, ever call it “late to cloud”, and sit tight. If the company can make its message more clearly reflect its energy, 2014 could be one hell of a ride.
@PeterGothard

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