SAP Gets Serious About The Large Enterprise Application Cloud: 

Its Long-Term Strategy Should Involve A Triple Platform Play For The Cloud

Until now, it looked like SAP was still trying to balance its existing on-premises licensed business with the cloud alternative. But following its acquisition of Success Factors and the arrival of that company’s outstanding CEO, Lars Dalgaard, SAP has become really serious about applications in the cloud, placing Mr. Dalgaard at the head of a 5,000-person development team.

SAP’s new cloud strategy is all about business applications in large enterprises. SAP today announced its People, Money, Customers, Suppliers strategy — a significant move to offer business applications for large enterprises, rather than just SMBs and a few niche cases. It’s really targeting its core business users. Today’s announcements show SAP combining its core strength of large enterprise applications with a ready-to-use cloud strategy for the first time.

What is really mission-critical in this transformation of SAP and its global customer base?

1. Cloud-generation business applications.

Software-as-a-service (SaaS) applications are not just rehosted traditional applications. SAP is still on a learning curve, and the infusion of Success Factors will definitely help. The upcoming generations of enterprise users expect their applications to be simple, collaborative, mobile, and very different from what they (and their moms and dads) have used in the past. SAP key’s challenge is to keep their existing, conservative customer base happy while meeting the requirements of (and signing deals with) this new generation.

2. Best-of-breed application landscapes – not total replacements.

The overlap with the existing on-premises SAP Business Suite is more visible than ever. The good news is that the typical Success Factors user hasn’t replaced the traditional SAP HR solution, if they had one — one example is Siemens, which runs Success Factors for 300,000 employees. Larger enterprises run hybrid environments; they keep the legacy systems that they have tailored most to their individual needs and complement these with the highly standardized cloud application logic. This is very different to the SMB space, where customers expect to fully replace their on-premises legacy environment; enterprise customers move slowly and pick out hybrid scenarios of cloud and on-premises applications that make sense for their individual use cases.

3. Cloud-based integration.

SAP seems to understand this issue in the SAP2SAP world, but it is also highlighting its work with partners such as Dell Boomi, IBM Cast Iron, and MuleSoft. This is crucial for orchestrating the wide variety of SaaS applications that enterprises currently use (typically up to 12). We’re not talking about lengthy, complex integration projects but about taking just a few days to configure the links between packaged SaaS applications and the SAP Business Suite, if it’s still close to the packaged standard.

4. Applications need a platform.

SAP’s DNA involves partnerships and leveraging its extensive ecosystem. SAP’s customers, systems integrators, and ISVs extend its applications to make them more relevant to specific industries, geographies, or customer segments. This can also work in the cloud: has shown the industry how to do this with its application-centric platform-as-a-service (PaaS) offering, SAP has a major opportunity in this space right now, given that major competitors like Microsoft and Oracle are still struggling to adapt their core business applications to the PaaS model. Once Oracle’s Fusion applications gain market share and Microsoft focuses more seriously on Azure as a default application platform for Dynamics and Office365, SAP’s window of opportunity will shrink rapidly.

5. Reinventing the platform for the next generation.

SAP’s ability to reinvent itself is the most critical part of this journey. Many customers still remember how SAP tried to complement the ABAP-based application logic with Java-based X-Apps a decade ago. The approach (and Shai Agassi) failed — SAP focused too much on meeting the demands of its largest customers rather than balancing customer demands with a technology that could capture a new generation of customers. The “cloud challenge” is very similar to the “Java challenge” that SAP faced 10 years ago. To succeed this time, SAP needs to embrace the new cloud-focused architectures and keep investing in both an application (ABAP)-centric PaaS option and a new, lightweight cloud PaaS offering. Nobody would think about using an SAP PaaS offering to develop a Facebook application today: SAP needs to deliver a long-term vision of business networks to secure the next generation of application developers. Let’s see if SAP NetWeaver Cloud delivers this balance. The in-memory Hana technology is just an enabler, not a strategy in this platform play.

My point of view:

SAP’s long-term cloud strategy needs to be a triple play: SaaS applications, an application-centric platform to extend them, and a new platform for the next generation of social business networks.

Let me know your take and leave a comment