ORLANDO, Fla.—The tale of the large, established enterprise IT vendor in the 21st century is now quite familiar. Enterprise resource planning giant SAP made sure it stuck to the story line at its Sapphire user group conference here this week.
Digital transformation? Check. Modernizing data centers and applications? Check. Having the cloud your way? Check. If you substitute the marketing tag line “S/4HANA is the digital core of your enterprise” for “the year of all-flash storage,” SAP could be EMC.
SAP, EMC and the other usual suspects are all saying the same things. They are in the fight for their lives to win and keep enterprise IT customers. That’s because they are scrambling for a market that is shrinking and being disrupted by cloud computing.
SAP’s effort in the cloud, the HANA Cloud Platform (HCP), “is the key to the company’s future—it is that simple,” said SAP Enterprise Platform President Steve Lucas. He’s right, because the company is all-in on the HANA in-memory platform, S/4HANA ERP applications and HCP. There is no turning back for SAP or its customers.
As much as SAP and the other established vendors want new customers, the battle is much more about retaining current ones. That is evident in Oracle’s cloud strategy. The good news for SAP is its customers don’t always have a viable choice of moving to another vendor or provider. ERP is not something you “lift and shift” to the cloud. Customers are “stuck” unless SAP really screws up.
Keeping Up With the Amazons
That said, cloud-centric challengers Salesforce and Workday are predicting the inevitable demise of SAP. Salesforce CEO Marc Benioff this week said Oracle and SAP are doing poorly in the cloud because “they just have not been able to make that transformation that we’ve made.”
That’s not a fair comparison, since Salesforce was born as software as a service and SAP was born in the mainframe. In many organizations, SAP is entrenched and highly customized. In reality, SAP is making a bigger transformation than Salesforce ever will and has to approach the cloud differently.
SAP’s strategy actually gives it a big advantage as it works to convert itself and its customers to the cloud. It starts with the data in the HANA in-memory database and builds out from there. The new “spring edition” of the HANA Cloud Platform is the kernel of SAP’s modernization efforts, building on top of open platforms Cloud Foundry and eventually OpenStack. Access to the ERP applications is enabled by the new SAP API Business Hub.
SAP’s other big advantage is that so many of the most important businesses and systems already run on SAP, giving it the first crack at the cloud business of those customers. HANA also has become important enough in the ongoing sustainability of its customers that rather than keep up with Amazon, AWS has to keep up with SAP. This week, AWS announced a new instance type named “X1,” which was developed to meet the requirements of running HANA in the cloud.
SAP Counting on Customers to Go All-In on Cloud Migration With HANA
At the conference, Microsoft CEO Satya Nadella also announced similar support on the Azure cloud and said that SAP applications will be integrated into Office 365, which could be SAP’s secret weapon in its effort to retain enterprise customers.
Building Data-Intensive Applications
Of course, the cloud is just a platform, and success comes down to use cases. In that respect, SAP is also well-positioned around one of the big potential cloud use cases—industrial Internet of things (IoT)—due to its longstanding customer relationships with manufacturers.
SAP has been doing IoT for a long time, said Nils Herzberg, global senior vice president for Internet of things at SAP. It’s more than just connecting a sensor to a dashboard and more about enabling “customers to run automated end-to-end processes.”
One of the keys to success in IoT is something the HANA platform is very good at as well, he said: being able to derive new intelligence from routine data that can drive new business processes and efficiencies.
Another data-intensive area that SAP is taking advantage of is health care, with the announcement of the SAP Connected Health Platform. After years of struggling with government-mandated electronic health record (EHR) systems, the industry is recognizing that medical records are just a means to an end, and the end is mining those records for ways to improve the quality of care.
“The irony is that since HITECH [the 2009 law that mandated EHRs and meaningful use standards] we are capturing every patient’s journey through the health care system, and at the end of the day it’s put in cold storage on a file server instead of using the information to make the system smarter,” said the head of the program, SAP Chief Medical Officer Dr. David Delaney.
Even with the right technology moves, SAP is working hard to win, or perhaps win back, the trust of its customers. SAP CEO Bill McDermott spoke passionately about “empathy” in his keynote to 30,000 attendees. He even gave out his email address and asked people to email him if they were dissatisfied.
Some customers may call. But unlike some of the usual suspects, SAP’s cloud revenues are growing. And now deployments and conversions are taking months instead of years. The cloud really isn’t the future for SAP. It’s the present, and its customers are along for the ride.
Scot Petersen is a technology analyst at Ziff Brothers Investments, a private investment firm. He has an extensive background in the technology field. Prior to joining Ziff Brothers, Scot was the editorial director, Business Applications & Architecture, at TechTarget. Before that, he was the director, Editorial Operations, at Ziff Davis Enterprise. While at Ziff Davis Media, he was a writer and editor at eWEEK. No investment advice is offered in his blog. All duties are disclaimed. Scot works for a private investment firm, which may at any time invest in companies whose products are discussed in this blog, and no disclosure of securities transactions will be made.