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IBM landed its biggest cloud deal to date, partnering with SAP to provide cloud infrastructure to the enterprise software provider and leveraging IBM’s $1.2 billion investment to expand its global cloud footprint in every major market.
Both companies come up winners in the partnership, as SAP selected IBM as a premier strategic provider of cloud infrastructure services for its business-critical applications–accelerating customers’ ability to run core business in the cloud.
The SAP HANA Enterprise Cloud offering is now available through IBM’s cloud. SAP HANA Enterprise Cloud will expand to major markets with the addition of the IBM cloud data centers. This is expected to enable customers to deploy their SAP software around the globe in a faster and more secure environment that is backed by IBM’s cloud capabilities.
“This is the kind of move we expected when IBM bought SoftLayer,” longtime IBM watcher and industry analyst Rob Enderle told eWEEK. “IBM can provide an enterprise-class cloud service now that is fully compliant with IT policy, and this is generally also a requirement when deploying products from enterprise companies like SAP. You should anticipate other deals like this for similar reasons with other vendors of all sizes that want access to enterprise buyers and need to supply cloud services while remaining compliant with corporate policies on security and access. IBM’s brand is tightly connected to the enterprise and it is well regarded when it comes to compliance so IT shops know their decisions to use cloud products on IBM’s services generally won’t be challenged by audit as aggressively as they might be had they used a service like Amazon’s instead.”
Big Blue officials said that together, IBM and SAP have the expertise, solutions and cloud infrastructure to deliver SAP business solutions on the IBM Cloud. SAP brings the power of real-time through in-memory computing capabilities of SAP HANA combined with the ability to run mission-critical business applications, like SAP Business Suite, in a cloud environment.
IBM brings enterprise depth and the open architecture of IBM Cloud Managed Services and SoftLayer — enabling customers to securely manage SAP workloads from trial to production on a consistent infrastructure, with transparency and control over where data resides.
In addition, customers will benefit from the technology and services from both companies including IBM consultants who offer industry-specific best practices, enabling customers to transform their organizations. SAP and IBM customers of all sizes will benefit from this joint collaboration of two of the most trusted companies in the industry.
“We look forward to extending one of the longest and most successful partnerships in the IT industry,” said Bill McDermott, CEO of SAP, said in a statement. “The demand for SAP HANA and the SAP Business Suite on SAP HANA in the cloud is tremendous and this global agreement with IBM heralds a new era of cloud collaboration. We anticipate customers will benefit from this collaboration and expansion of SAP HANA Enterprise Cloud.”
IBM, SAP Cloud Deal a Major Step for Enterprise Cloud Adoption
“This announcement is a significant milestone in the deployment of enterprise cloud,” said IBM chairman, president and CEO Ginni Rometty, in a statement. “It builds on our two companies’ long history of bringing innovation to business, and extends IBM’s position as the premier global cloud platform. Our secure, open, hybrid enterprise cloud platform will enable SAP clients to support new ways to work in an era shaped by big data, mobile and social.”
In a blog post, Constellation Research analyst Holger Mueller called the new partnership, “A good move by IBM to secure a piece of the SAP enterprise load. Compared with, e.g., Oracle and Microsoft, IBM brings the least in-house enterprise load to the cloud game, based on its 100+ SaaS products. That has forced IBM to look for load outside of IBM, and this is the first partnership IBM has signed. I would not expect it to stop here for IBM.”
Holger also noted that in early 2014, IBM announced plans to expand to 40 data center locations over the next several quarters as part of its $1.2 billion cloud expansion. “Given traditional cloud players like, e.g., Amazon, Microsoft and Google have not responded formally with an announcement to expand to 40 locations, too – if SAP really cared for global coverage then there was not a better option than IBM’s cloud infrastructure that is powered by SoftLayer as well as IBM’s Cloud Managed Services data centers, which IBM had built prior to the SoftLayer acquisition,” he said.
IBM and SAP said they are committed to security for enterprise customers in the cloud. The IBM Cloud provides visibility and control to enable enterprises to apply and extend their security best practices into a cloud environment. And the companies will now have additional reach and scale to more easily start locally and scale globally with cloud capabilities and also comply with data residency and other regulatory mandates.
Indeed, “The unique point of the deal between IBM and SAP is its size,” Charles King, principal analyst at Pund-IT, told eWEEK. “Both companies are major players in the enterprise IT space – some would say the biggest in their relative markets – and share numerous large global enterprises that stand to benefit from the SAP HANA Enterprise Cloud. The deal should benefit SAP by offering the company access to potential new customers and markets, and by presenting HANA in its best light. Given the magnitude of the agreement — the service will eventually be available in 40 IBM cloud data centers worldwide, plus the other successes of its SoftLayer cloud infrastructure services, the company can rightfully claim to be the cloud platform of choice for global enterprises.”
In addition to its $1.2 billion cloud investment, IBM also invested $1 billion to create a cloud development platform, IBM Bluemix, to enable a new wave of innovation in building cloud apps for the enterprise. And the company created the IBM Cloud marketplace to enable business, IT and development professionals to tap into enterprise cloud services from IBM and its growing cloud ecosystem.
IBM, SAP Cloud Deal a Major Step for Enterprise Cloud Adoption
Moreover, IBM invested $7 billion in 17 key cloud acquisitions including the $2 billion acquisition of SoftLayer and 100+ SaaS properties to serve every business role across the enterprise. In the second quarter of 2014, IBM cloud revenue was up more than 50 percent, with the “as a service” business doubling while the SoftLayer business contributed about one point to IBM Global Technology Services’ revenue growth in the quarter.
Meanwhile, IBM’s new cloud partnership with SAP expands existing relations between the two enterprise IT providers. “IBM and SAP have had a long running partnership around running SAP’s apps on DB2 or around running SAP’s middleware on IBM’s hardware,” said Al Hilwa, an analyst with IDC. “We are seeing here an important decision on SAP’s part to use IBM’s cloud infrastructure which represents a strong endorsement of what IBM is doing in that space. It also highlights the growing traction SAP is getting and its need to expand beyond its own data centers for its customers.”
Pund-IT’s King noted “The agreement qualifies as a great example of the creative ‘coopetition’ the IT industry loves to brag about. That is, the ability of vendors that compete in some areas to work together in others. It’s no secret that IBM has numerous in-memory and analytics offerings of its own that compete directly with SAP HANA. Yet the pair has found a way to leverage complementary technologies in ways that should benefit themselves and their customers. If the SAP HANA Enterprise Cloud service and partnership succeed to the degree that IBM and SAP hope, it should give food for thought to vendors focusing solely on homogeneous, proprietary analytics and in-memory solutions.”
King also said he believes that for SAP customers or companies that have an interest in trying out HANA, the new service is probably a “no-brainer” because it offers a simple on-ramp for determining HANA’s technical and business benefits with far less risk and capital expenditure costs than deploying a dedicated system. “If a CIO isn’t already working with SAP, it’s probably worth looking into SAP HANA Enterprise Cloud to see how its costs/benefits compare to his or her organization’s existing solutions,” he said.
For his part, Constellation Research’s Mueller added that SAP customers concerned about SAP’s expertise to build out data centers can now rely on a proven vendor with more than the SAP load. “Concerns about SAP not having local data centers maybe addressed by the IBM existing and planned data center locations,” he said. “Enterprise loads that may not have moved to the cloud because of data residency and privacy concerns may now be moved, if IBM Cloud can provide in-country or economic region-based data centers.”