I participated last week in two days of SAP briefings with a group of about 15 bloggers. Part of the time was devoted to explaining SAP's evolving cloud strategy, which I will attempt to summarize in this post.
Keep in mind that what I'm sharing here is not SAP's own messaging around its cloud strategy. Rather, it is my interpretation of where SAP is going and what it needs to do to be successful.
SAP Has a Proliferation of Cloud Assets
Over the past few years, SAP has been at work rolling out a number of cloud services. The most well-known is Business ByDesign (ByD), a full-suite ERP system, written from the ground up for software-as-a-service (SaaS). This was an enormous development effort, and it went through two development iterations until 2011, when it was ready to scale in production. SAP now has over 1,000 customers running ByD.
Following initial delivery of ByD, SAP also began rolling out its line-of-business applications. These were built on the ByD cloud platform to meet the needs of specific business functions, such as sales force automation (Sales OnDemand) and expense reporting (Travel OnDemand). There are others, also.
Then in 2011, SAP acquired SuccessFactors, a well-respected cloud-only HRMS vendor. This greatly increased SAP's stature as a SaaS provider, but it also added another set of cloud assets and executive leadership to the mix. Further adding to the complexity: SAP is in process of acquiring Ariba, the venerable provider of supplier networking services.
From Cloud Applications to a Cloud Platform
In my view, the current situation has led to a number of problems. First, SAP's cloud portfolio is largely a collection of unrelated systems, and several different cloud platforms. There has been no common architecture, and no integrated product roadmap.
Second, the rest of SAP's product porfolio is not standing still. Specifically, SAP has been making large investments in its in-memory database technology (HANA), and it has acquired and developed an impressive array of mobility applications and mobility platforms. All of these products have cloud-delivery aspects.
Third, SAP lacks a single extensible cloud development environment. (ByD does have a PaaS capability, for partners only, but it is limited to ByD.) Customers and partners don't just want cloud apps, they want the ability to extend those apps and build new applications that can interoperate with them. In other words, they want PaaS (platform-as-a-service) in addition to SaaS.
SAP's emerging cloud strategy addresses all of these issues: it embraces all of SAP's existing applications as well as its database and mobility platforms, and it gives customers and partners a development environment to build upon and extend these services.
Here are key aspects of SAP's cloud strategy, as I see them:
- Everything as a Service. Behind the scenes, SAP has been rearchitecting its SaaS offerings to be delivered as web services. For example, it has broken up ByD functionality into 32 "honeycombs," so that no two of them share a common database. Rather they communicate via messaging. SAP has taken the same approach with its line-of-business applications. In fact, all of SAP cloud applications will be deployed as web services, including its mobility and database offerings. I have to believe this also includes SuccessFactors. SAP will now be able to sell individual modules (e.g. Finance), or a complete suite, or combinations in between.
- Platform-as-a-Service. SAP has built a PaaS capability, now referred to as the SAP Netweaver Cloud (earlier code-names included JPass, Neo, and Project River.) It is intended as a multi-language/multi-framework platform. It is primarily a Java-platform, but its open nature also allows development in a variety of other languages, such as Spring and Ruby. Furthermore, it allows developers to access all of the SAP cloud applications, database services, and mobility services that are now accessible via web services (see point #1). It even allows applications to access SAP on-premises systems such as SAP ECC, CRM, and HCM. Conceivably, therefore, the Netweaver Cloud could be used for customizations/extensions of SAP on-premises systems that have been traditionally done with ABAP coding.
- Ecosystem. The SAP Netweaver Cloud can be used internally by customers or their system integrators, and it also can be also used by third-party developers to build new applications for sale on the SAP Store. This facilitates the growth of SAP's developer ecosystem.
The Netweaver Cloud runs in SAP's own data centers (including those gained through the acquisition of SuccessFactors). There are a number of other features, such as identity services and document services, which I won't go into in this post.
The Pluses and the Minuses
There are several things I like about SAP's emerging cloud strategy.
- Integration. SAP's is finally integrating all of its cloud assets into a single platform. If successful, nearly anything SAP delivers should be available and accessible through Netweaver Cloud.
- Openness. Netweaver Cloud does not use a proprietary language, like Salesforce.com's APEX. Use of public development languages, such as Java and Ruby, facilitates adoption by developers and also works against lock-in to a single platform. Likewise, the PaaS makes use of open source projects from Apache and Eclipse, which should further facilitate adoption by developers.
- Availability. Netweaver Cloud has already been released to customers, and it is scheduled for general availability at the end of this month. A free 90 day trial is already being offered. This puts SAP out ahead of Oracle, whose Oracle Public Cloud is still in controlled
availability (though hopefully there will be announcements at Oracle's Open World conference next month).
On the other hand, there are some aspects that give me concern.
- Will Customers Understand It? The cloud-only providers have one great advantage: simplicity. Everything Salesforce.com builds is on its Force.com platform. Likewise, enterprise cloud leaders such as NetSuite and Workday grew up with single platforms. Their platforms are relatively easy to explain and easy to understand. SAP, on the other hand, has a variety of on-premises and cloud systems. Furthermore, it has built or acquired a variety of database products and mobility applications and platforms. The SAP cloud platform must now deal with all of these products. It's not easy to explain, as witnessed by the difficulty SAP's own team had in communicating it with our group of tech bloggers. If the bloggers struggle with understanding it, what hope does SAP have to make the message clear to customers or prospects?
- Will Developers Adopt It? Developers are a key to success in cloud systems, just as they are in mobility applications. Salesforce.com already has a large and enthusiastic ecosystem of developers for its Force.com platform. Microsoft has an enormous ecosystem of development partners, for whom Microsoft's cloud platform (Azure) is more-or-less an incremental step in using existing Microsoft development tools. Will SAP's current population of partners readily embrace Netweaver Cloud, or will they be content to continue development in the SAP tools they have been using for years?
- Is SAP Too Late? Salesforce.com's PaaS was first introduced in 2006 (I wrote about it at the time, here). NetSuite has had CloudSuite for years. Microsoft has already rolled out and continues to refine its Azure PaaS. SAP is only now rolling out Netweaver Cloud. Though SAP denies this, I do believe that its cloud development efforts in recent years have taken a back seat to its database and mobility development efforts. So now, SAP is playing catch-up. SAP has a lot of work to do to be perceived as a cloud leader.
Regarding that last point, on the other hand, my research at Computer Economics shows that PaaS is a technology that is still in the early adopter phase. Most organizations are still buying individual SaaS applications and have not yet made a strategic commitment to cloud computing as a platform. They have hybrid systems: some on-premises, and some in the cloud. Of course, there are exceptions: these are the early adopters that embrace cloud computing not only for SaaS applications but for PaaS as a development strategy. Nevertheless, the majority have not yet seen the vision. Therefore, if SAP can quickly make its cloud strategy clear and deliver working product, it may still have a shot at being a major player.
Here are some reports from other bloggers who were at this event:
Disclosure: SAP paid for part of my travel expenses to this event.
SAP in Transition on Mobile, Cloud, and In-Memory Computing
SAP innovating with cloud, mobile and in-memory computing
Salesforce.com to allow customization of its hosted service
Labels: Azure, cloud, Force.com, Microsoft, NetSuite, Netweaver Cloud, PaaS, SaaS, Salesforce.com, SAP, Workday