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How SAP stopped worrying and learned to love the cloud

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SAP is becoming more open, embracing software-as-a-service (SaaS) business models and the public cloud, but can the 45 year old German software maker change the way it works, and the way customers see it, enough to thrive in the new market?

SAP has been shifting its business towards more SaaS applications for a while now, both through acquisitions of line-of-business vendors like SuccessFactors (HR), Concur (travel and expenses) and Hybris (ecommerce), and by re-architecting its own line of business applications to be consumed “as-a-service.”

SAP’s lifeblood is enterprise resource planning (ERP), so when it announced its next generation ERP, S/4HANA, which is built on top of its in-memory HANA database, cloud seemed the natural place to host it.

That didn’t stop customers deploying S/4HANA on-premise, or in a private cloud instance with SAP’s Enterprise Cloud though.

Now, SAP offers its core S/4HANA product on the big three public cloud vendors: Google Cloud, Microsoft Azure and Amazon Web Services.

Public cloud ERP

Last week, during its annual Sapphire conference in Orlando, Florida, at least four top level SAP executives claimed that public cloud is the future for the company.

Franck Cohen, SAP president for Europe, Middle East and Africa told Computerworld UK: “I am a firm believer that the future is public cloud. It is not public cloud for some companies, it is public cloud for everybody, and it is a matter of time.”

When it comes to ERP specifically, Cohen said that the “move to public cloud is already happening” through competitors like Netsuite, Microsoft Dynamics and British vendor Sage.

However, he admitted that SAP is “maybe a bit behind, but I think there are some advantages to come a bit behind, because you come with the very latest technology.

“For instance, the first product at SAP which will benefit from all of our machine learning and AI capabilities is going to be our public cloud ERP,” he said.

Cohen is an advocate for SAP’s cloud momentum, saying: “I have no doubt that the cloud will surpass the on-prem revenue very soon.

“If you look at the growth rate and the curve for the cloud revenue vs the on-prem you can already predict when it is going to happen, it is very simple. It is clear for me that the cloud will surpass the on-prem in the next few years.”

The numbers bear this out. Although its classic on-premise software licences still account for the lion’s share of its sizeable revenues – classic software licenses accounted for 15.4 billion, to cloud’s 2.9 billion, in 2016 – moving customers to the cloud is where the market is going.

This momentum was on show again in SAP’s Q1 2017 results, where total cloud subscriptions and support revenue grew 34 percent year-over-year to 905 million.


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