Cloud // Software as a Service
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5/23/2012
10:27 PM
Josh Greenbaum
Josh Greenbaum
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SAP Energizes Its Cloud Strategy

As the Lars Dalgaard era begins, SAP faces a major challenge in sorting out its cloud strategy.

One of the most amazing cross-country flights I ever took found me over the center of the country at night, flying through an unbelievable electric storm, with an almost constant arcing of lightning illuminating vast canyons and mountains of clouds. As the pilot maneuvered us through this unforgettable vision of nature's wonder, he came on the intercom to offer a phrase that has stuck with me since: "It's incredible how much more lightning there is in the sky that you simply can't see from the ground."

That metaphorical image is the cloud version of the iceberg's hidden girth--what you see from your puny perch in the bow of a ship at sea or with your neck craned to scan a stormy sky is a small part of a much larger phenomenon. And as I try to put my arms around SAP's long and often sordid cloud history, and make my way through the many cloud announcements at last week's SAPPHIRE, this image of an invisible, behind the scenes sturm und drang is the best way to describe not just how SAP got to its present strategy, but why it looks the way it does today and how it will evolve.

First and foremost is the lightning and thunder personified in Lars Dalgaard, founder and CEO of SuccessFactors, which SAP acquired early this year. His onstage and offstage personality is in the mold of the Norse god Thor, wielding his signature hammer in battle against myriad monsters and other evils. Watching Lars in action made it clear to me that this conceptualization is relatively close to the mark: He has been given a mighty hammer to wield across SAP's fractured cloud landscape, and he has no problem banging it in public and private. It's also clear from the glimmer in the eye of co-CEO Jim Snabe (a fellow Norse god: Odin, Thor's father, perhaps?) that there is some appetite, at least in the executive board-cum-Valhalla of which Lars is now a member, for a little hammering.

Handing off SAP's troubled cloud history to Lars at face value looks like a good idea--though I have a few caveats that I'll bring up in a moment. I was impressed to hear that he made the decision to keep Business ByDesign largely by installing it at SuccessFactors, instead of just listening to proponents' and opponents' competing presentations. I was also impressed by the rollout of a growing list of on-demand apps and the positioning of the SAP NetWeaver Cloud as the one true cloud fabric to rule them all: SuccessFactors, ByD, and the rest of SAP's cloud apps and technology will all come together under the NetWeaver Cloud umbrella. Of course, when this will be ready is a moving target; the NetWeaver Cloud will be generally available this summer, but don't expect it to be fully formed for some time.

[ Read more from Josh Greenbaum on SAP. See SAP's Success And Looming Challenges.]

So while the theory is largely sound, there are some serious problems with how quickly SAP will be able to realize this vision, mostly because the realization of a comprehensive cloud strategy is about much more than just "ending software" and creating a development platform and some APIs. There's a huge amount of work that has to happen--from reorganizing the field to adjusting revenue expectations to building a real cloud services platform that SAP, and every other vendor, will have to deal with.

Rather than just make the cloud safe for staging cloud-ified versions of on-premises software, cloud success for SAP and its competitors will require the development and deployment of net new cloud apps. I've previously referred to this as value-added SaaS: applications that provide functionality, which would have been impossible to build or afford on-premises. This is why the entry of SAP or any other traditional on-premises software company to the cloud can't be judged by the yardstick of pure on-demand pioneers like Salesforce.com, or SuccessFactors, for that matter. The value-added cloud is very different from the first-generation cloud, and it requires a different set of, pardon the pun, success factors:

1) A robust, open development environment that supports existing tools and comes with easy license terms--but strict quality and security controls--that can energize an enormous developer base.

2) A set of application building blocks, components and objects that developers can use to build great cloud apps by leveraging existing technology and packaged business processes.

3) Quality content in the form of third-party data services that, like the application building blocks, can be used to build out next-generation cloud apps.

4) A built-in, robust IaaS capability that allows integration to be exchangeable and interchangeable, and essentially drives the cost and complexity of cloud-based integration to zero.

5) A commercial environment for the staging, commercialization, and consumption of cloud-based apps--an App store--that makes it easy to buy and sell great new apps.

SAP's progress on all these fronts is limited to date, though it's moving forward on all except number three as far as I can tell. But, when compared to Microsoft Azure, SAP is significantly behind. Of course, Azure is very behind as well, which means that the entire market is still building out this vision, and no one, including a market leader like Microsoft, has completely nailed it yet.

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