SAP Co-CEO Explains Cloud Plan, 'Wacky' Hana

Does SAP finally have its act together on cloud computing, will its Hana in-memory platform do more than speed queries, and why does it "require a PhD" to understand the company's pricing? These are just a few of the hardball questions SAP co-CEO Jim Hagemann-Snabe faced during a 45-minute on-stage interview at this week's InformationWeek 500 Conference in Dana Point, Calif.

After a few opening remarks in which he described SAP as "the innovator in business software," Snabe was asked by interviewer Fritz Nelson, InformationWeek's senior VP and editorial director, to give SAP a letter grade for its performance on enterprise software, cloud computing, big data, mobile, technology innovation, and customer responsiveness.

Snabe gave SAP mostly A grades, but he allowed that the company has moved from a D to a B on cloud computing after a slow start. The D was clearly about SAP's early travails with the Business ByDesign apps suite, which had to go through a cloud-infrastructure overhaul soon after it was launched in 2008. SAP has since moved up to a B, according to Snabe, particularly with this year's acquisition of SuccessFactors and the forging of a new cloud strategy focused on money, people, customer, and supplier apps.

[ Want more on competing in-memory approaches? Read Hana and Exalytics: SAP's Hype Versus Oracle's FUD. ]

"In the last four months, after (SuccessFactor's CEO) Lars Daalgard took over SAP's cloud team, not only has he evolved his own line-of-business solutions for HR, but he has also delivered new products," Snabe said. "I'd like to hear from the audience and our customers on these new apps, because I think many would give us an A."

SAP's money apps include the Business ByDesign suite, a just-launched Enterprise Performance Management OnDemand app, and a soon-to-be-released Finance OnDemand app based on a subset of functionality from Business ByDesign. The people apps include SuccessFactors' human capital management apps, which are used by more than 5,000 companies. The customer apps include Business ByDesign and SAP Sales OnDemand. The supplier-oriented apps are to be gained though SAP's pending $4.3 billion acquisition of Ariba, which is still awaiting regulatory approvals.

So, Nelson asked, what's Snabe's response to Oracle CEO Larry Ellison's widely followed June Twitter post: "SAP's got nothing in the cloud but SuccessFactors until 2020"?

"My parents taught me never to lie," Snabe said. "If you compare the two companies, Oracle has Fusion and we have ByDesign ... Fusion has around 100 customers and ByDesign has 1,100 customers. So we have 10 times more customers just on our suite, and we also have our four categories of [cloud-based] line-of-business applications."

When the topic turned to Hana, Nelson pointed out that Oracle, too, has a high-speed, in-memory query option with Exalytics. So how does Hana stand apart? Snabe detailed Hana's architectural differences at length, pointing out that the database platform does away with conventional disk drives and their inherent I/O constraints. With the combination of columnar compression and the ability to run both transactional applications and analytic queries on a single database, Hana will deliver "radical simplification," Snabe promised.

"Today with modern hardware with no moving parts, a 1-terabyte main memory system that's about my size will outperform a traditional, disk-based system [of the same capacity] that would be the size of this stage and would cost 10 times more," Snabe said.

Of course, that vision is biased toward ERP data. SAP doesn't talk too much about how data from third-party systems would be analyzed if you eliminate the separate warehouse (though when pushed, they'll bring up the Sybase IQ database as an option). What's more, SAP customers can't count on radical simplification just yet, as Hana is not yet certified to run SAP's transactional enterprise applications. Parts of the ERP suite will start to run on Hana beginning next year, Snabe said.

Snabe played right along when Nelson raised Ellison's descriptions of Hana as a "wacky" skunk works project. "The reason you can argue it's wacky is that we don't often see performance improvements in this industry by a factor of two or three," he said. "When customers see that Hana is 10,000 times faster and in some cases even 100,000 times faster [than a conventional database], it's wacky, but it's true.

There were more tough questions from the audience during the Q&A session. "I've had two U.S. SAP executives say to me that to figure out the company's pricing, you need a German PhD," commented James Cocca, CIO of Spirit Aerosystems, a Wichita, Kan., based supplier to Boeing and other aerospace giants. "What are you doing to simplify pricing and help us deliver more to our customers at lower cost?"

Snabe shared an anecdote about meeting the CEO of a very large German company who complained, "we spend too much on SAP." The company's total expenditures on SAP maintenance, new licenses, and services totaled about $50 million per year. To put that in perspective, Snabe said he asked questions and learned that 70% of the company runs SAP and that its total annual IT budget is $1 billion per year, so SAP accounts for 5% of the company's total IT spend.

"I asked 'can we look at that $1 billion and help you reduce that by 20%, and if we succeed, would you spend more with SAP on innovation?'" Snabe said. The offer was taken, and through a combination of consolidating redundant SAP software and replacing 200 legacy systems with functionality that could be provided by the company's existing ERP deployments, Snabe said the company was able to save $150 million per year.

"Gartner analyses confirm that we're typically 5% of the total spend," Snabe said. "Why are we not in hardware or services? Because we want to increase the value of the software and reduce the total spend with rapid-deployment solutions, best practices, and reductions in infrastructure costs through simplification, like with Hana or with cloud services."

The discussion concluded with the topic of SAP's ongoing legal battles with Oracle on the TomorrowNow copyright infringement case. Snabe returned to the theme of his opening remarks, saying, "if I had a choice, I would go for the best engineers for software development, not the best lawyers."