SAP’s cloud business accounts for less than 5% of revenue, noted Gartner analyst Thomas Otter just over half a year ago. Since then, the acquisition of SuccessFactors and its planned acquisition of Ariba have brought SAP more than just new customers. Even the analysts now see SAP as a force to be reckoned with in the cloud business. The latest figures from Q2 2012 show that SAP earned 69 million euros in revenue from cloud software. The share of business from the cloud division is now at 6.5%.
SAP hopes to gain some wins by offering corporate groups and large enterprises ERP solutions and cloud solutions for specific departments and processes. SAP Business One, SAP Business ByDesign, and Dynamics NAV from rival Microsoft still dominate ERP in the cloud, with ERP solutions for corporate groups yet to make it in to the cloud. This is set to change. Sven Denecken, one of SAP’s thought leaders, says that in the future SAP will be focusing on the core modules customers, employees, finance, and suppliers. With SuccessFactors, a specialist in human capital management (HCM) solutions, SAP acquired 17,000 cloud customers and invested in the employee core module. Ariba covers the supply chain, and makes it possible to use the cloud to get the most out of the networks that exist not just within companies, but between companies.
The rationale for these activities is clear: In an online survey conducted by TNS Infratest with over 600 larger companies in Brazil, Germany, the United Kingdom, and the United States, one in five companies said that over the next year and a half they would be investing half of their IT budget in cloud solutions. Of those companies surveyed, four out of five saw cloud computing as important to their business. According to a Saugatuck survey from February this year, three out of every four euros invested in new IT solutions are spent on cloud or hybrid solutions. As the TNS Infratest survey confirmed, companies still have the familiar concerns about unsatisfactory data security (44%), compliance issues (38%), and the risk of losing control (38%) – concerns which are at most low-level background noise accompanying the inevitable shift to cloud computing.
On the following pages, Denecken explains the next three steps SAP will take on its cloud roadmap.
Denecken, SAP’s vice president for cloud strategy and head of co-innovation, says there are three milestones on the route to cloud computing:
1. Companies use individual cloud services to complement existing solutions.
One example is travel expenses. A mobile device, either an iPad or a BlackBerry, is connected to employees’ credit cards and diaries. Using the cellphone to photograph a taxi invoice or train ticket, for example, means that employees do not end up with a pile of receipts by the end of their business trips. Ideally, by the time they get back in the office, their expense claims have been signed off and settled. For Denecken, the most important point to remember is: “Pure cloud solutions often don’t integrate. We at SAP see that differently; hybrid solutions are very popular.”
Next example: Strategic purchasing departments use “sourcing on demand.” Orders are created in the ERP system. The cloud is used to find the supplier with the best offer in an auction, and to complete the purchase. Not least, large enterprises use mid-market solutions such as SAP Business ByDesign in their regional offices to close their books faster, says Denecken, giving Lufthansa Revenue Services, BP (British Petroleum) and travel company TUI as examples.
Talent management is another example, a real gain for SAP from the SuccessFactors acquisition. Employees can exchange information about meeting targets, and about skills and competencies. The processes are connected up with the HR systems used to handle compensation and bonuses. The system is built with the user in mind, says Denecken. One of the main goals SAP is currently pursuing is a “mobile first” mentality. SuccessFactors is a major step in this direction.
2. Putting lines of business in the cloud.
Having all payroll and HR functions available as cloud applications while keeping finance on premise is one conceivable scenario. Hybrid solutions, which combine on-premise and cloud solutions, are used by almost two thirds of the companies who, in TNS Infratest’s survey, said they were looking to invest more money and resources in cloud computing in the future. “Log on once and go hybrid” is SAP’s motto. It does not matter whether extra services come from other providers by means of cloud integrators such as IBM’s Cast Iron or Dell’s Boomi. “Customers decide whether they want to access an SAP solution or a different one in the cloud,” says Denecken, who is looking to offer cloud solutions for finance and suppliers in the near future.
3. Optimizing processes and increasing efficiency using the Business Web.
The aim will be to get the most out of the relationships that exist between companies in the Web. “Small and midsize companies in particular don’t have enough capacity in many of their IT processes. Having the expertise on site is difficult,” explains Denecken, “but they can put forward their innovations here and submit them to the network.” The “Facebook for business,” as Denecken calls it, could one day become an important driving force for large enterprises. Ariba’s online commerce network already brings together enormous purchasing power. The top 2,000 companies in the network account for $12 trillion worth of business – an enormous market, and SAP wants to benefit from this network. “Ultimately, it’s no longer the conventional relations between organizations but the LinkedIns, the social networking sites for business, that companies should be using,” believes Denecken.
No matter what type of solutions SAP and its competitors focus on, cloud, mobile, analytics, and big data are the future. “The cloud is the catalyst,” believes Denecken. By developing with a “mobile first” mentality, having the user in mind at every step, and delivering a complete package, SAP will, if you take Denecken’s view, only succeed with the cloud.