So let’s dissect the press releases in our typical new analysis and implications style:
ARMONK, N.Y. and WALLDORF, Germany— Oct. 14, 2014: SAP SE (NYSE: SAP) and IBM (NYSE: IBM) today announced that SAP has selected IBM as a premier strategic provider of Cloud infrastructure services for its business critical applications – accelerating customers’ ability to run core business in the cloud. The SAP® HANA Enterprise Cloud offering is now available through IBM’s highly scalable, open and secure cloud. SAP HANA Enterprise Cloud will expand to major markets with the addition of the IBM cloud data centers. This is expected to enable customers to deploy their SAP software around the globe in a faster and more secure environment that is backed by IBM's proven cloud capabilities.
MyPOV - So IBM gets the first mover advantage becoming a 'premier strategic provider' for SAP cloud infrastructure. In early 2014 IBM announced to expand to 40 data center locations over the next quarters, an investment that is well under way for IBM (our take here). Given traditional cloud players like e.g. Amazon, Microsoft and Google have not responded formally with an announcement to expand to 40 locations, too – if SAP really cared for global coverage then there was not better option than IBM’s cloud infrastructure that is powered by SoftLayer (our take on the acquisition here) as well as IBM's Cloud Managed Services data centers, which IBM has build prior to the SoftLayer acquisition. And SAP is probably one of the enterprise vendors more sensitive to data location and data privacy laws, giving global experience, coverage and customer demand.
"We look forward to extending one of the longest and most successful partnerships in the IT industry,” said Bill McDermott, CEO of SAP. “The demand for SAP HANA and the SAP Business Suite on SAP HANA in the cloud is tremendous and this global agreement with IBM heralds a new era of cloud collaboration. We anticipate customers will benefit from this collaboration and expansion of SAP HANA Enterprise Cloud."
MyPOV – Interesting that McDermott refers to HANA and Business Suite on HANA only – SAP runs more than these two products in the SAP Cloud, which is also the home of the acquired SAP applications, Ariba, SuccessFactors, Hybris and probably (not announced and confirmed) Concur soon. So we will need to learn more which applications (and with that related load) SAP is bringing to the IBM cloud. If it’s only Business Suite on HANA that would be certainly a lot of potential, but a lot of future and not current load. But as almost all acquired products have a roadmap to be 'ported' to HANA - 2015 should see the full potential of the partnership.
“This announcement is a significant milestone in the deployment of enterprise cloud,” said IBM Chairman, President and CEO Ginni Rometty. “It builds on our two companies’ long history of bringing innovation to business, and extends IBM’s position as the premier global cloud platform. Our secure, open, hybrid enterprise cloud platform will enable SAP clients to support new ways to work in an era shaped by Big Data, mobile and social."
MyPOV – Similar to the Apple announcement, it’s again not ‘Ladies First’. So we may speculate that IBM wanted this partnership more than SAP, or that SAP is senior partner here. Unrelated Rometty is surely right that this is a significant milestone for both vendors. IBM gets load, and SAP gets data center access around the globe.
Together, IBM and SAP have the expertise, solutions and cloud infrastructure to deliver SAP business solutions on the IBM Cloud. SAP brings the power of realtime through in-memory computing capabilities of SAP HANA combined with the ability to run mission-critical business applications, like SAP Business Suite, in a cloud environment. IBM brings enterprise depth and the open architecture of IBM Cloud Managed Services and SoftLayer — enabling customers to securely manage SAP workloads from trial to production on a consistent infrastructure, with transparency and control over where data resides. In addition, customers will benefit from the technology and services from both companies that offer industry-specific best practices, enabling customers to transform their organizations. SAP and IBM customers of all sizes will benefit from this joint collaboration of two of the most trusted companies in the industry.
MyPOV – Some reading between the lines: The SAP scope got extended in comparison to the above quote from McDermott, leaving room to other applications 'like' the SAP Business Suite. Good and makes sense. Interesting enough the section also refers to ‘trial’ – something that traditionally does not happen for SAP applications – but something this partnership could enable more efficiently. And then IBM stresses its large consultant force knowledgeable of SAP. But if this partnership is gated to the IBM services on the consulting side, then I think it will not reach its potential. We will have to see if SAP / IBM can attract additional customers beyond existing IBM consulting customers. It remains one of my concerns for IBM cloud that it is run out of the services division, with the risk of too much focus of consulting centric services.
Key Benefits to Enterprises of All Sizes
· Customers can take advantage of the SAP HANA Enterprise Cloud with the global footprint of IBM Cloud. This enables customers to put data to work with SAP HANA and business applications in the IBM Cloud built for speed, transparency and control.
MyPOV – Location matters both for regulatory compliance and performance of cloud deployments. IBM Cloud does very well here.
· SAP HANA will run on IBM Cloud to provide an open-standards-based approach that will help create the foundation to more easily integrate existing technology investments with new workloads.
MyPOV – We will have to understand in more details on what machines HANA will run in the IBM Cloud. [Update from IBM, October 15th 2014: HANA on SoftLayer is using SoftLayer bare metal servers, HANA on IBM Cloud Managed Services for SAP us using the IBM System x appliance.]
· IBM and SAP are committed to security for enterprise customers in the cloud. The IBM Cloud provides visibility and control to enable enterprises to apply and extend their security best practices into a cloud environment.
MyPOV – Both the bare metal capabilities and recent Intel TXT partnership (read more here) will help in the aspect of security.
· Companies will now have additional reach and scale to more easily start locally and scale globally with cloud capabilities and also comply with data residency and other regulatory mandates.
In one of the briefings on the topic I also learnt from Kevin Ichhpurani, that SAP will offer a single SLA to customers, with SAP being the first line of support - also for running and administering the pieces that run on IBM's cloud infrastructure.
Analysis points
- The Enterprise Cloud is coming – Enterprises have run applications on the cloud before, but so far there has not been a combined offering of enterprise applications (brought here by SAP) and infrastructure services (brought here by IBM) – that offers a global cloud capability why addressing security concerns (bare metal and e.g. Intel TXT) with numerous global locations, and a provider commitment to continue to 40 worldwide locations (as previously made by IBM). Enterprises will appreciate this combined offering.
- Locality matters for cloud – In an ironic twist the location of data centers not only matters from as statutory, data privacy and emotional level, but it also increases performance and accessibility of cloud services. If you doubt it – speak to Southern hemisphere users in e.g. Australia, South Africa or Argentina, trying to access Northern hemisphere services. Latency is and remains an issue.
- Getting share matters – It will be interesting to see how much market share IBM can get from SAP – both in terms of application portfolio and then with customers running on different hardware vendors infrastructure. There is nothing in the agreement pointing to a exclusivity. If IBM can pitch the advantages of the IBM cloud to SAP customers running on premise in e.g. HP, Dell etc. and move them to the IBM cloud, that would be big points in the overall battle for compute load in the cloud. On the flipside if IBM can only win deals where IBM Global Services is in charge anyway, that would be a suboptimal outcome for the vendor, given its lead with the IBM Cloud powered by SoftLayer over known competitors on the hardware side like IBM, Dell etc. and provider side like e.g. VMWare, Cisco et al.
- Service Level Agreements (SLA) matter - Enterprise customers look for a single 'throat to choke' when it comes to strategic projects. Moving to the cloud is certainly one of these projects and with SAP offering a single SLA across SAP and IBM data center locations, customers and prospects will certainly take note.
- Hardware matters - At the moment IBM can only run HANA on x86, something giving the recent disvestiture of that business to Lenovo maybe suboptimal for IBM. So it's not a surprise that IBM is certainly working with SAP on certifying the POWER plattform for HANA.
Implications, Implications
So what does this mean for SAP, IBM customers and for their partners and competitors?Implications for SAP customers
SAP customers so far worried about SAP’s expertise to build out data centers can now rely on a proven vendor with more than the SAP load. Concerns about SAP not having local data centers maybe addressed by the IBM existing and planned data center locations. Enterprise loads that may not have moved to the cloud because of data residency and privacy concerns may now be moved, if IBM Cloud can provide in country or economic region based data centers. Existing HEC customers should compare rates and compare performance and then make decisions on where to run their HEC based applications going forward.Implications for IBM customers
Existing IBM Cloud customers that also use SAP now have more load that can be brought to their cloud infrastructure of choice. Negotiate SLAs and discounts hard with IBM. Also, before going ‘all in’ with IBM (as with any other cloud provider), customers need to think twice, both from a contractual and commercial tie in with a single vendor. If the SLA may transfer to SAP, look at the fine print. And inquire on the timelines of the HANA on POWER certification project, as this may offer better price / performance ratio and will certainly see IBM being motivated to promote its POWER platform.Implications for IBM and SAP partners
There is nothing exclusive in the announcement. IBM has first mover advantage and probably global build out advantages over other cloud service providers that want to run SAP load (e.g. we don’t see Google as one of these providers). Other SAP partners that provide cloud services need to see if data center locality matters to enterprise – or not – and then react accordingly. We expect e.g. Microsoft and VMware having a significant interest. Microsoft does not have a platform for running HANA applications in production (the HANA developer edition runs on SUSE in Azure). VMware does a lot of revenue with virtualization of on premise SAP deployments, which are at risk when moving to the public cloud.Implications for IBM and SAP competitors
IBM competitors will try to get their SAP partnerships in place asap. SAP is the largest single vendor for potential enterprise software load, and a too big target not to compete for. But IBM is the first out of the gate and if data center locality matters, has an advantage in terms of earlier investments. We expect both VMware and other cloud services providers (e.g. Deutsche Telekom) to ramp up SLA level and guarantees, using partner data centers. The promise has always been the one of consistent SLAs across all data centers, but naturally enterprises have been skeptical in regards of a partner based SLA vs a single vendor SLA. Amazon remains a formidable competitor and surely will look at SAP load, too.For SAP competitors we expect to see either similar strategies or an accelerated build out of data centers. Oracle is likely to accelerate data center rollouts (it has 22 already) and not partner with e.g. IBM. Infor, enterprise vendor #3, has already partnered with Amazon AWS, leading the market decision wise in March of this year (read our analysis here). It’s clear that Microsoft business applications have no other place to go than Azure. Earlier in May Epicor made already a decision to use Microsoft Azure. We expect Salesforce and Workday to remain on their existing paths, with Workday notably adopting more of OpenStack (our analysis here).
MyPOV
A good move by IBM to secure a piece of the SAP enterprise load. Compared with e.g. Oracle and Microsoft, IBM brings the least in house enterprise load to the cloud game, based on its 100+ SaaS products. That has forced IBM to look for load outside of IBM, and this is the first partnership IBM has signed. I would not expect it to stop here for IBM.And a good move by SAP, following the moniker of ‘friends don’t let friends build data centers’. Building out HEC is a significant IP and capital investment. Having IBM pay for that is a good move for SAP’s CAPEX budget planning, which hopefully it will invest into more application development. But then SAP will not give up and close any data centers in the near future.
Both development are good news for customers, as IBM gets more load and SAP gets a strong cloud partner and renewed focus on enterprise product development.
Overall a win / win / win for customers, IBM and SAP. How much business will be able to get captured is the real interesting future that only future will be able to answer. And some more analyst insights – so stay tuned.
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- Event Report - IBM Enterprise - A lot of value for existing customers, but can IBM attract net new customers? Read here
- Progress Report - The Mainframe is alive and kicking - but there is more in IBM STG - read here
- News Analysis - IBM and Intel partner to make the cloud more secure - read here
- Progress Report - IBM BigData an Analytics have a lot of potential - time to show it - read here
- Event Report - What a difference a year makes - and off to a good start - read here
- First Take - 3 Key Takeaways from IBM's Impact Conference - Day 1 Keynote - read here
- Another week and another Billion - this week it's a BlueMix Paas - read here
- First take - IBM makes Connection - introduces the TalentSuite at IBM Connect - read here
- IBM kicks of cloud data center race in 2014 - read here
- First Take - IBM Software Group's Analyst Insights - read here
- Are we witnessing one of the largest cloud moves - so far? Read here
- Why IBM acquired Softlayer - read here
And more on overall SAP strategy and products:
- Market Move - SAP strikes again - this time it is Concur and the spend into spend management - read here
- Event Report - SAP SuccessFactors picks up speed - but there remains work to be done - read here
- First Take - SAP SuccessFactors SuccessConnect - Top 3 Takeaways Day 1 Keynote - read here.
- Event Report - Sapphire - SAP finds its (unique) path to cloud - read here
- What I would like SAP to address this Sapphire - read here
- News Analysis - SAP becomes more about applications - again - read here
- Market Move - SAP acquires Fieldglass - off to the contingent workforce - early move or reaction? Read here.
- SAP's startup program keep rolling – read here.
- Why SAP acquired KXEN? Getting serious about Analytics – read here.
- SAP steamlines organization further – the Danes are leaving – read here.
- Reading between the lines… SAP Q2 Earnings – cloudy with potential structural changes – read here.
- SAP wants to be a technology company, really – read here
- Why SAP acquired hybris software – read here.
- SAP gets serious about the cloud – organizationally – read here.
- Taking stock – what SAP answered and it didn’t answer this Sapphire [2013] – read here.
- Act III & Final Day – A tale of two conference – Sapphire & SuiteWorld13 – read here.
- The middle day – 2 keynotes and press releases – Sapphire & SuiteWorld – read here.
- A tale of 2 keynotes and press releases – Sapphire & SuiteWorld – read here.
- What I would like SAP to address this Sapphire – read here.
- Why 3rd party maintenance is key to SAP’s and Oracle’s success – read here.
- Why SAP acquired Camillion – read here.
- Why SAP acquired SmartOps – read here.
- Next in your mall – SAP and Oracle? Read here.
And more about SAP technology:
- HANA Cloud Platform - Revisited - Improvements ahead and turning into a real PaaS - read here
- News Analysis - SAP commits to CloudFoundry and OpenSource - key steps - but what is the direction? - Read here.
- News Analysis - SAP moves Ariba Spend Visibility to HANA - Interesting first step in a long journey - read here
- Launch Report - When BW 7.4 meets HANA it is like 2 + 2 = 5 - but is 5 enough - read here
- Event Report - BI 2014 and HANA 2014 takeaways - it is all about HANA and Lumira - but is that enough? Read here.
- News Analysis – SAP slices and dices into more Cloud, and of course more HANA – read here.
- SAP gets serious about open source and courts developers – about time – read here.
- My top 3 takeaways from the SAP TechEd keynote – read here.
- SAP discovers elasticity for HANA – kind of – read here.
- Can HANA Cloud be elastic? Tough – read here.
- SAP’s Cloud plans get more cloudy – read here.
- HANA Enterprise Cloud helps SAP discover the cloud (benefits) – read here.