What is Happening? If it’s May, Saugatuck must be participating in SAP’s annual SAPPHIRE user and partner event. And if we’re talking about SAP, we must be talking about what they said they would do, and what they have actually done.

Here’s what we said last May about SAP, Cloud, and the company’s business model:

In a few years, we could be looking back on Sapphire 2012 as a watershed moment, as the dominion of legacy business management software moves to the Cloud. If SAP is serious about Cloud, and we believe it truly is, then they can/should/will legitimize Cloud for business management software. I joked with several analysts, media members and SAP executives at the event that “OK, we can stop calling it ‘Cloud’ and start calling it ‘business IT’.”

Beyond these moves, SAP is completely bullish on the future of Cloud as it relates to the HANA data analysis engine/platform. SAP’s vision includes HANA at the heart of its applications and at the heart of SAP’s core value to customers and partners.

A key component of that is the assumption/expectation that in the near future, enterprises will be able to, and should, place all their data into memory for in-memory, HANA-driven analysis and management, which is a foundational element of SAP’s long-term business and technology plan. That can only happen in a Cloud-centric, Cloud-enabled IT environment with massively scalable and exceptionally affordable compute and storage resources. Therefore SAP is pinning its HANA-driven strategy on the growth and acceptance of Cloud.

SAP's future business builds on HANA; HANA is at least as key to SAP’s future as R/3 was to its past. And the HANA strategy is all about Cloud. If SAP is to succeed, Cloud must be the core business IT worldwide. Soon. (Read, “ All-in with Cloud: Notes and Insights from SAP Sapphire 2012”)

So, what did SAP do this year at Sapphire?

  • Stated unequivocally that the HANA Cloud platform is now the core of SAP’s business model – confirming that SAP is no longer a traditional enterprise business management software company;
  • Affirmed its dedication to the new model by announcing (early) general availability of its core Business Suite offering on the HANA Cloud platform;
  • Announced the launch of Fiori, 25 “consumerized” business apps that can be used across desktops, tablets, and smartphones; and
  • Made clear that HANA is positioned as a Cloud-optimized development, hosting, and delivery platform for third-party enterprise business application development, delivery, use, and management.

In sum, SAP has solidified, and articulated, a core business strategy and model to take it from the realm of traditional enterprise software and into position to profit from the expanding Boundary-free Enterprise™ using Cloud, Mobility, Social IT and advanced data Analytics (read, “Saugatuck Report Frames the Boundary-Free Reality of Nonstop IT Growth”).

Why is it Happening? First and foremost, we see SAP’s announcements as affirmation of the accelerating move by enterprise business users and IT buyers toward not only Cloud, but toward the entire collection of technologies and capabilities that enable the embryonic Boundary-free Enterprise business and technology archetype that is increasingly preferred and implemented in most markets (read, “Emergent Trends and SPPs in The Boundary-free Enterprise”).

It would be hard to envision a more apt “poster child” for the rapidly-shifting realities of enterprise IT than SAP. There are few entities with a more entrenched position and reputation at the core of traditional, server-based, data center-oriented IT.

But here SAP is, only a few years removed from its initial forays into Cloud-based technologies and business, affirming that a Cloud-centric, platform-based business and technology architecture is its next ticket to prosperity.

It’s not been sudden by any means. SAP has gone through a series of very public moves over several years in its journey toward today’s Cloud-centric construct, including investments, acquisitions, along with technology and offering development efforts, not all of which have gone as the company planned.

What finally made this change possible for SAP is broad and deep company willingness and ability to shift most of its core culture, along with its technology and business models, toward the new reality. As recently as 2010, there were significant doubts that SAP would, or even could, accomplish such a feat. The company was seen as trying to engineer traditional approaches and solutions to emergent, advanced, mostly Cloud-based competition and demands.

As Saugatuck research and analysis has shown repeatedly, the ability to compete and succeed in Cloud (or any business IT paradigm shift) lies in a provider’s ability to adapt, including re-inventing itself, creating new businesses, and developing entirely new visions. That adaptability does not always begin at the top levels of management, but top levels must be completely on board, and must be in synch with every other level – and then must work to convert the existing customer+partner ecosystem to the new vision while fostering new means of growth (e.g., new channels, partners, customer types, business units, sales teams).

Protect the legacy customer and partner (i.e., developers, ISVs, VARs, SIs) base for SAP by enabling them to retain their existing technologies, software, processes, and practices while addressing their needs and desires for more flexibility and creativity in business and IT.

It also (of course) enables significant new revenue streams – really, a new business model – for SAP that includes positioning SAP’s future with HANA as a provider of core enterprise DBMS capabilities, shifting SAP’s own center farther from apps builder more toward apps architect. In many ways, SAP is positioning itself much as Oracle did years ago, with a relatively advanced DBMS platform that enables a massive ecosystem of enterprise app, system, and services development well beyond what a single app maker could cultivate.

For an extended version of this Research Alert, visit Saugatuck Technology.

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