With the launch of its latest business suite of hybrid-computing products, SAP is responding to the increasingly-crowded financial software market lead by emerging cloud companies.
The new business suite of HANA-driven applications is dubbed SAP S/4 HANA, and it is the company’s biggest launch in over two decades. HANA has been the company’s crown jewel for the last four years: an in-memory database engine designed to perform real-time analytics with blinding speed. It can handle both high transaction rates and complex query processing on the same platform, effectively eliminating the need for data warehouses which slow down query response times. Vishal Sikka, SAP executive board member of technology and innovation, said, “This potential of being able to do everything just-in-time is at the heart of what is possible with the power of HANA.”
The new S/4 HANA products have been “reinvented for the digital age,” says CEO Bill McDermott. This release brings the software vendor (along with its existing catalogue of users in addition to new ones, SAP promises) into the modern age of cloud computing and next-gen apps by repositioning itself as an “innovation partner.” Its two streams of code will allow SAP apps to run on other competitor databases — primarily arch nemesis Oracle — as well as on HANA.
SAP’s founder and chairman, 71-year-old Hasso Plattner, has a lot riding on this launch. He tells Re/code, “If this doesn’t work, we’re dead. Flat-out dead. It’s that simple.”
As one of the biggest players in the enterprise resource planning market, SAP has been hit hard by new cloud vendors that offer far more flexible and cost-friendly software-as-a-service (or SaaS). Back in the medieval days of ERP software, clients would have to license apps, buy computer services, build data centres, and then install the whole system. It was a costly process which could take years. Today, cloud companies such as Workday, Netsuite and Oracle, who rent their apps and deliver them through a network on a subscription basis, are digging into SAP’s client base.
SAP’s own attempts to write cloud apps in-house have not been successful — Plattner himself acknowledged that the company’s old cloud addition “sucked.” To make up for this gap, SAP has been buying its way into the cloud with multi-billion dollar acquisitions of SuccessFactors and Ariba.
With S/4 HANA, the company is betting on its innovation capabilities to override potential drawbacks, most notably that there is still a considerable amount of lock-in required of customers. Despite its dual lines of code, S/4 is optimized for the HANA database. It’s not unreasonable to assume that SAP will favour HANA-based apps, either. At some point, non-HANA S/4 customers will likely have to consider switching databases. SAP argues, however, that S/4 features, when run on HANA, are so compelling, a swap won’t be an issue.
Currently there are more than 5,800 HANA customers, with 2,000 of those using HANA with SAP’s other apps. But even this number, which Plattner calls good, is not where the company wants to be. He says, “We have 2,000 systems sold, and I learned today that we have 270 more in production. If we only double that in 2015 I will be disappointed. That is a significant number, but I will be disappointed by it.”
Time will tell if SAP’s effort is enough and in time. And other ERP providers will have to decide quickly if the new wave of SaaS cloud companies, which are threatening the reigning financial software provider, are a threat to their relevancy, too.
For more on SAP, read this report they released with CMO Council
Photo of SAP CEO Bill McDermott via LinkedIn
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