SAP Energizes Its Cloud Strategy – The Lars Dalgaard Era Begins

One of the most amazing cross-country flights I ever took found me over the center of the country at night, flying through an unbelievable electric storm, with an almost constant arcing of lightning illuminating vast canyons and mountains of clouds. As the pilot maneuvered us through this unforgettable vision of nature’s wonder, he came on the intercom to offer a phrase that has stuck with me since:  “It’s incredible how much more lightning there is in the sky that you simply can’t see from the ground.”

That  metaphorical image is the cloud version of the iceberg’s hidden girth – what you see from your puny perch in the bow of a ship at sea or with your neck craned to scan a stormy sky is a small part of a much larger phenomenon. And as I try to put my arms around SAP’s long and often sordid cloud history, and make my way through the many cloud announcements at last week’s SAPPHIRE, this image of an invisible, behind the scenes sturm und drang is the best way to describe not just how SAP got to its present strategy, but why the strategy looks the way it does today and how it will evolve in the future.

First and foremost is the lightning and thunder personified in Lars Dalgaard, whose onstage and offstage personality is definitely in the mold of the Norse god Thor, wielding his signature hammer in battle against myriad monsters and other evils.  Watching Lars in action made it clear to me that this conceptualization is relatively close to the mark: Lars definitely has been given a mighty hammer to wield across SAP’s fractured cloud landscape, and it’s clear that he has no problem banging that hammer in public or private. It’s also clear from seeing the glimmer in the eye of co-CEO Jim Snabe (a fellow Norse god: Odin, Thor’s father, perhaps?) that there seems to be some appetite, at least in the executive board-cum-Valhalla of which Lars is now a member, for a little hammering.

Handing off SAP’s troubled cloud history to Lars at face value looks like a good idea – though I have a few caveats that I’ll bring up in a moment. I was impressed to hear that he made the decision to keep Business ByDesign largely by installing it at SuccessFactors,  instead of just listening to competing presentations by the proponents and opponents. I was also impressed by the rollout of a growing list of on-demand apps, and the positioning of the SAP NetWeaver Cloud (SNC) as the one true cloud fabric to rule them all – SuccessFactors, ByD, and the rest of SAP’s cloud apps and technology will all come together under the SNC umbrella. Of course when this will be truly ready is a moving target: the NetWeaver Cloud will go GA this summer, but don’t expect it to be fully formed for some time.

So while the theory is largely sound, there’s some serious problems with how quickly SAP will be able to move forward to realize this vision, mostly because the realization of a truly comprehensive cloud strategy is about much more than just “ending software” and creating a development platform and some APIs. There’s a huge amount of work that has to happen – from reorganizing the field to adjusting revenue expectations to building a real cloud services platform that SAP, and every other vendor, will have to deal with.

Rather than just make the cloud safe for staging cloud-ified versions of on-premise software, cloud success for SAP and its competitors will require the development and deployment of net new cloud apps, what I’ve previously called value-added SaaS: applications that provide functionality that would have been impossible to build or afford on-premise. This is why the entry of SAP or any other traditional on-premise software company to the cloud cannot be judged by the yardstick of pure on-demand pioneers like Salesforce.com, or SuccessFactors, for that matter. The value-added cloud is much different than the first generation cloud, and it requires a very different set of, pardon the pun, success factors:

1)      A robust, open development environment that supports existing tools and comes with easy license terms – but strict quality and security controls – that can energize an enormous developer base

2)      A set of application building blocks – components and objects – that can be used by developers to build great cloud apps by leveraging existing technology and packaged business processes

3)      Quality content in the form of third party data services that, like the application building blocks, can be used to build out next generation cloud apps

4)      A built-in, robust IaaS capability that allows integration to be exchangeable and interchangeable, and essentially drives the cost and complexity of cloud-based integration to zero

5)      A commercial environment for the staging, commercialization, and consumption of cloud-based apps – an App store – that makes it easy to buy and sell great new apps

SAP’s progress on all these fronts is limited to date, though the company is moving forward on all but number three as far as I can tell. But, when compared to Microsoft Azure, SAP is still significantly behind. Of course, Azure itself is significantly behind as well – which really means that the entire market is still building out this vision, and no one, including a market-leader like Microsoft, has completely nailed it yet.

SAP’s biggest hole for now is on the developer side, and here’s where SAP’s potentially greatest strength is right now a major weakness. The cloud opportunity that SAP presents really encompasses all three of its major focus areas – mobile, in-memory analytics, and business process innovation. In an ideal world a great cloud app would be mobile, use HANA when and if necessary, and reuse SAP’s large base of business objects and processes, if not connecting directly to the Business Suite or ByD itself.

The problem with this vision is that there’s no single development environment for building that cool mobile, in-memory, cloud-based, value-added business app. The erstwhile developer wanting to leverage all of SAP’s coolness will need a lot of patience figuring out how to proceed. What this pretty much guarantees is a siloed approach to applications innovation, at least for the time being. That’s part of the old-school, 20th century model that SAP has to kill off in order to make good on its potential.

Again, following Microsoft’s lead may be a good idea. Microsoft iterated through this problem years ago by creating the catch-all umbrella of .NET, and is now working on unifying its mobile, desktop and cloud development paradigm under the Windows 8/Azure umbrella. Some of this is more market-tecture than technology, but it’s good market-tecture, as it serves the purpose of giving developers a solitary target to shoot for.

SAP certainly understands the need to make the developer community its new BFF, and in conversations across SAP it was clear to me that this isn’t just lip service, but a significant new focus that acknowledges the need to pull in a vast ecosystem of partnerships – from individual developers to start-ups to big ISVs to global systems integrators to corporate IT shops – in order to make good on the platforms that SAP is now depending on for growth. This makes the announcement of free developers’ licenses for HANA one of the more significant announcements at this year’s SAPPHIRE. And the prospect of an SNC that not only unifies SAP’s disparate cloud infrastructures but also provides developers with the option to deploy on non-SAP cloud architectures promises a degree of flexibility that will appeal to the development community.

This model will need continual extension and modification if SAP is to really make good on cloud and other opportunities. For example, SAP needs to make it easy to partner for startups, as opposed to the death march that partnership has meant for smaller companies in the past. And it must simultaneously make sure that quality and security remain top considerations for its ecosystems partners: Google and Android, with their almost criminally negligent security and privacy models, have handed SAP (and Microsoft and Apple) a golden opportunity to codify enterprise mobility in a real enterprise-class security and privacy model. SAP in particular can use the Sybase Unwired Platform to great effect in this regard, though of course it will need to be linked up to the rest of the SAP development world to ensure that one-stop-shopping model that SAP’s developers will need.

The rest of the SAP cloud story is, I believe, relatively sound, mostly because the market is still nascent enough that SAP doesn’t need to nail it all right now. In fact, considering the agile development underpinnings of cloud technology and deployment, it’s fitting that every vendors’ strategy – as well as their customers’ strategies – be refreshed on a regular basis. Any vendor that says it has completely nailed a ten or even five year strategy for the cloud would instantly reveal how little it understands about the cloudy future of this market.

Which should hopefully reassure SAP that the chances it is somehow late to the cloud in the way it was allegedly late to the Internet in the dotcom era are nil.  The cloud party has yet to really get going – the realignment of the vendor community is only presaging a much larger realignment of global business towards the new functionality and business opportunities that the cloud can bring. That realignment of the business community – those pesky customers who don’t necessarily follow the market up every hill as quickly as vendors and pundits would like – still has a good ten years to play out. And ten years is a century in our industry.

Which brings me to a final point about Lars the thunder god. Nordic culture has a strong warrior ethic, and the Eddas, the epic poetry of the region – the Norse equivalents of Greece’s Homeric tradition – are replete with stories of great struggles and great heroics. There is another, less well-known part of Nordic warrior culture that bears mentioning here. The Vikings had a special class of warrior called Berserkers, truly dangerous, wild men who fought with psychopathic fury and were both feared and respected by their otherwise fearsome peers – in case you hadn’t noticed, this is the origin of our English word berserk. These Berserkers were just the guys you wanted leading the charge against the most formidable foes, but in times of peace they were encouraged to go off to the forest and leave civilized society alone, as the traits that made them great warriors were antithetical once the war was over.

Lars’ big challenge will be to stay in place as a Thor-like “god”, wielding his hammer and knocking a few heads in the process, without being perceived as a Berserker, someone to keep around when heads need knocking but then send back to the woods once the battle has been won. SAP’s cloud strategy is as much a cultural as it is a technological shift, and it’s clear that Lars has been given a hammer precisely because massive cultural change is best effected by a combination of war and peace, of pen and sword. But to be most effective the two will have to be wielded together carefully, very carefully, something a Thor might be able to do, but a Berserker could never accomplish.

As they say in Lar’s homeland – til lykke Lars, good luck. And while luck favors the prepared mind, and Lars is nothing if not prepared, there’s a large element of luck that will have to play out in order for both Lars and SAP to succeed.  The Lars/cloud bet is clearly SAP’s biggest bet ever, and it’s both the most necessary and the most risky ever undertaken by a traditionally risk adverse company.

This is the hidden struggle – the lightning at the top of the storm that only high-flying pilots can see – that SAP has to sort out as its cloud strategy matures into an expectant future. So, do what I did that stormy night at 38,000 feet: fasten your seatbelts, dim the lights, and look out the window at the flashes of light in the distance. And remember that even as the storm on the ground abates and clear skies loom in the distance, the sturm und drang in the sky is not necessarily over.

 

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