How to Best Understand SAP’s Multicloud Announcement

Executive Summary

• SAP announced the “multicloud,” which is a massive change in strategy for SAP.
• SAP makes several claims in the announcement that are either false or can be classified as “word salad.”

Video Introduction: How to Best Understand SAP’s Multicloud Announcement

Text Introduction (Skip if You Watched the Video)

This article covers the announcement made at SAPPHIRE regarding SAP, offering what it called multi-cloud options. SAP announced the “multicloud,” which has been used by SAP to try to bolster its credibility regarding the cloud. What IT media entities did not observe is that this announcement is a 180-degree change in SAP’s previously declared strategy. Before the multi-cloud announcement, SAP denigrated the IaaS cloud provides like AWS, proposing that SAP could do better. You will learn how SAP constantly changes its story to fit its competitive posture in the market.

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Notice of Lack of Financial Bias: We have no financial ties to SAP or any other entity mentioned in this article.

• This is published by a research entity, not some lowbrow entity that is part of the SAP ecosystem. 
• Second, no one paid for this article to be written, and it is not pretending to inform you while being rigged to sell you software or consulting services. Unlike nearly every other article you will find from Google on this topic, it has had no input from any company's marketing or sales department. As you are reading this article, consider how rare this is. The vast majority of information on the Internet on SAP is provided by SAP, which is filled with false claims and sleazy consulting companies and SAP consultants who will tell any lie for personal benefit. Furthermore, SAP pays off all IT analysts -- who have the same concern for accuracy as SAP. Not one of these entities will disclose their pro-SAP financial bias to their readers. 

SAP and Multicloud

SAP has announced that its Cloud Platform is now also offered as a multicloud environment, which will allow customers to develop and run apps via their choice of infrastructure providers.

This is an excellent time to review the definition of multicloud. According to Wikipedia, multicloud is the following:

“For example, an enterprise may concurrently use separate cloud providers for infrastructure (IaaS) and software (SaaS) services, or use multiple infrastructure (IaaS) providers. In the latter case, they may use different infrastructure providers for different workloads, deploy a single workload load balanced across multiple providers (active-active), or deploy a single workload on one provider, with a backup on another (active-passive).”

Therefore I interpret this to mean that different “layers” of the cloud are accessed from different vendors. Consequently, the term multicloud would imply a great deal of choice.

Using Multiple Cloud Vendors

“Customers will be able to use Amazon Web Services (AWS), in general availability; Microsoft Azure, under public preview; and the demo showcase of Google Cloud, in addition to full multicloud support through the SAP Cloud Platform.”

This part of the article is confusing because AWS and Azure are not different layers in the cloud. The SAP announcement is merely stating that you can use a mixture of cloud providers to, in essence, host SAP applications. And that this then allows you to support SAP Cloud. But you could also have done this before this announcement.

Is it Really Multicloud?

I am open to being persuaded otherwise (so comment below if you think I am missing something), but SAP’s announcement does not seem to use the term multicloud properly. Instead, what SAP is proposing is is that its cloud can be used in conjunction with other far more established and successful cloud providers. SAP is primarily an application vendor, and they always have been. They have applications like XI/PI, an integration harness, which is rarely used on projects. They have MDM, which is seldom seen, and if seen as a tiny footprint within a company’s master data workload. The basis is the server control in SAP.

SAP’s NetWeaver Shenanigans and the Questions of NetWeaver’s Existence

SAP calls this and several other items “NetWeaver,” which it also calls a platform. Netweaver is not a platform in any sense. NetWeaver is an umbrella marketing term to describe some things that existed before the word showed up on the scene. Strangely, I am one of the few analysts to question whether NetWeaver ever existed, as I covered in this article years ago. If you go to an SAP account executive and ask to buy NetWeaver, he or she will have nothing to sell you. You have to buy NetWeaver MDM, NetWeaver XI, etc.. The product is the second word. NetWeaver is merely tagged on the front.

Several SAP account executives have admitted that they have stated to customers that XYZ was “NetWeaver Compliant” and realized that they did not know what this meant. But it seems to work on executives and makes them feel calm, so they would only keep saying it.

HANA for SAP’s Infrastructure Street Cred

SAP’s real claim to being at the level below the application is HANA, a database. First, HANA is very new and still not that common as SAP has run on non-HANA databases for the vast majority of its history. Also, HANA is rarely delivered via the cloud. SAP Cloud, which was until just recently called SAP HANA Cloud. It was specially designed to deceive customers, and Wall Street that more HANA was being used than actually was, as I covered in the article Is the SAP HANA Cloud Platform Designed for HANA Washing?. While at the same time deceiving customers and Wall Street, HANA was being deployed more in the cloud than it actually was. Is the SAP HANA Cloud Platform Designed for Cloud Washing? 

The long and the short of it is that SAP has been posing as an infrastructure vendor for some time. They continually use the term platform in their product names and marketing material, but what infrastructure product of any prominence do they own? That would be HANA, but a costly (and therefore limited use) database rarely delivered from the cloud does not put SAP in the position it would like to be.

AWS and Azure

Although I am unconvinced why one would need to use the SAP Cloud Platform, Azure, for instance, already offers SAP on Azure. AWS offers SAP on AWS.

As a general statement, customers will want to stay away from SAP’s cloud offerings as much as possible, as SAP does not have any competitive capabilities in the area. AWS and Azure, on the other hand, are proven in this area.

So understanding that it’s difficult to see why one needs the SAP Cloud Platform.

Details on the SAP Cloud Platform

“The Cloud Foundry-based SAP Cloud Platform includes multi-language runtime environments, such as Java, Node.js, and the advanced model of SAP HANA extended application services.”

That is nice. All technologies have some components to them, but I don’t know why this sentence is here.

Azure and the SAP HANA Enterprise Cloud

“As part of its alliance, Microsoft said it is also working with SAP to make Azure available as a deployment option for SAP HANA Enterprise Cloud.”

Yes, but why? One can already host SAP on Azure. Why would a company want SAP HANA Enterprise Cloud involved? Once again, outside of its acquired applications (SuccessFactors, Ariba, etc.) that were already cloud-based, SAP does not have much competence in the cloud. SAP has few customers for any of the areas listed by SAP up to this point.

SAP APIs Announced

“Also announced during day one of Sapphire Now in Orlando was the addition of “hundreds” of new APIs for SAP S/4HANA, SAP Hybris, and SAP Ariba to the SAP API Business Hub, as well as the availability of new integration flows and microservices.”

That is nice but unrelated to the central issue.

“Similarly, the SAP App Center also received an upgrade.”

Great.

Is SAP Positioning Itself as the Open Vendor?

“SAP’s cloud-related announcements are focused on the theme of openness.”

Perhaps, but SAP has, for its entire history, been focused on closeness. I don’t know how the most closed-off software vendor that ever existed (IBM would be a close second) in enterprise software can claim now to be open. I have had so many conversations on projects with SAP and SAP consultants at Deloitte, IBM, etc., where it has been explained to me that it is a good thing that SAP is such a closed system. And that customers should only be using SAP applications because integration is such a pain. It is hard to describe to those who have not experienced it, but most of the SAP consultants and consultancies I know consider non-SAP applications to be non-starters. If you are an SAP consultant, it does not pay for you ever to praise non-SAP software. That software may become popular, and that is not profit-maximizing for the SAP consultant.

Therefore, SAP has hundreds of thousands of loyal consultants (the vast majority not working for SAP) to help block out non-SAP applications. This applies equally to IT decision-makers in customers who use SAP, which often sees their allegiance as more with SAP and the SAP ecosystem than with their present employer.

Is SAP Constantly Taking IP from Other Vendors?

In one meeting, the following was stated by an SAP consultant to the customer.

“The thing is that SAP is constantly surveying the landscape for good things in other applications. SAP then takes those things and places them in SAP. So no matter what, you eventually get everything you need in SAP.”

Hmmm…does that sound like openness? Also, can you smell what SAP is selling Wall Steet here?

It’s locked in customers.

Wall Street wants to purchase the stock of monopolies that can fleece their accounts. Wall Street talks in terms of free markets, but they want secret cartels when it comes to how they behave. It’s a bit like how they operate, unencumbered by regulation, running monopolies, getting government insurance (why the investment banks became banks after the bailout), and receiving money from the Fed at 0% interest. That is the big “free market” system that Wall Street favors.

Bill McDermott Tacitly Signals SAP’s Monopolistic Power to Wall Street

Another comment against openness is from Bill McDermott in their 2017 Q1 earnings call.

“So here is my hypothesis on the industry. Why is SAP the de facto standard business software company in the world? I’ll tell you why. Because even if we don’t win every sale and somebody at a point solution level takes something, they still have to live with us and the other 80% of the enterprise.”

So there you have it. SAP will enforce its power against a vendor that offers a superior application to them. They will make it as difficult as possible for that application to be successful, speak dismissively towards it, make it challenging to integrate into SAP. Bill McDermott very effectively makes the argument that SAP will continue to behave as a monopolist.

Mind Controlled SAP Accounts

On projects, I use Demand Works Smoothie to perform forecast testing to make improvements to SAP DP. I do this because testing anything in SAP’s DP application is so complicated that most companies don’t perform any testing. However, even though I show up at repeated customers that have never tested any forecast comparison in DP, I am still asked why I would test outside of SAP, even if I will make the adjustments back in DP.

This is their position even though I have documented the problems in DP in best fit functionality in articles going back to 2009. So it is clear, according to SAP and to SAP consultancies, all non-SAP applications are inferior to SAP. They are not standard (SAP is the de facto standard, as expressed by Bill McDermott), and these other applications (that are superior to SAP in every single application category outside of ERP as explained in How SAP is Now Strip Mining its Customers) need to be minimized and removed from the solution design when possible. Indirect access, which SAP is the only vendor enforce*, is the manifestation of SAP’s perspective that any customer that connects any non-SAP system to an SAP system should pay them to double the licenses for the SAP system. It is difficult to see how SAP could make it any more clear that they oppose open systems.

Is SAP About Open Systems?

Openness means more competition, and it means a reduction in profit margins. It is the right thing to do for customers, but when has SAP been in favor of that?

“Speaking at the opening keynote on Tuesday, Bernd Leukert, member of the executive board of SAP SE, products & innovation, touted openness as the new game changer within an organization, saying it drives new business values.”

SAP has a constant stream of proposals about things that sound good, but then SAP goes and does the opposite in reality. So some other statement to the same effect carries no information.

“We promise we will breakdown all the barriers that prevent you to innovate,” he said.

“Openness makes our software much richer. This is the age of openness of SAP, but more importantly for you, our customers.

“Leave the technology to us.”

I would suggest disregarding all of these statements. They do not carry information.

Some SAP Word Salad

“According to SAP CTO Bjoern Goerke, we are living in a time of accelerated change; a time where software is eating the world and everything will be digitized.”

“Every company — large and small — needs to constantly adapt and reinvent itself to stay competitive. Embracing constant change and the willingness for continuous learning are the new norm for the 21st century workforce,” he said

“Business agility and speed become imperatives for success, and customers are looking for ways to accelerate the delivery of innovative solutions that provide an engaging and seamless customer experience, all without disrupting their core business processes.

“Digital transformation needs escape velocity.”

This has nothing to do with whether one should use SAP for hosting services when there are so many better options in the market that are proven. Overall the expansionist and looney tunes commentary sounds like something from one of Deepak Chopra’s books. You can get the same commentary from the patients of any number of insane asylums.

NetWeaver and Some Buzzwords

“Also on Tuesday, SAP announced the expansion of its Google Cloud Platform partnership to certify SAP NetWeaver and integrate machine learning, the Internet of Things (IoT), and productivity tools, as well as the expansion of its Leonardo digital innovation system which covers new applications concerning machine learning, the IoT, Big Data, analytics, and blockchain on its SAP Cloud Platform.”

So I have pointed this out several times in the past, but NetWeaver does not exist and has never existed.

Machine learning and IoT are buzzwords and have nothing to do with SAP. SAP has nothing to do with Big Data, and the rest is just word salad.

What Is The True Purpose of the Multicloud Article?

The purpose of this article is not to announce anything but to get customers thinking about using more SAP cloud offerings. However, this is a white flag of surrender. SAP has not been successful with its cloud, and there are many reasons why. One is that SAP is not even interested in hosting. They outsource the hosting to companies like IBM and Wipro. All while pitching to Wall Street, they are a big cloud company. How they do, this is the subject of a future article.

However, IBM has been losing very significant data center business to AWS and a lesser extent Azure. CSC, another dinosaur like IBM, has been losing business to AWS and Azure in a similar fashion. I mean, what I take from it is that SAP realizes their goose is cooked, and their old strategy did not work. Even Salesforce now uses AWS. Evernote now hosts with Google. So it is demonstrating that the large-scale economies of scale of companies that provide hosting.

SAP, who previously put AWS on notice, finally realized their goose is cooked, and their old strategy did not work. Even Salesforce now uses AWS. Evernote now hosts with the Google Cloud. So it is demonstrating that the large-scale economies of scale of companies that provide hosting are not just affecting SAP but all manner of vendors.

But it is only taking SAP so long to figure out these things; it brings up the topic of how good SAP’s management is. I can, with far less access to information, easily outguess SAP’s management. Eventually, they switch back to what is practical when what they would like to have happened proves untenable. Is that really why SAP top executives are paid tens of millions per year? So they can repeatedly fall into uncovered utility hole covers?

That is precisely the point of using SAP’s cloud offering? Companies can go out to AWS or Azure and stand up SAP already and push the SAP Cloud out of the way. The value of the SAP Cloud is only not there, and they don’t appear to have any vision aside from producing aspirational press releases.

I have had a hard time seeing how the announcement changes anything. It seems like a way to promote SAP Cloud while essentially admitting defeat internally but on a brave face externally. The proper interpretation of this announcement is the following:

“Hey how about if you use our cloud along with AWS and Azure……pretty please….use our cloud ok?”

Vendor Enforcement of Indirect Access

*I was recently told by a customer where Software AG tried to enforce indirect access. They were inspired by SAP to do so. However, without the market leverage of SAP, they were unsuccessful in doing so. To enforce a false legal concept like Type 2 indirect access, you need to be very large.