2012 looks like being interesting year for SAP's cloud ambitions

SAP is set to push on with its cloud plans thanks to the Success Factors bid - but there are lots of challenges

SAP had a good year for a change. The horrors of 2008-9 seem to be behind the company and business is looking up. At least for the time being. Revenues were up substantially and you can be sure it will hit its numbers for year end. 

This was all telegraphed a while back with emphasis on HANA delivering its stated goal of €100 million in revenue this year. SIs report an upswing in upgrade work which they believe will keep them busy through 2012 and possibly into 2013. Even on the cloud front, SAP managed to get its act together - after a fashion.

At last week's SAP Influencer Summit, co-CEO Jim Snabe said they are on track to deliver 1,000 Business ByDesign customers for the year - again as promised. But the big news was the proposed acquisition of SuccessFactors.

At $3.4 billion, SAP paid a whopping 52 percent premium over the average share price in the period immediately preceding the acquisition. The timing was good from the point of view that it allowed SAP to start claiming cloud cred but lousy in the sense that the company cannot discuss its plans in public because the deal has yet to close.

In my initial analysis, I took a different tack, arguing that this is really about putting up a beach head against Workday which is doubling up on bookings from 2010 to some $300 million and looks set to reach around $1 billion by 2014-15. SAP of course spins this a different way, arguing that SuccessFactors provides volume and scale that plays well to the customer base into which they hope to sell.

Just as the dust was settling on the Influencer Summit and as I waited to board the plane home from Boston, Salesforce.com went and spoiled the party by announcing it is acquiring Rypple with plans to rename that business Successforce.

Colour me stupid but if that isn't one in the eye for the German Giant then I don't know what is. We will have to see how this plays out but I imagine there could be the odd lawsuit or two once the Rypple/Salesforce.com deal is consummated. While Salesforce.com owns the Successforce trademark, it was not designed for the purpose it is now being put. That opens the door to a potential lawsuit in itself.

What will 2012 look like? We can certainly expect a much stronger emphasis on cloud and from what we were told, SAP plans yet another influencer get together around the end of January to reveal its plans.

They're not too difficult to guess at this stage but there may yet be a few surprises. Central to SAP's thinking is its belief that the core ERP will not go away from the on premise world anytime soon. To that end it has said that while it will be releasing enhancement packs, there will be no more upgrades to the BusinessSuite. Support for the Suite runs through to 2020.

Alongside, it expects to develop a string of cloud based services jump started via the SuccessFactors acquisition. That will lead to what my analyst colleague James Governor calls 'pace layering' of technology where the core moves slowly while the Virtual Cloudsvides a much higher delivery cadence. How well this works depends on a number of factors, not least the extent to which customers are prepared for this style of implementation.

The question in my mind is whether SAP has all the ingredients to make this work. It understands the DNA-related issues around on-premise versus cloud software and believes that buying SuccessFactors allows them the best chance of making the DNA shift. I'll take that idea under advisement.

While the incoming head of cloud tech will be Lars Dalgaard, current CEO of SuccessFactors, we've seen his like before in the shape of Shai Agassi. The both have egos the size of small planets and are used to barrelling through problems.

History shows that doesn't work so well inside SAP where powerful mid tier managers act as antibodies maintaining the status quo. But then Dalgaard does have the benefit of fellow Dane Snabe covering his butt. That's not quite the same as having Hasso Plattner, co-founder on your side but its a pretty good start. If Plattner gets four square behind Dalgaard then anything is possible, especially given the extent to which we've seen HANA take off internally as much more than Dr Plattner's pet science project.

In the past, Plattner has been no fan of Java, upon which SuccessFactors is built but it now seems he is getting a fresh dose of Java religion. We'll see how well that plays out once the SAP geeks get their paws on the source code.

I suspect that 2012 could be a year when the company will have to pull some big rabbits out of the hat. Right now it is far from clear how that will happen, unless SAP makes another Big Bang acquisition. My sense is that Workday's planned IPO is going to eclipse anything SAP does. Too many financial analysts are watching that company, salivating over the rich pickings they believe are in store. Colleagues who have looked under the Workday covers are pleased with what they see. I certainly like what they're doing with financials.

Add in the fact that leading CIOs are no longer asking about technical detail but are wanting to know much more about the cloud BPO story and you have an interesting cocktail of events and mood that will surely draw attention away from SAP's cloud ambitions.

Of course I could be hopelessly wrong but then as always in enterprise tech, we live in interesting times.

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