While promiscuity is a given among top SaaS vendors and the big hyperscalers, it looks to me like Google Cloud has cut in aggressively on Microsoft as the infrastructure heartthrob SAP likes best.
First of all, SAP CEO Christian Klein recently stated quite assertively that while it’s all nice and wonderful that the big hyperscalers—Amazon, Microsoft and Google Cloud—are forging tighter partnerships with SAP, those IaaS heavyweights have to remember that the partner controlling the strategic customer relationship is SAP.
In an early May interview with diginomica.com’s Den Howlett, Klein said, “In the partnerships, we are closing, we have to own the business platform, we have to own the application layer.”
In analyzing the situation based on Howlett’s interview with Klein, I wrote the following on May 12 in SAP Will Battle Microsoft & Google for Customer Control, Says CEO Christian Klein:
The pivotal issue is the radically different technology stack in the cloud versus in traditional on-premises IT. In the old world, one set of companies made the hardware and another set, led by SAP, made the applications. And because the applications ran the business processes that powered the operations of global corporations, the applications companies led the customer relationships.
But in the new world of the enterprise cloud, those boundaries have been erased. Two of the three top cloud-infrastructure players—Microsoft and Google—also offer growing portfolios of enterprise applications. The third major hyperscaler—Amazon’s AWS unit—does not currently offer enterprise applications.
For SAP, that means that two of the top IaaS providers (Microsoft and Google) that SAP depends on to meet the infrastructure needs of its large and mid-size customers are each looking to gain greater control of how customers use technology to transform, evolve and prosper.
So if Microsoft and Google are both in relatively the same position regarding Klein’s unequivocal insistence that SAP own the customer relationship, why do I believe that Google is becoming #1 in SAP’s heart?
Here are 3 primary reasons why I feel that’s happening:
1. Microsoft has a large, fast-growing, and increasingly strategic SaaS portfolio. Google Cloud does not.
While Satya Nadella’s Dynamics 365 business has nowhere near the global presence of SAP’s vast installed business within most of the world’s largest corporations, it’s probably approaching a $2-billion annualized run rate. And in the quarter ending March 31, the Dynamics 365 business grew at a whopping rate of 49%, the company said. So is Microsoft gunning to displace SAP as the ERP provider at the world’s largest energy companies, car companies, industrial giants and banks? Not at all—well, at least not yet.
But Nadella has been making Dynamics 365 a cornerstone of the company’s new cloud-to-edge strategy, and an essential element in its AI-driven data-insights approach. And I believe Dynamics 365—which, like SAP’s portfolio, includes apps for everything from ERP to CRM and lots in between—will only become more vital to Microsoft’s rapidly growing cloud empire. So as much as Klein values the close partnership SAP and Microsoft forged more than a year ago with the “Embrace” program, he is also fiercely determined to protect SAP’s position as the world’s #1 provider of enterprise apps, particularly at this critical juncture as many customers are moving aggressively to the cloud.
2. Recent announcements from SAP and Google Cloud underscore a powerful partnership that is rapidly becoming more intimate—and more successful.
Google Cloud recently opened a data center for SAP that will exclusively run SAP apps. This is the first time I’ve heard of a hyperscaler devoting an entire data center to a single SaaS vendor. It’s quite a profound commitment. Here’s an excerpt from how SAP described that one-of-a-kind data center: “SAP’s customers have had their business software applications running on hyperscale infrastructure or in SAP data centers for a while now. But they will soon also be able to see their applications running in this specific environment that combines both the strengths of SAP data centers and Google Cloud,” wrote SAP senior VP Gary Slater in a mid-June post on LinkedIn.
“The new data center in Frankfurt delivers the power of Google Cloud dedicated only for use by SAP. As an SAP-only data center, the full capacity deployed is guaranteed for use by SAP and its lines of business, including the business software applications running on this infrastructure. With SAP as the only tenant for the data center’s resources, the network, hardware, and hypervisor layers are only used by SAP. In addition, only SAP can use products, run workloads, and store and access data in this specific data center.”
Now, that’s a commitment. And it’s a big one: highly innovative, fearless and very public.
From the Google Cloud side, a recent blog post called Future-proofing your business with Google Cloud and SAP revealed some fascinating nuggets:
- For example, check out the speed to value and innovation in these customer deployments of big-time projects: “Current market conditions are creating an even greater need for SAP customers to take advantage of cloud agility and innovation,” writes Snehanshu Shah, managing director for SAP at Google Cloud. “Tory Burch was able to complete SAP S/4HANA development in 16 weeks and deployment in six weeks on Google Cloud. Carrefour Spain deployed SAP HANA in production in 15 weeks.”
- Overall, wrote Shah, “SAP customers report a 65% reduction in staff time to deploy/migrate SAP applications to Google Cloud.”
- And while SAP and Microsoft for at least a while shared a deep Embrace, SAP and Google Cloud have created a new program called Cloud Acceleration Program (CAP). In his blog post, Shah described CAP as “a first-of-its-kind initiative empowering customers with solutions, guidance, and incentives from Google Cloud and our expert partner community. Customers receive access to expert capabilities for migration, implementation optimization plus deeper capabilities in the areas of analytics and machine learning. Google Cloud is also providing CAP participants with upfront financial incentives to defray infrastructure costs for SAP cloud migrations and help customers ensure that duplicate costs are not incurred during migration.”
3. The Thomas Kurian Effect.
In 18 months as CEO of Google Cloud, Thomas Kurian has reorganized, revitalized and fundamentally reimagined every facet of the Google Cloud business. And he’s inspired his colleagues to do the same, which was a major reason that I chose Kurian as the Cloud Wars CEO of the Year for 2019.
Under the former leadership at Google Cloud, the initiatives described above would never have happened. The perspective was too insular, too focused on pure technology and products, and too distant and removed from primary customer considerations. I was on a briefing yesterday with a GC senior director from the Solutions Selling team, and at one point he described the new outlook this way: “We’re now all about going from customer problems inward, rather than the old way of just pushing products out.” That might seem obvious, but if you think about the mindset and culture within Google Cloud before Kurian’s arrival a year and a half ago, such a perspective would have been impossible to find.
By relentlessly entreating his colleagues from one end of Google Cloud to the other to be passionately focused on customers and to have a deep sense of empathy for their businesses, their challenges and their admittedly imperfect IT environments, Kurian has made possible the creation of things like an SAP-only data center. And the Customer Acceleration Program. And many, many other undertakings that have made Google Cloud the fastest-growing vendor on the Cloud Wars Top 10.
Top 10 Rankings — June 29, 2020
|1. Microsoft — New top priority is converting Oracle’s on-prem database customers|
|2. Amazon — With world surging to cloud, Jassy & team reach $10B in Q1 cloud rev|
|3. Salesforce —Benioff’s Secret Weapon: Tableau Creates Analytics Powerhouse|
|4. Google — Helps big-box retailer Lowe’s triple online revenue with new platform|
|5. SAP — Klein vows to battle Microsoft, Google Cloud for strategic customer control|
|6. Oracle — Ellison goes silent about snatching huge ERP customers from SAP|
|7. IBM — Deepens partnership w/ SAP to help customers survive digital revolution|
|8. Workday — Bhusri hammers legacy IT, tops $1B for Q1, embraces MSFT & SFDC|
|9. ServiceNow — McDermott riffs on Oracle & SAP, culture and even Grateful Dead|
|10. Adobe — COVID + problems w/ Advtsg Cloud stunt fiscal Q2 growth to 5%: $826M|
On top of all that, Kurian made one of the best hires in the cloud business in the last 5 years when he brought former SAP sales leader and customer advocate Rob Enslin aboard as president. Enslin’s been a huge force-multiplier for Kurian across the sales org, with product strategy and go-to-market plans and in ensuring customers understand that the new Google Cloud is very, very different from the old.
Anyone’s who’s spent even 5 minutes with Cloud Wars will know that I take a back seat to no one in my admiration for Microsoft and in particular for CEO Nadella and what he’s accomplished in the past several years. Nadella has powered a transformative overhaul that will go down as one of the great turnaround stories in the history of business—not just in the tech industry, but in any industry. And Microsoft clearly know and clearly values the enormous opportunity that exists for helping the massive SAP customer community move to the cloud.
But just as Nadella and Microsoft have their own expansive and sweeping ambitions—Microsoft is, after all, the world’s most-valuable corporation—so too does SAP under Klein. At this time of rampant change and upheaval, Klein cannot afford to look to SAP’s proud past to chart his course for the company’s future.
And in the shaping of that future, no doubt Klein will reserve an influential and important part for Microsoft to continue to play.
But to me, it looks like Google Cloud, driven by Kurian and Enslin, have grabbed the inside track for leading the next wave of SAP customers into the cloud.
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