SAP co-CEO Jen Morgan talks about the SAP Microsoft deal in cloud
SAP co-CEO Jen Morgan talks about the SAP Microsoft deal in cloud

SAP Rides Microsoft Deal to First $2-Billion Cloud Quarter as McDermott Era Ends

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With its powerful new Microsoft cloud deal already driving a big chunk of future cloud revenue, SAP reported Q3 cloud-revenue growth of 37% to $2 billion as Bill McDermott’s decade-long SAP era winds down.

The landmark SAP-Microsoft deal—first reported here in Cloud Wars 5 months ago in Microsoft Begins Selling SAP Applications As Cloud Ecosystem Evolves and SAP and Microsoft Revolutionize the Cloud Market—is designed to simplify and accelerate customers’ journeys to the cloud.

Driven by new SAP co-CEO Jennifer Morgan and Microsoft executive vice-president Judson Althoff, the partnership gives big customers a unified vision and approach across 3 previously fragmented suppliers: the hyperscaler IaaS providers; SAP as the enterprise-apps vendor; and the global systems integrators doing the implementation.

In the past, those customers had to reconcile for themselves the various points of view, priorities, and outlooks across those three sets of suppliers. But within the “Embrace” program created by Morgan and Althoff, all of that fragmented input is now consolidated. This makes it simpler for customers to evaluate the entire process.

And the impact has been stunning. For new cloud bookings in Q3 (as opposed to revenue the company already recognized for Q3), the Microsoft partnership “contributed 18 percentage points to the 39% Q3 new cloud bookings growth,” SAP said.

This SAP-Microsoft partnership is one of the most-powerful indicators that the entire cloud business has reached a new point of maturation. Now, individual technologies and supplier capabilities must become subservient to the wants and needs of customers.

I also think it’s highly likely that this fond embrace between SAP and Microsoft will accelerate the growth of the entire cloud industry. Here’s why:

  1. It will surely give business customers more confidence in their ability to shift mission-critical workloads to the cloud.
  2. It will surely spur other cloud vendors to emulate the objective of the Embrace program. Namely, to make customer outcomes—rather than various whiz-bang cloud technologies—the centerpiece of and top priority in every cloud project.
  3. And it will likely inspire other cloud vendors to form similar alliances that will, again, boost customer confidence in pushing more of their IT environments into the cloud.

From the SAP press release outlining the new plan with Microsoft, here are comments from Morgan and then from Althoff:

SAP’s Morgan: “This partnership is all about reducing complexity and minimizing costs for customers as they move to SAP S/4HANA in the cloud. Bringing together the power of SAP and Microsoft provides customers with the assurance of working with two industry leaders so they can confidently and efficiently transition into intelligent enterprises.”

SAP co-CEO Jen Morgan talks about the SAP Microsoft deal in cloud
Jen Morgan

Microsoft’s Althoff: “SAP’s decision to select Microsoft Azure as its preferred partner deepens the relationship between our two companies in a differentiated way that signals a shared commitment to fostering the growth of the cloud ecosystem. Today’s news also reflects our commitment to a customer-first mind-set and supporting their cloud transformation, which continues to drive how we at Microsoft approach everything from partnerships to product innovation. It takes co-selling to a whole new level.”

If you’d like to see some additional proof of the huge impact this partnership has already have and will no doubt continue to have, recall that just a couple of weeks after we broke the story about this SAP-Microsoft cloud alliance, none other than Oracle—the ultimate lone wolf—reached its own cloud partnership with Microsoft.

You can read all about that one right here: Microsoft-Oracle Shocker: Customers Win as #1 and #6 Vendors Pair Up.

And that headline spells out the real value of these deals among the Cloud Wars Top 10: “Customers Win.”

Cloud Wars

Top 10 Rankings — Oct. 21, 2019

1. Microsoft — Q1 cloud revenue will top SFDC, SAP, Oracle & Google *combined*
2. Amazon — AWS Q2 revenue jumps 37% to $8.38B, cites broad innovation in ML
3. Salesforce —Is Benioff planning to switch more databases from Oracle to AWS?
4. SAP — McDermott steps down for new adventures after posting great Q3 numbers
5. Oracle — Ellison: Autonomous DB growth “so extraordinary, we’re not forecasting”
6. Google — Q2 cloud rev. tops $2B; Kurian’s customer focus leads jump from #7 to #6
7. IBM — Q3 cloud rev. up 14% to $5B; Red Hat triggers sweeping internal changes
8. Workday — CEO Aneel Bhusri says Oracle, SAP can’t match it in Fortune 100 mkt.
9. Accenture — Up from #10 on ties w/ MSFT AWS GOOG; $9B cloud biz up 23% in ‘18
10. ServiceNow — Donahoe looks to Microsoft & mobile to drive next growth wave

Disclosure: at the time of this writing, SAP and Microsoft were clients of Cloud Wars Media LLC and/or Evans Strategic Communications LLC.


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