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SAP AND CLOUD COMPUTING IN

2012 AND BEYOND

Group 9

Ruchi Banga - PGP/17/163Srishty Barla - PGP/17/179Tamaraiselvi A - PGP/17/184


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Introduction: Decision to acquire

The then view:

In 2004, IT industry was revolutionized by the introduction of Salesforce.com

SAP believed that market for enterprise software would remain on-premise and SaaShad limited applicability and value

The problem became more serious when some marginal accounts started defecting tocompetitors like SuccessFactors and Workday

In response SAP developed an internal version of SaaS but didnt turn the corners dueto many reasons

In 2012, SAP decided to acquire SuccessFactors followed by Ariba


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Strategic Positioning in ERP market

The main product of SAP was ERP 6.0 as part of the SAP Business Suite It was originally produced for Fortune 500 companies They also targeted SMEs with their SAP Business One and SAP Business All-in-one SAP Business Suite had six applications operating in service-oriented architecture, of which SAPERP was the oldest The latest version released was Business Suit 7, offering modularity and a usual upgrade path i.eeliminating the need for full upgrade

SAPs five market categories Applications(market leader, CRM and Finance were fastest growing sub markets ) Business Analytics(led the market with double the share of closest competitor) Database and Technology(ranked fourth) Mobile(leader in market but some sources placed it behind RIM) Cloud(ranked fifth)

SAP had listed three corporate performance objectives to be achieved by 2015 Total global revenue: Euros 20 billion Operating margin: 35%

Total user reach: 1 billion


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Increasing trend in ERP softwaremarket

The ERP market is expected to increase to $50 billion with cloud and SaaS being the larger chunks. SaaSis expected to increase at an annual rate of 21% through 2015

SAP had itself build its functionality into itscore Business Suite ERP solutions They continued to build upon and their core

product offering The softwares were tightly integrated andhelped in standardized business processes butwould be difficult to adjust to the changing

requirements SAP had lowest business risk Higher business benefit It was the market leader in 2012 with 24%market share

Major difference between SAP and ORACLEs ERP

Oracle had grown primarily through the

acquisition of the best practices(Eg. PeopleSoft forHR) Oracle was moving towards merger of the best

practices it had acquired Oracles approach could allow it to offerflexibility and best of practices but could becomea problem while enforcing standardization Oracle has an advantage over SAP in terms ofimplementation duration and cost It had highest executive satisfaction level It maintained the second position with 18%market share


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Customer Perspective: Role of CIO

The Changing IT Landscape in 2012:

The numerous number of IT applications that were in use since a long time had become obsolete

CIOs were given the responsibility of: aligning IT and business goals Controlling IT costs IT governance and portfolio management

CIOs were responsible for innovation to drive constant business improvement gainingcompetitive advantage

CIOs had control over the infrastructure to make innovation possible using largechunks of data

Customer centricity was realised to be an important factor in organisation's success


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Changing Technology Trends

Increased adoption of new technical gadgets by customers

Increasing number of technical devices

It was realised that cloud computing had the way CIOS delivered innovation

Modifications in traditional systems required huge cost and time butmodifications on a cloud application could be done overnight at no cost andno risk

Number of facebook user had been 1 billion by 2012

Various organisations had been generating 10,000 TB of data


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Emergence and Characteristics ofCloud Computing

Delivery of computing and storage capacity as a service to a heterogeneous community of end recipientsThree types of Cloud Computing: IaaS, PaaS, SaaS

Moving enterprise data out of the company not new Payroll or customer support.But cloud computing different in four ways: Multi-tenancy, Granular, Componentized and highly scalable

Cloud computing is indeed a market with an anticipated compounded annual growth of 24%. Butanother faster growing market in 2012 was cybercrime which posed a threat for cloud computing.

Another problem for cloud computing is government interference

For consumers, cloud computing meant Virtually unlimited storage

Facilitated greater sophisrication inconsumer mobile user experience

But in business, the implications were

not clear particularly regarding theenterprise resource planning softwarethat lies in the core of the business

Cloud market included

Information Platform collaboration, Data and MobileServices


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SAP and the Cloud

In September 2007, SAP attempted to enter SaaS ERP market after 4 years of development.Targeted SMEs with SAP Business ByDesign Product which had all components of ERP

Idea behind Business ByDesign Product was to design it for end-to-end, flexible, adaptable business.

A purported advantage SAP had over Salesforce was indeed the turnkey capability to connect to back-endfunctions

Poor performance related to complex product architecture and lack of powerful sales channel, kepthampering market success

A second attempt at the SAPs on -demand offering was staged in late 2010.

Initial market response was better but did not reach the expectations

In December 2011, announced plans to acquire cloud-based business software provider SuccessFactors


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SAP and SuccessFactors

SuccessFactors originally built to serve the new needs of Human Resources Department for Talentmanagement Software

Products: Performance Management, Compensation Management, Recruiting, Analytics, Enterprise Socialwith Jam

Real Dominance is Talent Management Performance and Goal Management, CompensationManagement, Success in planning recruitment and learning

Some Differences.

Dalgaards fit in SAP corporate culture is more phelgmatic, cautious, analytical and hierarchical

Dalgaards experience with numerous false starts, dead ends, and failed leadershipDalgaard perserved in the trenches of his key business operations particularly in channel sales and

direct selling, areas where SAP Business ByDesign failed

SAPs strongest asset is its Intellectual Property, embedded in roughly 50 million lines of codethroughout the entire ERP

In 2012, few months after the merger Dalgaard was officially in charge of SAP Cloud business


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What do you think will be challengesfaced by SAP from this acquisition?

What kind of decisions are to be taken?


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Challenges Faced

How SuccessFactors be presented to the user? Should they be presented inside theSAP portal to leverage SAP components?

Should SuccessFactors remain a separate operating unit, keeping the on-premise andcloud businesses in their own world?

Could the addition of SuccessFactors bring with the enough revenue clout to have animpact on the traditional power structure?

Should customers embark in an all-out tear and replace strategy for their ERP orshould they embrace a more progressive approach, with the coexistence of cloud andon-premise applications at least for a while?

SAP America was the vehicle through which SuccessFactors was acquired. Legalstructure has a direct impact and how the business should be run and where the powerlay?


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Recommendations

Keeping SuccessFactors separate is a very smart move because it keeps the on-premiseand cloud businesses in their own worlds

While the acquisition strategy allows them to catch up with pace of innovation in theSaaS sector, it also often leaves them with heterogeneous software architectures. SAPcan promote its Gateway technology to help integrate SuccessFactors products with itsown

SAP can re-acquire its customers lost to SuccessFactors (Siemens)

SAP and SuccessFactors have complementary customer bases, allowing for cross-sell


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What happened Next?

At the time of the acquisition, SAP said SuccessFactors would continue to run as anindependent company, but that strategy has shifted. SuccessFactors has been folded intoSAPs newly formed Cloud Business Unit, which also includes a handful of othercloud-based applications. SuccessFactors CEO Lars Dalgaard now leads the companysentire cloud business (with the exception of another recent cloud acquisition, businesscommerce network Ariba, which remains independent)

To get sales reps to work together and sell both cloud and on-premise purchases, SAPhas been double comp -ing all cloud deals, meaning it is paying a commission to boththe traditional software reps and cloud salespeople

The companys plan to move beyond its legacy business and invest in newertechnologies SAP HANA


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THANK YOU