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PaaS SAP Cloud Platform [shutterstock: 1008371191, VVector]
[shutterstock: 1008371191, VVector]
Blog Editor-in-Chief

The End Of SAP Cloud Platform

Gartner predicts that two thirds of iPaaS providers will cease to exist by 2023. How likely is it that SAP and its partners like All for One will be one of them?

Right now, SAP and many of its partners are still successful in the PaaS business. But it might be a catastrophe waiting to happen – maybe in 2023.

The current success of cloud providers will be their future downfall, according to Gartner, “Even though the market for integration platform as a service, iPaaS, is showing strong growth right now, we have already detected signs for a market consolidation.”

Research and consultancy firm Gartner expects two thirds of iPaaS providers will either merge, be acquired, or leave the market until 2023.

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“The challenge most iPaaS providers face is that their business is not profitable”, explained Bindi Bhullar, Senior Research Director at Gartner. “Revenue growth and increasing customer acceptance cannot keep up with operational costs of platforms, and high sales and marketing budgets.”

There’s no better way to describe SAP’s business figures last year. CEO Bill McDermott used high revenue growth and customer acceptance to praise himself to the highest heavens. However, at the same time, his CFO Luka Mucic had to admit that there still was low profitability. Obviously, this is the result of high PaaS costs.

SAP and partners are gaining customers, their revenue grows, but high operational costs impede sustainable profit.

Gartner states, “Top dogs like Oracle, Microsoft, and IBM are better suited to face these challenges. They are able to enforce more cost-efficient offers and more aggressive pricing models than smaller providers.”

Gartner predicts that this trend will continue and that the market share of specialized iPaaS providers will shrink. This includes companies in and around the SAP community, like All for One.

PaaS: Size matters

Ultimately, it is a question of size. While hyper scalers like AWS, Google, IBM, Oracle, and Microsoft are able to safely disembark from the journey of iPaaS (too big to fail?), smaller PaaS providers will shipwreck.

SAP serves as an example. Of course, Bill McDermott clings to his “Cloud First” strategy, but internal experts have long since concluded that SAP will not survive with this mindset.

SAP’s PaaS business is simply too small compared to hyper scalers – and it is highly likely that it will still be too small in 2023. At SAP Fkom (Field Kick Off Meeting) 2019, SAP therefore presented an exit strategy: Embrace.

SAP wants to embrace its more successful PaaS partners like Microsoft, AWS, Google, and maybe even IBM, and squeeze their money out of them. It would exist only in their shadow, but at least it would survive.

One year ago, former SAP CTO Bjoern Goerke already debuted the concept of multi-cloud at the DSAG Technology Days 2018. SAP customers were supposed to simultaneously use cloud platforms of SAP, AWS, Google, and Microsoft. However, at the end of February 2019, Bjoern Goerke left the company.

Bill McDermott’s “Cloud First” strategy and his vision for PaaS seems to have failed on multiple fronts.

Source:
E-3 Magazine April 2019 (German)

About the author

Peter M. Färbinger, Editor-in-Chief

Peter M. Färbinger is Editor-in-Chief and Publisher at E-3 Magazine, B4Bmedia.net AG, Munich, Germany. He can be reached at [email protected]

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