On-Prem Cloud For ERP

Of course, it’s a little misleading to say that SAP is selling Qualtrics. SAP wants to spin out the experience management company in the U.S to do a little damage control. Both companies are supposed to benefit: SAP will get back some money and Qualtrics can continue its success independently.

There are always two sides of the coin, however: Spinning out Qualtrics means that SAP is admitting defeat. It apparently really was impossible to integrate Qualtrics with SAP’s solutions or the Hana platform.

CEO Christian Klein already knew what a disaster it would be in 2019 – but he wasn’t the one leading the company back then. Now, it’s too late: Many customers have opted for Qualtrics in the hopes of seamless integration with their existing solutions, but all they will be getting now are half-hearted consolidation attempts with Fiori. So, the whole Qualtrics situation is a disaster – and others are sure to come if SAP continues down the same path.

On-prem cloud

There are applications that are suitable for cloud computing, and others that aren’t. Oracle co-founder, executive chairman and CTO Larry Ellison is one of the first to recognize this, realizing that ERP users need a completely new cloud concept, maybe also a new datacenter concept, that goes far beyond traditional hybrid cloud scenarios. Oracle isn’t saying that ERP and cloud don’t match – it’s saying that the execution of hybrid concepts up until now has been lacking.

ERP is an intimate challenge that needs to be tackled in a secure environment. A modern datacenter is the natural habitat of an ERP system. For years or even decades, SAP customers have worked on harmonizing, consolidating and virtualizing their systems – all of this work can’t have been for naught.

With its new cloud approach, Oracle is trying to preserve everything that makes on-premises operation so indispensable while leveraging the cloud’s scalability. However, Larry Ellison’s idea is not a typical hybrid approach where customers try to benefit from the best of both worlds. Oracle is trying to combine the two concepts in the hopes of creating a new one – an on-prem cloud, if you will.

Oracle’s approach could prove risky for SAP as its success would throw the ERP company’s ‘Cloud First’ mentality into question. Economically speaking, SAP is no match for hyperscalers on its own. SAP needs allies but can’t build up crucial competencies. It needs partners but cannot match their cost-efficient prices. It’s a predicament for SAP, and the company apparently knows it, too – why else would it spin out Qualtrics, one of its most highly praised cloud acquisitions?

SAP is ERP market leader. SAP is app innovator and pioneer in digital transformation. But SAP is no cloud company. A cobbler should stick to his last, and SAP should stick to what it does best. If Oracle’s on-prem cloud proves successful, SAP will have to reverse course, anyway – which might not be too bad for the ERP company or its customers.