Why SAP’s Cloud Business Will Fail
Blog Last and Least

Why SAP’s Cloud Business Will Fail

SAP has been busy trying to position itself as a successful cloud provider. Here’s why it will fail.

2004 has not been a good year for SAP. It was then that it acquired all shares of its consultancy subsidiary SAP Systems Integration. Seems harmless enough, right? However, this acquisition led to a significant loss of know-how in outsourcing, hosting, SaaS, and cloud computing. But why? Well, SAP may have integrated SAP SI, but T-Systems got its know-how.

To this day, SAP has not been able to recover from this loss of know-how – and it shows. Customers who opt for HEC, the Hana hosting of SAP, have to cancel their projects because – you guessed it – the cloud business know-how is just not there.

Lapse in judgement

SAP made a mistake when it acquired SAP SI but gave up its know-how, yes. But customers who gave up their IT know-how in favor of cloud computing also made a severe mistake. And not only that, they doubled down on it, turning down cheaper offers from AWS, MS Azure, and Google, and deciding on the pricier HEC (Hana Enterprise Cloud) instead.

Granted, when they opted for SAP’s HEC, they hoped that higher prices also meant higher level of know-how and experience. What a lapse in judgement!

Now, both sides are missing IT know-how. Users don’t have it anymore because they planned on cloud computing, and SAP doesn’t have it because they began building it up too late. HEC projects had to be stopped and canceled.

A growing trend in the SAP community right now is that SAP customers turn to niche cloud providers who still have SAP know-how. Some customers also opt for Azure, because Microsoft has been involved with SAP systems for many years now. Furthermore, it also knows about ERP’s complexity first-hand – resulting in know-how and experience.

As the situation of SAP customers seems to get (slightly) better, one question remains: what can SAP do to save its cloud business? It can either reduce its cloud prices significantly or invest massively in consultancy services. All in all disastrous conditions for a satisfying cloud return.

E-3 Magazine February 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 pmf@b4bmedia.net


Click here to post a comment

  • Hi Peter
    What makes you say that customers are canceling their HEC projects?
    Thanks, A.

    • Hi Ahmed,

      thank you so much for your question! As is often the case with the Editor-in-Chief blog, this article is mostly based on discussions and private talks with customers themselves. At least in the German SAP community, customers are cancelling their HEC projects ever more frequently. I hope this answers your question!

      • Yes. Thank you for your answer.

        I know that GE (US) is using HEC. I wonder what’s different about HEC for European customers? Do you think its the cost, service quality, or something else?

        • Well, as the article suggests, it’s a combination of many factors, but first and foremost the high cost without high-quality, competent service. US-based companies often have a different approach to SAP’s prices than German/European SAP customers, so maybe that accounts for the difference in opinions.

          • Thank you and I agree with you.

            Can you elaborate on what happened in 2004 with SAP’s acquisition of SAP SI? Why did SAP lose the talent and T-Systems win them? What did T-Systems do?

          • Well, what happened with the acquisition was that SAP wanted to integrate (and did ultimately do so) SAP SI for administrative purposes (one datacenter to manage instead of two). SAP did not need the people working there, IT specialists, hosting and sourcing experts,as it already had its own sourcing staff (at least so they thought). At the same time, T-Systems was building up its own hosting and outsourcing business, welcoming any specialists and experts that SAP didn’t want. Consequently, the know-how (the people) went to T-Systems, while SAP got what it orignally wanted: less administrative effort. I hope this answers your question!

Sign up for e3zine´s biweekly newsbites

Please do not use administrative mail adresses like "noreply@..", "admin@.." or similar as these may get blocked for security reasons.

We use rapidmail for dispatching our newsletter. By signing up, you agree that the data you have entered will be transmitted to rapidmail. Please take note of their terms and conditions and privacy policy.termsandconditions.

Our Authors