SAP AND CLOUD COMPUTING IN

2012 AND BEYOND

Group 9

Ruchi Banga - PGP/17/163
Srishty Barla - PGP/17/179
Tamaraiselvi A - PGP/17/184
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 SaaS
had limited applicability and value

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

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

In 2012, SAP decided to acquire SuccessFactors followed by Ariba

ERP in Business
ERP includes:

Financials

Human Recourse

Corporate services

Operations

PLM

CRM

SCM

SRM
SAP ERP

Previously known as R/3 and introduced in 1992

Had gained a large customer base and was
successful among the more capital intensive
industries

It had diverse customer base including NASA, US
Postal service and US Department of Navy

The 22% maintenance fee contributed to 60% of
the revenue

Customers were supported through problems
Received regular innovation called Support packs
and Enhancement packs

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 SAP
ERP was the oldest
The latest version released was Business Suit 7, offering modularity and a usual upgrade path i.e
eliminating 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
Increasing trend in ERP software
market
The ERP market is expected to increase to $50 billion with cloud and SaaS being the larger chunks. SaaS
is expected to increase at an annual rate of 21% through 2015
SAP had itself build its functionality into its
core Business Suite ERP solutions
They continued to build upon and their core
product offering
The softwares were tightly integrated and
helped in standardized business processes but
would 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 for
HR)
Oracle was moving towards merger of the best
practices it had acquired
Oracles approach could allow it to offer
flexibility and best of practices but could become
a problem while enforcing standardization
Oracle has an advantage over SAP in terms of
implementation duration and cost
It had highest executive satisfaction level
It maintained the second position with 18%
market share
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 gaining
competitive advantage

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

Customer centricity was realised to be an important factor in organisation's success
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 but
modifications on a cloud application could be done overnight at no cost and
no risk

Number of facebook user had been 1 billion by 2012

Various organisations had been generating 10,000 TB of data
Emergence and Characteristics of
Cloud Computing
Delivery of computing and storage capacity as a service to a heterogeneous community of end recipients
Three 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%. But
another 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 in
consumer mobile user experience

But in business, the implications were
not clear particularly regarding the
enterprise resource planning software
that lies in the core of the business
Cloud market included

Information
Platform collaboration,
Data and Mobile
Services
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-end
functions

Poor performance related to complex product architecture and lack of powerful sales channel, kept
hampering 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
SAP and SuccessFactors
SuccessFactors originally built to serve the new needs of Human Resources Department for Talent
management Software

Products: Performance Management, Compensation Management, Recruiting, Analytics, Enterprise Social
with Jam

Real Dominance is Talent Management Performance and Goal Management, Compensation
Management, 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 leadership
Dalgaard 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 code
throughout the entire ERP
In 2012, few months after the merger Dalgaard was officially in charge of SAP Cloud business
What do you think will be challenges
faced by SAP from this acquisition?

What kind of decisions are to be taken?
Challenges Faced
How SuccessFactors be presented to the user? Should they be presented inside the
SAP portal to leverage SAP components?

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

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

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

SAP America was the vehicle through which SuccessFactors was acquired. Legal
structure has a direct impact and how the business should be run and where the power
lay?
Questions for Discussion
SAP being leader in ERP business, do you think it is necessary for SAP to start
exploring cloud technology?

What do you think were the reasons for SAPs market failure in cloud prior to the
acquisition?

Do you think acquisition is the only way for SAP to enter cloud business?

What do you think are the benefits for SAP and SuccessFactors from this acquisition?

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

Do you think there will be challenges for SAP to convince their clients of this
acquisition? Can you suggest some ways to convince the SAP customers to move to
cloud
Recommendations
Keeping SuccessFactors separate is a very smart move because it keeps the on-premise
and cloud businesses in their own worlds

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

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

SAP and SuccessFactors have complementary customer bases, allowing for cross-sell
What happened Next?
At the time of the acquisition, SAP said SuccessFactors would continue to run as an
independent company, but that strategy has shifted. SuccessFactors has been folded into
SAPs newly formed Cloud Business Unit, which also includes a handful of other
cloud-based applications. SuccessFactors CEO Lars Dalgaard now leads the companys
entire cloud business (with the exception of another recent cloud acquisition, business
commerce network Ariba, which remains independent)

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

The companys plan to move beyond its legacy business and invest in newer
technologies SAP HANA
THANK YOU