SAP In Transition: Mobile Is Customers’ “Preferred Consumption Method”

SAP is a company moving from a leading core enterprise software business to a planned, strongly cloud-oriented model. We spoke with Adam Stein, senior director of mobile marketing about SAP’s initiatives and their attitude towards the mobile cloud.

Stein, who previously was a key marketing exec at MobileIron, affirmed the emerging dominance of the mobile cloud, adding that he believed that a third leg of future growth is Big Data analytics.

He stated that mobile is our customers’ “preferred consumption method.” SAP’s uniqueness, he believes, lies in its ability to tie mobile to big data, providing scalability for clients.

What he refers to as SAP’s “mobile stack” includes: apps, apps development and HANA (High Performance Analytic Appliance – SAP’s in-memory, column-oriented, relational database management system.) Stein describes HANA as a common conduit for the flow of big data and analytics, including data from the Internet of Things. (HANA has been proclaimed by SAP as the fundamental element in transitioning its core business to the cloud. The company’s broader vision foresees HANA as a platform on which is based its cloud business for: vertical markets, lines of business, analytics, and 3rd party apps.)

The apps capabilities of SAP in the mobile area include both their mobile apps development platform (MADP) and the SAP Store. The Store offers industry-specific apps, line of business apps, consumer apps, or mobile device management. The 250+ apps were developed largely by SAP partners. Many are vertically focused.

Vertical industry focus has been labeled by SAP as its “strong suit”. The company reaches its markets through five routes: direct sales, OEMs, VARs, systems integrators (including telcos) and embedded sales. Stein points to examples such as a system provided to all of Hallmark’s stores. This system, developed with Verizon, employs SAP’s Afaria platform for mobile device management and uses Mocana, the mobile security provider (that SAP partnered with in 2013) for app wrapping.

SAP also highlights mobile security as a strong point. Stein states that he feels that “policy management” is somewhat of a misnomer. He prefers to think in terms of “real time protection” or “defensive depth.” He points out that sometimes policies can actually frustrate security measures.

He states that SAP looks at the apps as the container for security purposes, rather than the device. He adds that frequent changes in device software annoy people who don’t like to see their interfaces changing.

SAP must be credited for its move into mobile (relatively early compared to other giant software providers) – when it acquired Sybase in 2010. At the time Sybase was already moving aggressively into mobile. Its products included its iAnywhere Solutions segment for enterprises which offered mobile device management, wireless email, mobile middleware platforms, database and synchronization, and other solutions; as well as its Sybase 365 segment which provided mobile information and mCommerce services to carriers, and enterprises, including financial institutions.

SAP has extended these mobile capabilities. The company divides its mobile capabilities into three major categories: 1) SAP Mobile Platform, which provides MADP capability and includes the Sybase Unwired Platform; 2) SAP Afaria, its MDM capability; 3) Sybase 365, which provides carriers with interoperability services, which Stein notes, exchanges about 365 billion messages per day between carriers. The company also points to its growing number of mobile consumer apps, aimed at healthcare and other areas.

Clearly SAP is identified with the enterprise market. However, Stein states that the HANA platform is increasingly attracting smaller companies as well. He believes this is because it gives SMBs the ability to handle big data. He believes that the with the ascendancy of the cloud, many SMBs who might have hesitated to do extensive premises software installations are jumping directly to the cloud when they update their systems.

In summary, SAP has under way a massive transition from their core, or legacy, systems to becoming a cloud-based provider. Stein estimates that about 30% of their 250,000+ enterprise clients have heavy mobile involvement.

It would be difficult not to take this company very seriously as an entrant in the mobile cloud area. However, questions remain to be answered.

While the company is very vocal in proclaiming HANA as the platform of the future, over the past year it only represented less than 5% of revenue. Most of the HANA revenue in 2013 was from premises installations, rather than from the cloud. In addition, although SAP has scaled its core business very successfully, the ability to scale, based on its highly verticalized approach to cloud markets, is open to question.

This is not to question whether it will have a major role in the mobile cloud going forward, but what the nature of that role will be. Will it progress towards a leading role across the full range mobile cloud services or will it emerge as more of a customized provider of services to various verticals, more on the model of an IBM or Accenture.

In 2013 the company reported about $1 billion of “cloud subscriptions and support’ revenue. It projects that this will grow by over 400% to $4-5 billion per year by 2017, about 15% of total company revenue at that point. It is unclear how much of this projected cloud revenue will be mobile-based. However, Stein’s observation that mobile is the preferred medium of users, would lead us to assume that it will be the majority of the cloud business. (Note that the cloud revenue includes revenue of SAP’s Ariba commerce cloud trading network operation, acquired in 2012. At the time of acquisition Ariba had annual revenues of nearly $450 million. In 2013 SAP acquired Hybris – revenues estimated at $100+, which offers customer engagement software, both as an on-premise, or a cloud offering.)

SAP has recognized the critical role of the convergence of mobile and cloud computing as witnessed by the forceful statement recognizing the vast potential impact of the mobile cloud that it made (in its Annual Report) nearly two years ago.

“The pervasiveness of the cloud and mobile devices, together with the power of in-memory computing, allow people to connect and collaborate wherever and whenever they choose. At the same time, they can access and analyze large amounts of data in seconds. We strongly believe that the convergence of these technologies has the potential to create enormous business value and power new business models both in developed countries and emerging markets. We further believe this will change cultures — both within companies and externally among their customers, partners, and others across their business ecosystems.”

We will be interested to track the company’s determined efforts as it moves along this path.

* Photo by Phil Campbell (Email) [CC BY 2.0], via Flickr Creative Commons