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SAP has released its third quarter results, with cloud subscriptions and total revenue going up over 2013 figures, but software revenues taking a downturn.

Cloud subscriptions and support hit €738 million (£584.1m), a jump of 51% from Q313’s €488m (£386.2m), at an increase of 51%. Software revenues were at €2.53bn, a downturn of 3% from €2.61bn in 2013.

Total revenue was up 3% at €12.1bn, but operating expenses also increased to €9.53bn, up 5%. Profit after tax was down, at €1.97bn compared to €2.01bn. SAP gained 2774 employees between Q313 and Q314.

 “We are accelerating our shift to the cloud with more than 40% revenue growth in the cloud,” said SAP CEO Bill McDermott in a statement. “SAP is THE cloud company powered by SAP HANA helping customers run simple with over 44 million cloud users and the world’s largest business network.

“Our portfolio depth in the cloud, global scale and industry domain expertise are the bedrocks that separate us in the marketplace,” he added. “With SAP HANA and the Business Network, SAP will continue to shape the future of the enterprise software industry.”

Analysis

Even as software numbers continue to fall, it represents good news in terms of SAP’s master plan. The company, like Oracle and IBM, is engaged in a long term battle to shift its key revenue streams to the cloud and provide a seamless transition.

Oracle announced its Q1 financial results this time last month. New software license revenues were down 2%, yet overall net income practically stood still, noting a very slight decrease in constant currency. The new CEOs, Safra Catz and Mark Hurd, noted immediately that the first quarter was traditionally a leaner financial time, as well as arguing that cloud software will bolster the figures in due course.

SAP seems a little further down this path than Oracle, and the firm’s recent partnership with IBM, where SAP HANA will be delivered through IBM’s cloud, solidifies this.

SAP and IBM’s partnership goes back more than 40 years, so the deal makes sense from that standpoint. Doug Clark, UK&I cloud leader at IBM, told CloudTech at the time: “We are trusted by a lot of clients who live or die by that SAP system being up and running. This is SAP’s biggest news sitting on one of IBM’s biggest investments.”

The company’s first quarter figures, released back in April, started the trend which the Q3 numbers continue. Back in June Kevin Kimber, SAP UK&I managing director, told CloudTech the project was “hugely ambitious” and added the agile startup culture was something the nearly 70,000 strong German firm was aspiring to.

“The investments we’re making from an acquisition perspective, the organic developments we’re making, they’re all cloud first,” he said.

Last month SAP acquired software firm Concur Technologies for an estimated $7.4bn, the biggest buyout in its history, to bolster its cloud play. It’s one of many good signs – and both sets of numbers, cloud and software, are going in the right direction.

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The International Organisation for Standardisation (ISO) has released two new standards for cloud computing, in an attempt to “put some order in the chaos” for users.

The generally accepted definition of cloud computing was put together by the National Institute of Standards and Technology (NIST), with the final version hitting the stands in September 2011. In it, cloud computing is defined as “a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources…that can be rapidly provisioned and released with minimal management effort or service provider interaction.”

Yet the new standards from the ISO give a largely similar definition, choosing to call cloud computing an “evolving paradigm.” The document’s assessment of cloud’s key concepts – including broad network access, measured service, multi-tenancy, on-demand self-service, rapid elasticity and scalability, and resource pooling – ring very true with the NIST ruling.

As opposed to the NIST ruling which only proffers platform as a service, software as a service and infrastructure as a service, the ISO ruling has seven distinct cloud service categories, including network as a service (NaaS) and data storage as a service (DSaaS). Similarly, ISO expands on NIST’s 2011 definition on cloud deployment models, adding community cloud to public, private and hybrid.

There are two standards which have been released by ISO; the ISO/IEC 17788, a 16 page overview, and the ISO/IEC 17789, a 58 page behemoth.

In a blog post, ISO’s Vivienne Rojas outlines the problems with current cloud computing standardisation.

“The sky’s the limit for cloud computing, which seems set to change the entire computer industry,” she wrote. “This revolutionary concept has reached unexpected heights in the last decade and is recognised by governments and private sector organisations as major game-changing technology.”

“The cloud, as it is known, poses many issues, chiefly related to compatibility,” she added. “With more and more providers offering cloud-based services, the technology has suffered from chaotic development, making it almost impossible for companies to ascertain the quality of services offered,” Rojas added.

ISO adds that its joint ISO/IEC technical committee, JTC 1/SC 38, is piloting projects in areas such as SLAs, interoperability, and dataflow across devices and cloud services.

You can see the standards in full here.

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Microsoft has announced a strategic partnership with Docker, an open platform for developers and administrators to build portable, run-anywhere apps, to bring support with the next version of Windows Server.

It’s no secret that Redmond is forcing through its cloud and mobile-oriented ethos, with the shift coming from the very top. This partnership bolsters Microsoft’s push in the open source and Linux space – a much needed change – as well as providing a variety of benefits to developers and cloud platform customers.

Docker Hub, a cloud service for sharing applications and automating workflows, will be integrated with Microsoft Azure, enabling Microsoft’s ISVs and cloud developers access to Docker’s community. Elsewhere Microsoft is contributing to Docker’s open orchestration APIs, meaning developers can work with a preconfigured Docker Engine in Azure for the first time.

“The power of Azure and Windows Server leveraging the Docker platform redefines what enterprises should expect and demand from their cloud,” said Ben Golub, Docker CEO. “Together, we will provide a framework for building multiplatform distributed applications that can be created with exceptional velocity and deployed and scaled globally.”

The overall consensus on the move from Microsoft was summed up by Cade Metz in Wired: “The next big thing in cloud computing doesn’t work with Microsoft’s Windows operating system. But Microsoft wants to change that.”

Other cloud vendors, such as Google, Amazon and Rackspace, are already using Docker on top of their public cloud services.

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It was a little bit of a surprise when Google’s third quarter results came back. Even though profits were at $2.8bn (£1.7bn), it was down 5% from this time last year. Operating income was $3.72bn, down on $3.76bn in 2013, yet it now comprises less than a quarter (23%) of overall revenues, compared to 27% last year.

Consolidated revenues therefore were at $16.52bn, an increase of 20% this time last year. Nevertheless the figures caused ripples on the stock market, with shares down 2% in after hours trading.

For the execs, there isn’t even a hint of a problem. “Google had another strong performance this quarter, with revenue up 20% year on year,” said CFO Patrick Pichette in a statement. “We continue to be excited about the growth in our advertising and emerging businesses.”

No problems here at all. But the part on ‘emerging businesses’ is an interesting one. It’s not a misnomer to say that Google’s ecosystem is sprawling. From search to YouTube to cloud, it’s an impressive portfolio. Yet there was a lot of talk about enterprise cloud in the earnings call accompanying the financial results – particularly with regard to questions from analysts.

“Cloud is an area that is kind of booming right?” said Pichette, according to Seeking Alpha. “We know that the long-term trends are very clear for us, which is the vast majority of businesses. Everybody is moving their infrastructures to the cloud.

“It is an area where we have fundamentally great assets to contribute to this industry, both in terms of the flexibility, the cost structure, the technology, and that’s why we’re investing heavily in there,” he added. “We’re seeing great progress from an adoption perspective, signing up new customers.”

Pichette couldn’t give specific numbers behind the levels of traction, number of customers, CapEx, or level of investment in Google’s cloud. But there’s been a lot of promise in recent news. Earlier this month the company announced latest price cuts on its Compute Engine series, as well as offering a $100k Cloud Platform credit to eligible startups.

Despite this, the analysts aren’t exactly overwhelmed by Google’s current offering. According to Synergy Research, which studies the cloud infrastructure services market extensively, Google is off the pace in the race for second place, behind Microsoft and IBM and, of course, behind the behemoth that is Amazon Web Services.

This time last year, Amazon’s estimated revenues were larger than Salesforce, Microsoft, IBM and Google combined. 2014 sees that number dwindling, yet also sees Google’s market position dwindling, according to chief analyst John Dinsdale. He argued that Google’s lack of enterprise presence at the time counted against it.

Elsewhere, the Google cloud team announced a series of infrastructure refreshes in its Europe region. Customers get a new shiny Google Compute Engine zone, europe-west1-c, but deprecating europe-west1-a at the same time. The new zone will be launched in two weeks, while the doomed europe-west1-a will disappear on March 29 next year, giving customers plenty of time to orchestrate their exit.

What do you make of these results, and Google’s position in the premium IaaS market?

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A senior executive at cloud services provider Claranet has claimed that most cloud services providers and end users are relying too much on the standard service level agreement.

Paul Marland, Claranet director of account management, believes that cloud service today is far more dynamic. Contracts can – and should – change dependent on the customer’s need, and the classic SLA prohibits that.

“The vast majority of SLAs don’t really get to the heart of what’s important to customers – or, at the very least, fall short of guaranteeing what customers really need and expect, beyond uptime and availability,” Marland said.

“As businesses have come to rely more heavily on third parties to deliver their IT, and as solutions have become more complex, ‘good service’ can’t simply be reduced to the pure metrics of service availability,” he added.

Marland argues it’s not just a numbers game for end users, and that performance is key. The SLA might stipulate a five nines uptime, and the service provider may be adhering to that, but it doesn’t mean emails are being sent as fast as they could be, or pages are loading fast enough to take advantage of click-throughs.

“These performance-based issues have proven to be something of a bugbear for the service provider industry,” he admits. “[It’s] a grey area that falls beyond the remit of the traditional SLA, but remains key to the overall customer experience.

“The industry tends to measure against technical metrics, but it’s important to remember that it’s the end user’s actual experience that counts.”

Another big problem with SLAs is that if – or when – they invariably fall, figures and claims have to be reassessed and CSPs can feel the brunt of customers’ ire. When Autotask’s systems fell over for several hours back in July, the company admitted to CloudTech that it had put them a little bit below four nines in the affected zones. Some providers offer a 100% uptime agreement – iomart being one example, as well as Mimecast before it fell last year – yet the issue remains a thorny one.

As a result, OpenStack solutions and partnerships are the order of the day for a lot of vendors. Doug Clark, UK&I cloud leader at IBM, cited that as a main issue when speaking over IBM and SAP’s major enterprise cloud partnership earlier this week. You can use SAP HANA Enterprise Cloud on IBM Managed Services, or SoftLayer, and there isn’t anything tying you down to it.

Marland notes that if the SLA is technically exceeding customers’ expectations yet the CSP is still getting complaints over service, it points to a SLA that’s too generic, and doesn’t fit the specific performance objectives of the end user.

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Research published today by Canopy and Vanson Bourne shows that three quarters of chief financial officers think their organisations are not ready for digital business transformation, with a similar number worried they’ll become uncompetitive by the end of 2015.

This translates as CFOs missing out, on average, €67m of revenue last year due to not having the right cloud solutions in place, according to the research, of 950 CIOs, CFOs and business decision makers in mid-market and enterprise firms in Europe.

Here’s what else the survey found:

• Two in five (41%) of respondents admitted frustration with onboarding customers due to the poor responsiveness of IT tools
• Improving customer service (67%) is most important to fast-track digital transformation, ahead of improving mobility (45%) and using digital channels for selling (42%)
• Two thirds (64%) admitted that a lack of cloud investment was “holding back vital digital projects”

The future should be rosy for financial execs, according to the research. CFOs estimated that if enhanced cloud capabilities were in place in their company, double digit growth could be achieved in 2015 – a €123m revenue boost on average. The vast majority (90%) of respondents said they needed to embrace cloud based applications and infrastructure to deliver digital transformation.

“One of the keys to unlocking digital transformation is cloud computing,” said Jacques Pommeraud, Canopy CEO, in a statement. “From the work we’re doing with clients, we’re seeing that it has the power to create revenue by making the customer journey effortless across any device, enables faster customer sign-ups so they’ll spend sooner and support real-time analytics to make more accurate targeting decisions.

“The most innovative clients use the power of cloud and large scale analytics to generate new sources of revenue, for example in manufacturing for the area of preventative maintenance,” he added.

These results are particularly interesting, given Salesforce announced Wave, its new analytics cloud, at Dreamforce earlier this week. Meanwhile, research from the NCC Group found that three quarters (72%) of CIOs at financial services firms feared the cloud because of data concerns.

You can read more on the Canopy results here.

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SAP and IBM have announced a major partnership with SAP HANA Enterprise Cloud being delivered through IBM’s cloud.

The two firms, who have had a fruitful partner relationship for over 40 years, gives users the choice to run SAP’s HANA in-memory database across either SoftLayer, the IaaS firm acquired by IBM last year, or IBM’s cloud managed services.

Doug Clark, UK & I cloud leader at IBM, notes the previous collaborations the two companies have, with IBM already hosting SAP architecture for a lot of its clients. “To term SAP in ISVs is probably doing them a huge disservice,” Clark tells CloudTech.

“We are trusted by a lot of clients who live or die by that SAP system being up and running,” he adds. “And I think [it’s] what this is a really nice reflection of. You get to steady state when you’re working with a partner like SAP, and I think what’s really nice about this is [it’s] both of us moving to a new place.”

Even though the two companies have partnered up in the past and are happy to do so again, they’ve both got their separate agendas in enterprise cloud. IBM chief exec Ginni Rometty is driven to become the leader in enterprise cloud, and SAP famously went on record for its ambitions to become “THE cloud company.”

“We do a lot of great stuff together, we do stuff in parallel without bumping into each other, we’ve got our own strategies, but this actually is another convergence point on those strategies,” says Clark.

The two companies aim to bring different elements to the table; SAP will bring “the power of real-time”, as the press material puts it, while IBM brings the open architecture of IBM Cloud Managed Services and SoftLayer. HANA running off IBM will also enable organisations to integrate existing technology investments with new workloads.

For Clark, who has spoken at length in the past about the merging of cloud, mobile and social, as well as the interesting plays IBM is making with Watson, it’s about “balancing the two sides of the scales.”

“This is us maintaining a phenomenal future position with SAP, as well as working in the new exciting space with mobile, and social, and all of that analytics piece, and being able to grab the really strong benefits of both,” he says.

“This is SAP’s biggest news sitting on one of IBM’s biggest investments.”

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Tech giant EMC has bought open cloud provider Cloudscaling, according to reports, bolstering the firm’s push towards OpenStack.

The reports, which first surfaced in Bloomberg, gave little information regarding further details, but suggested that the deal was worth less than $50m.

Cloudscaling delivers on-premise elastic cloud solutions and is a key provider of OpenStack-powered IaaS for private and hybrid cloud, through its OS, Open Cloud System. EMC’s acquisition evidently plays into that space, yet there are other factors at play.

Here are both sides of the coin as to why EMC has moved in for Cloudscaling:

EMC needs to keep itself cloud-relevant as a legacy vendor

It’s a trend which is impossible to miss. Long standing technology vendors are reinventing themselves as agile and innovative. A lot of that is by moving operations to the cloud. Take the IBM and SAP partnership announced yesterday. These are two companies that have been partnering decades before cloud computing as we know it today existed.

For other companies, OpenStack is another route in trying to maintain relevance. Scott Kupor, in an Andressen Horowitz blog post, summed it up best: the established firms, once beneficiaries of free-flowing venture capital, are rapidly becoming victims of the cloud push. He cited SAP specifically as a company which was doing it right.

“SAP is not standing idly by,” he wrote. “Why? Because the financial consequences of being on the wrong side of technology platform shifts can be monumental.”

It’s a difficult process, hence why a lot of players are getting in early. Legacy firms can rely on fat government contracts, and other major clients who aren’t going to about turn any time soon, but that money will dry up eventually. With a push towards open source computing and trying to avoid vendor lock-in at all costs, there are OpenStack businesses available – and that’s the route EMC appears to have gone down.

EMC needs to beef up its non-VMware operation

As has been de rigeur of late, larger tech firms are spinning off into two. HP did it, as has Symantec, while eBay is separating PayPal from its other business.

EMC owns VMware, which it had bought back in 2003. Earlier this week hedge-fund manager Elliott Management said it had sent a letter to the board of EMC advising them to cast off its VMware unit.

Nothing concrete has come back from the company saying whether this will happen, yet as Ron Miller noted in TechCrunch: “If EMC joined the parade of companies breaking in two, and it spun off VMware, it would be left a modest sized company.”

But what’s next? As reported earlier this week, long standing merger rumours between EMC and HP have ground to a halt. Yet now HP has siloed its cloud and enterprise operation into a separate service, could the two firms come together if EMC spins off VMware?

What do you make of this move? How would you define their strategy? We’d love to hear your comments.

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Edward Snowden has told an audience at the New Yorker Festival to “get rid” of Dropbox as it doesn’t support encryption or protect private files, instead opting for a service such as SpiderOak.

The whistleblower, who was taking part in a ‘virtual interview’ through Google Hangouts, also criticised Facebook and, ironically, Google, although conceded their efforts in keeping user data safe were improving.

Yet when asked what someone who wasn’t a ‘computer genius’ could do to keep themselves safe, Snowden said: “We’re talking about encryption, we’re talking about dropping programs that are hostile to privacy, for example Dropbox. Get rid of Dropbox. It doesn’t support encryption, it doesn’t protect your private files. And use competitors like SpiderOak that do the same exact service but they protect the content of what you’re sharing.

“Same thing with companies like Facebook, companies like Google,” he continued. “They’ve made strides to increase the security of their programs and they’re getting better than they have been, but they’re still not safe. These are dangerous services.”

Meanwhile Dropbox has had to deny reports its service had been hacked, with security exec Anton Mityagin confirming that the series of usernames and passwords posted by hackers were not associated with Dropbox accounts.

“Recent news articles claiming that Dropbox was hacked aren’t true. Your stuff is safe,” he wrote in a blog post. “We have measures in place to detect suspicious login activity and we automatically reset passwords when it happens.”

For Snowden, the finger of blame for hacks is pointed squarely at one target. “You have to use secure communications,” he said. “The real key is, companies that are willing to collaborate with any government to compromise the security of their products and services do not deserve to be trusted with your data. Because if they’ll do it for one government, they’ll do it for another.”

You can watch the full interview with Edward Snowden here.

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Software giant Oracle has reportedly hired former SAP exec Shawn Price in another push towards cloud computing, days after hiring Google App Engine founder Peter Magnusson.

Price was fired by SAP five months after he took on the role of global cloud president, having taken over from Robert Calderoni in January. As CloudTech reported at the time, the surprising move was taken as part of a wider effort to shift the business towards cloud computing.

According to Re/code, Price’s new job title will be senior VP for product strategy and marketing, reporting to CEO Mark Hurd.

Unlike Magnusson, whose LinkedIn profile confirmed he was at Oracle with the vague job description of ‘public cloud’, Price’s LinkedIn offers no clues. This may not be unexpected however, as it still lists him as an employee of SAP.

Oracle’s aggressive move towards cloud services was exemplified by Larry Ellison’s keynote speech at this year’s OpenWorld, where he told delegates: “Our cloud is bigger than people think, and it’s going to get a lot bigger.”

It’s been a particularly busy time for Oracle’s HR department of late, with a litany of new hires as well as the boardroom shuffle which saw founder Ellison move to chief technical officer, with Safra Catz and Mark Hurd taking over as CEOs.

During a recent analyst call, Ellison joked: “You’re going to have to wait a little while longer before you get me off the call”, indicating that while Ellison was no longer the boss on the face of it, he’d still be doing his fair share of backseat driving.

SAP and Oracle have plenty in common. Both companies are moving their business models to cloud from on-premise software sales, both companies have used the co-CEO model, and now the former SAP cloud chief is taking an executive role at Oracle.

Oracle’s last set of financial results saw new software license revenues down 2%, total revenues up 3%, and net income pretty much standing still at $2.184bn.