SAP upped its future guidance last week on the back of impressive financial results that underlined the forward momentum of its cloud business model.

Cloud revenue grew 30% year-on-year to €1.2 billion in the German software firm’s second quarter of 2018, while new cloud bookings grew 24% year-on-year, hitting €421 million, though the figures were boosted by SAP’s Callidus acquisition.

Naturally, traditional license revenue dropped – by 9% – as SAP converts its on-premise customers into cloud users, falling to €996 million.

It comes on the back of SAP’s belated counter to Salesforce’s dominance in CRM, releasing C/4 HANA only last month to target its users – largely back-office customers – with a front-office product too.

CEO Bill McDermott hailed the results as evidence of customers embracing the vendor’s «clear strategy», saying: «SAP customers are finally able to focus their entire business on delivering a personalised experience to their customers.

«The intelligent enterprise is the elixir to bridge silos inside fractured businesses and beyond so CEOs get a single view of the customer.»

As a result, SAP has raised its guidance for 2020, expecting non-IFRS cloud subscriptions and support revenue of between €8.2 billion and €8.7 billion, up from previous guidance of €8 billion to €8.5 billion.

While the results were well-received by analysts, market observers did point to a few challenges – and opportunities – ahead for the ERP vendor, which we outline below.

Cloud is growing, but is it scaling?

While SAP’s cloud growth is strong, it’s harder to tell if the company is doubling down on that growth by investing in its own platform. For users deploying ERP at scale, larger, enterprise-friendly clouds like Microsoft’s might appeal over SAP’s, says SAP implementation specialist Centiq’s CEO, Matt Lovell, who claims Microsoft has been spending $1 billion a month on expanding Azure’s scale.

Similar investment in SAP’s own cloud isn’t clear from its balance sheet, with €5 billion in operating expenses for the quarter not suggesting that any of that is related to expanding its data centre footprint.

«SAP’s got to catch up a bit,» says Lovell. «Microsoft’s global fabric is far more expansive and extensive and the roadmap is going to give much more benefit to [big] customers globally.

«To compete with that kind of global scale – Google’s in a very similar category – in terms of locality of infrastructure, which we know to be important to lots of SAP customers … you want to [offer] that business continuity on a global basis and [customers] want to be able to pinpoint performance pinch points and optimise the cost of cloud.»

S/4 HANA continues to add customers, but what about Leonardo?

SAP was keen to boast of further adoption of its new ERP product, S/4 HANA. The suite grew its customer base 41% year-on-year, now counting 8,900 users.

«This is of significant interest,» says Lovell, tempering the news with the point that S/4 migrations are complicated and mean some users will be using more of the suite than others. «Obviously they’re at different stages of migration, which could take a year or more given the complexities of migrating ECC and ERP. We can expect the number to grow but that number’s going to reflect more customers inside a longer journey.»

But he adds that the growth will continue as new S/4 users learn best practice from those who have already deployed the suite.

Research firm TechMarketView’s research director, Angela Eager, adds that 40% of the new S/4 customers are brand new SAP users – a significant win – but adds that other product lines, like innovation umbrella Leonardo, barely got a look-in: «The limited detail on HCM and the significant Leonardo products was notable.»

C/4 HANA is yet to prove itself

C/4 HANA, SAP’s answer to Salesforce’s ever-growing market share of the CRM space, was only revealed in early June, yet according to SAP’s financials is already a rollicking success, bringing in €242 million in revenue for the quarter.

Of course, C/4 packages up SAP’s sidecar acquisitions – Callidus, Gigya and others – and so really the financial growth isn’t off the back of a new product, but largely acquisitions.

«It seems late in the day to be launching such an initiative,» says Eager. «With Salesforce still ascendant, it will be a tough market to work — and [to] deliver the triple digit growth SAP is expecting from CRM products.»

The market will instead watch closely to see how SAP’s bet on CRM pays off against this baseline, with SAP aiming first to double CRM business in the next two years.

Picture credit: SAP

G-Cloud 10 is now live, with more than 3,500 suppliers listed on the latest iteration of the framework.

More than 90% of the 3,505 companies who’ll be competing for public sector contracts are SMBs, according to the Crown Commercial Service (CCS), and there are 649 more vendors listed on the new version of G-Cloud than there were on its previous incarnation.

«Small businesses are the backbone of our economy, delivering innovative solutions in partnership with the public sector, fuelling economic growth and supporting the delivery of efficient, effective public services that meet the needs of citizens,» said Oliver Dowden, minister for implementation, who oversees CCS.

«The success of G-Cloud demonstrates how we are breaking down the barriers for SMBs who want to supply to government.»

Government figures show that G-Cloud has racked up £3.1 billion in sales since its launch in 2012, with 48% of that going to SMBs.

But SMBs have criticised the framework for its inability to allow them to change their prices on a given iteration – e.g. G-Cloud 9 – if their own costs increase.

Nevertheless, suppliers welcomed the launch of the latest version, with UKCloud founder Simon Hansford, whose firm has listed services since G-Cloud’s inception, saying: «With each iteration the framework has seen enhanced functionality and an increased volume of transactions as it has supported a thriving ecosystem of UK tech SMBs that have succeeded in winning business through it.»

G-Cloud allows public sector departments to put cloud contracts up to tender to a wider pool of bidders that are often smaller than the big tech firms that have historically benefitted from UK government spending.

The arrival of G-Cloud 10 was in doubt for some time, after the government originally said G-Cloud 9 would remain in place until May 2019, rethinking its decision earlier this year.

A new framework means suppliers can list new services they provide and adjust their prices.

Slack is down, forcing workers everywhere to resort to sending mass emails as the collaboration app tackles a major outage.

The communication tool, which passed six million daily users in 2017, warned that «all workspaces are experiencing difficulties».

Downdetector, which tracks outages with popular applications, showed the US, UK and mainland Europe were having the most difficulty.

Naturally, people responded to the issue with a sense of calm equanimity online.

The issue began at 2.33pm BST, with Slack posting the following update to its status page an hour later: «We are continuing to work on fixing the connection problems that have been impacting folks. We hope to have the issue fully resolved as soon as possible.»

On Twitter, Slack posted: «We’re working hard to isolate the issue. Thanks for your patience!»

However, with the investigation ongoing, it’s not clear yet what’s caused the issue, though Cloud Pro has approached Slack for more information.

The firm runs its platform on top of Amazon Web Services (AWS) – EC2 instances for basic compute, S3 for user uploads and static assets, Elastic Load Balancing to distribute workloads across EC2, and EBS for overnight backups.

«As a company, our business is integral to our customers’ daily lives,» Richard Crowley, Slack’s director of operations, is quoted as saying on AWS’s website.

«So in our customers’ eyes, our security controls and ability to deliver a reliable service become incredibly important, and it’s a responsibility we take incredibly seriously.»

Slack debuted new developer tools last month designed to allow them to code and test their own Slack apps within the Slack platform, as well as coming with built-in integrations for third-party apps popular with coders; Asana, Bitbucket, HubSpot, Zendesk and Jira.

The collaboration tool isn’t the only service to experience issues recently, with Office 365 dropping offline for UK users earlier this month, as well as back in April.

SAP’s licensing has struggled to keep up with how customers have used the vendor’s technology in recent years.

Its per-user pricing model doesn’t account for the world of IoT, in which devices, applications and bots, not human workers, access the German software maker’s ERP systems, and do so much more often than staff would.

But customers had previously felt comfortable setting up such access, with SAP personnel aware of these connections without raising any issues, or any customers falling foul of licensing audits, according to the SAP User Group Executive Network (SUGEN), which represents customers.

However, after SAP sued high profile customers brewery Anheuser-Busch InBev and British firm Diageo, against whom it sought huge multi-million-dollar damages, for cases of indirect access, customers understandably grew worried.

Their cases typified indirect access use cases; Diageo enabled access to SAP’s ERP system via third-party software, Salesforce. The accusations against Anheuser are less clear, but SAP alleged that it accessed its systems directly and indirectly without appropriate licenses. Anheuser settled out of court with SAP in March.

SAP moved to address customer fears over indirect licensing by introducing a new policy in April to cover third-party access to its ERP and S/4 HANA systems (on-premise or in the cloud), as well as taking steps to ensure the threat of audits isn’t used in sales negotiations.

The new pricing model for indirect access to SAP’s ERP applications, and its S/4 HANA suite of ERP tools, aims to bring SAP’s licensing into step with modern uses of technology – essentially, machine-to-machine interactions replacing a lot of human access to ERP systems.

After introducing some new licensing models some months previously, as of April SAP detailed a new licensing policy to account for IoT use.

Instead of following its per-user pricing model, this one differentiates between human access via SAP software and device or bot access to core ERP systems.

This new model charges for access on a per-transaction level (SAP calls it a ‘document’), where that transaction might be a POS transaction, an approved invoice or something else that requires accessing SAP’s ERP.

So, what’s changed?

SAP’s per-user licensing model remains unchanged, and organisations can also use SAP’s other two models, procure-to-pay and order-to-cash – both order-based pricing models – choosing between them to best suit how they use SAP’s applications.

This new per-document pricing model addresses the biggest fear among SAP’s customers though; indirect access.

It will price access based on the number of transactions or ‘documents’ (an item like an invoice that needs to be run through the ERP system) accessing S/4 HANA or SAP’s ERP suite.

You can decide whether your usage suits the document-based pricing model

Customers can choose which model suits their needs best, and can move to the document-based pricing model or remain on their existing model.

SAP has promised «conversion offerings» for those considering a switch. However, SUGEN warns that it’s not clear whether users will save money under the new model.

SAP promises to separate software audits from sales negotiations

With customers scared that SAP will use the threat of software audits in sales negotiations in light of SAP’s lawsuits against Anheuser and Diageo, the German tech firm has promised to ensure the two remain separate.

As SAP put it, somewhat mildly, audits coinciding with talks around new software purchases «can sometimes cause frustration» for customers.

It’s promised to change this to ensure audits aren’t co-opted as a nasty sales tactic, and will introduce self-service auditing features for customers to check how their usage measures up to their licensing agreements.

So, what questions should you still have about SAP’s new licensing direction?

Will you save money under the document-based pricing model?

The biggest question is whether you’ll actually save money by switching to the new licensing model. SUGEN believes it’s too early to tell.

«It is difficult to know if existing customers will pay more under the new model, as the measurement and auditing tools required aren’t currently available,» SUGEN core leadership team member Philip Adams says.

«It won’t be until Q1 2019 that customers will be able to assess any potential cost impact. However, we have urged SAP to publicly promise that customers would be able to adopt the new model without incurring further costs if the business value or scope of their usage has not changed.»

Will the new per-document model be priced reasonably?

The lack of certainty above is in part because the catch-all nature of the term ‘document’ will mean different things for different industries – it could be an invoice, a retail transaction, an oil production contract, or anything else: clearly some will be easier to process than others, or require fewer touchpoints with an ERP system.

«Generally I think it’s a good move by SAP but there are many details that are still unclear,» says Duncan Jones, principal analyst with Forrester. «For instance, will the price for the new per order be reasonable and will SAP sales teams discount it appropriately?

«My general advice is to prepare a solid negotiation strategy to embrace the change but get sufficient safeguards and compensation in return.»

Will organisations using non-SAP software pay more to integrate these apps into their ERP platform?

This is something else that’s too early to answer, and may play into your decision as to whether you want to change your pricing model at all.

«What is clear is that if you move to the new model, ‘indirect’ transactions from non-SAP systems to SAP systems would be counted and charged for in the new way,» explains SUGEN’s Adams, «hence customers with existing contracts need to look at and understand whether they are licensed for these types of transactions under their current contracts.»

Diageo’s court case came about because of its use of Salesforce, and SAP will be keen to encourage customers to use its newly-launched C/4 HANA suite of CRM apps over rival offerings.

Should you trust SAP?

This one’s easy to answer – wait and see.

SUGEN points out that SAP has known about situations where customers connect third-party systems to its ERP platform for at least six years, but only started punishing companies for doing so recently, leaving its customer base panicked and confused about what they could and could not do.

«Expecting customers to talk to and trust account managers in an environment where SAP has admitted to having lost customer trust is asking a lot,» says chairman Gianmaria Perancin.

«If SAP publicly provided reassurances that customers won’t be asked to pay more for use cases and implementations that were undertaken in good faith, this would go a long way to encourage customers to engage with SAP proactively.»

However, Adams adds: «Without these reassurances, customers will find themselves in a state of paralysis, unable to move forward as they do not yet know what the new licensing model will mean for them. Over the coming months, we will be surveying customer organisations to see if their licensing positions are clearer, and what this means for their future plans and investments with SAP.»

Image: Shutterstock

Microsoft is under pressure from the tech community to terminate a contract it holds with US Immigration and Customs Enforcement (ICE), in light of the department’s family separation policy.

A blog post published in January has resurfaced in the last couple of days, detailing how Microsoft «is proud to support» ICE’s IT innovation aims through its Azure Government platform.

A protest is taking place later today outside Microsoft’s DC office about the issue, and employees are being encouraged to speak out online.

Erica Baker, a senior engineering manager at Patreon, said on Twitter: «Friends who work for @Microsoft, FIGHT THIS. Make the biggest noise imaginable about it.

«Don’t fall for the «all companies take government contracts» spin. Your company has THIS contract and is *proud* of it.»

A spokesperson for Microsoft said it’s not working with ICE or US Customers and Border Protection «on any projects related to separating children from their families», and doesn’t believe its Azure services are supporting such projects.

«As a company, Microsoft is dismayed by the forcible separation of children from their families at the border,» the spokesperson added.

«We urge the administration to change its policy and Congress to pass legislation ensuring children are no longer separated from their families.»

Its original blog post, written by Tom Keane, general manager at Microsoft, read: «ICE’s decision to accelerate IT modernization using Azure Government will help them innovate faster while reducing the burden of legacy IT.

«The agency is currently implementing transformative technologies for homeland security and public safety, and we’re proud to support this work with our mission-critical cloud.»

This section was reportedly removed from the blog by an employee earlier in response to the social media outburst, but was later re-inserted.

Picture: Bigstock

Line of business users can create apps for routine tasks not covered by traditional CRM, ERP and HR tools with Google’s new low-code environment App Maker, the cloud giant said yesterday.

End users with little or no experience of coding can speed up workflows by using G Suite’s new low-code development feature to build apps that make specific manual processes far more efficient.

Tasks that are often specific to a particular organisation aren’t covered by the large apps bought in by IT, which tend to have a broader, utilitarian focus.

«Too few businesses have the means, let alone the resources, to invest time and effort in building custom apps,» said Geva Rechav, product manager for App Maker.

«Why? Because their IT budget centres on big enterprise apps like CRM, ERP and SCM, and beyond those priorities, IT executives’ attention focuses on security and governance.»

But tasks like requesting purchase orders or filing and resolving help desk tickets are key to how departments like HR, sales and finance operate.

Google App Maker (credit: Google)

Game development firm Electronic Arts (EA) found it was often allocating staff to different projects with little notice, from designers joining new game projects or HR advisers helping set up studios. On Google’s Early Adopter Program, EA used App Maker to automate the process.

«Pooling talent resources was always an ad hoc process,» said EA’s director of IT, Peter McAuley, «but App Maker let us quickly build an app that tracks allocation requests in detail.

«Our custom app also calculates and provides management with a view of total resource utilisation by month, something which was always more of a chore to put together manually.»

End users and IT developers can use its drag-and-drop UI design, and declarative data modelling, to build their apps quickly.

App Maker-built apps can hook into Gmail, Sheets and Calendar for useful integrations, Google said, while Apps Script offers connections to 40 other Google services, and Google Cloud Platform.

It offers built-in support for Google Cloud Platform’s managed database, Cloud SQL, but users can also integrate it into their own database with the Java API JDBC or a REST API.

The service is available to G Suite Business and Enterprise users, as well as G Suite for Education customers.

Picture: Bigstock

IBM has launched 18 new availability zones for its cloud, introducing more datacentres to the UK, North America, Europe and Asia-Pacific.

The expansion will mean IBM Cloud operates in 78 locations, with the new datacentres opening in Germany, the UK, Washington, DC, Dallas, Tokyo and Sydney. The zones are defined as isolated clouds within a cloud region, and they are designed to improve capacity, availability, redundancy, and fault tolerance of IBM Cloud as a whole.

The tech giant’s customers will also be able to use IBM Cloud Kubernetes Service to deploy multizone container clusters across different zones within a region, something that allows containerised software to offer high availability.

«The world’s biggest companies work with IBM to migrate them to the cloud because we know their technology and unique business needs as they bridge their past with the future,» said David Kenny, senior vice president of IBM Watson and the cloud platform.

«Our continued cloud investment and growing client roster reflect that companies are increasingly seeking hybrid cloud environments that offer cutting-edge tools including AI, analytics, IoT and blockchain to maximise their benefits.»

Pointing to its hybrid cloud’s popularity with enterprises, IBM also revealed that ExxonMobil, Bausch + Lomb and Australian bank Westpac are migrating central workloads to its cloud.

ExxonMobil is using IBM Cloud to underpin a mobile app for motorists developed by IBM Services, while eye health firm Bausch + Lomb is using IBM’s cataract surgical system, Stellaris Elite and Westpac now deploys applications and customer products on IBM’s cloud.

IBM is also positioning its cloud as the platform to underpin smart building and IoT innovations, as a place to analyse the vast quantity of data such technologies produce.

«Buildings have long mimicked living organisms — plumbing circulates through the walls, wires innervate every room, and concrete and beams provide skeletal support — but until recently, buildings lacked the most critical body part: a brain,» said Bret Greenstein, global VP of Watson IoT.

«The IBM Cloud is the cognitive centre that enables buildings we live and work in to serve our needs in new and unprecedented ways.»

It is supporting elevator manufacturer Kone analyse the movement of people inside buildings, up lifts and escalators, to manage that flow better, and UK-based Chameleon Technology is using IBM’s Watson Assistant to allow people to speak to their smart energy meters.

Privacy Shield, the agreement underpinning data transfers from Europe to America, must be suspended if the US does not fully meet its obligations come 1 September, MEPs voted last night.

The Civil Liberties (Libe) Committee’s decision isn’t binding, but puts pressure on the European Commission to ensure the data-transfer arrangement is being honoured by US authorities.

Drawn up to replace the abandoned Safe Harbor agreement in 2016 after that deal was brought down by a legal challenge, Privacy Shield now faces obstacles of its own.

Designed to extend EU-like data protection to European residents’ data transferred to the US, now the Libe Committee believes the new agreement fails to provide that protection as well.

«While progress has been made to improve on the Safe Harbor agreement, the Privacy Shield in its current form does not provide the adequate level of protection required by EU data protection law and the EU Charter,» said Libe Committee member Claude Moraes.

«It is therefore up to the US authorities to effectively follow the terms of the agreement and for the Commission to take measures to ensure that it will fully comply with the GDPR.»

MEPs raised their concerns following the Cambridge Analytica scandal affecting Facebook, about which the social network’s CEO, Mark Zuckerberg, gave evidence to the European Parliament recently.

While the incident pre-dates Privacy Shield, it was concerned about US authorities’ ability to monitor US firms’ compliance with the agreement, given both Cambridge Analytica’s affiliate company, SCL Elections, and Facebook are both still listed on Privacy Shield.

SCL Elections still listed on Privacy Shield

MEPs also said they’re concerned about a new US law called the CLOUD Act, which gives US authorities the right to access data stored in foreign locations, as long as the organisation storing it is American.

The Libe Committee said this could clash with EU law on data protection.

Picture: Bigstock

SAP has moved to curb the impact Salesforce is having on its own CRM play with its latest product, C/4 HANA, analysts say.

C/4 HANA is SAP’s attempt to tie together its ERP applications with front-office customer-facing tools, aiming to create a better customer experience overall.

«SAP was the last to accept the status quo of CRM and is now the first to change it,» said CEO Bill McDermott.

«The legacy CRM systems are all about sales; SAP C/4 HANA is all about the consumer.»

Industry observers suggest that SAP has made the move to stop the likes of Salesforce eating into its installed base.

C/4 will comprise all of SAP’s CRM acquisitions to date – SAP Marketing Cloud, SAP Commerce Cloud, SAP Service Cloud, SAP Customer Data Cloud (including the acquired Gigya services) and SAP Sales Cloud (including the newly-acquired CallidusCloud services and acquired Hybris business).

SAP is the second largest CRM vendor, owning 8.5% market share in 2017, according to Gartner’s statistics. But while customers of SAP’s ERP products are loyal purchasers of its front office kit in sectors like utilities, chemicals and industrial manufacturing, those in retail and consumer goods are more likely to use Salesforce, Gartner research VP and distinguished analyst Ed Thompson said.

«The battle is between those who want a unified front-office and value it more than those who want an integrated front to back-office,» he told Cloud Pro. «The issue has been whether they’re patient enough to wait for SAP to get their act together or whether they want something more quickly.»

Another factor is the size of the CRM market – it overtook the ERP market in 2015 and is expected to be worth $75 billion by 2022, according to Gartner figures, compared to ERP’s $44 billion market cap.

«So in essence SAP has to do well in CRM; it will one day be bigger for them than ERP,» Thompson said.

But bearing in mind Salesforce’s 19% market share, SAP must reach beyond traditional users of its CRM products to offset its dominance.

«It will take more than launching C4/HANA for SAP to close the gap,» Thompson said. «They’ll need to find a way to appeal to those who are not existing SAP customers for CRM, widen their ecosystem of ISV and consulting partners and make ground in the industries they haven’t traditionally sold CRM to.»

C/4 HANA simplifies the branding of SAP’s range of CRM software by putting it under one roof. One level up from that, and SAP is effectively selling S/4 and C/4 under the ‘intelligent cloud suite’ brand as one whole connected service tying together front and back office IT.

As McDermott put it: «When you connect all SAP applications together in an intelligent cloud suite, the demand chain directly fuels the behaviours of the supply chain.»

But Constellation Research’s Mueller stressed that customers now need to see the new positioning backed up in product announcements.

«SAP has a shot to redefine #CRM with the @CallidusCloud and #S4HANA assets,» he tweeted, «but must show complete processes.»

This means integration via APIs, and fast – something Thompson also highlights.

«It will require a quick follow up with details on architecture and roadmap to back up the strategy and it doesn’t yet address the issue of how this will encourage a CRM ecosystem of partners and facilitate increased innovation,» he claimed.

Both analysts view it as a move to limit the impact Salesforce is having on SAP’s CRM business, rather than an aggressive push of its own. «Pressure on CRM must be substantial,» Mueller observed.

«This is a defensive [move] in response to Salesforce,» Thompson added. «It will take more to get on the offensive.»

Image: Shutterstock

Rackspace has become the latest firm to offer Kubernetes as a managed service, joining the likes of Google, AWS, IBM, Microsoft and Cisco in offering the open source container to customers.

Its Kubernetes-as-a-service product aims to make it much easier for enterprises to adopt containers, which serve to isolate software and any associated dependencies in one bundle to ensure it remains identical across test and dev and production environments, creating the potential for smoother development and even deployment of applications.

Kubernetes, Google’s own open-source rival to other containers like Docker and Mesos, has grown in popularity since its creation in 2015. It accounts for 69% of all container deployments, according to a survey of 764 respondents conducted by the Cloud Native Computing Foundation (CNCF) in late 2017.

«With this level of demand, it was apparent that a Kubernetes service was the best way to support the enterprises managing production workloads with containers,» Rackspace’s EMEA CTO, Lee James, told Cloud Pro.

While Kubernetes has grown incredibly popular with developers, Rackspace said it is responding to customer demand for a managed version due to the complexity of deploying the technology.

Security, networking and storage are the trickiest aspects of implementing Kubernetes, according to a recent CNCF survey, and James explained: «This is largely due to the difficulties that IT teams encounter when deploying a new environment on existing services.»

The product’s popularity was underlined when AWS launched its own managed service version of Kubernetes in late 2017 – supporting it alongside its own, less popular, ECS container.

While AWS’s managed Kubernetes service automatically deploys it across multiple availability zones to eliminate any single points of failure, Rackspace said it too offers Kubernetes at enterprise scale.

The open source vendor believes its strength is in offering Kubernetes across many environments, making multi-cloud deployments easier to manage.

«Rackspace will fully operate the Kubernetes deployment, including the infrastructure, on almost all of the leading public and private cloud technologies in nearly any data centre in the world,» James said. «This will offer our customers much needed flexibility in their multi-cloud operations.»

However, it is only immediately available on Rackspace’s own OpenStack Private Cloud, where Kubernetes accounts for 47% of all container deployments, coming to Rackspace’s managed versions of AWS, Azure, Azure Stack and VMware later this year.