Secondly, we augment this cloud offering with new services that we can deliver ourselves in the cloud. These are narrow applications—like talent management, salesforce automation and pricing optimization. We will deliver or are already delivering these in the form of integrated and complementary services that we offer in the cloud, and those clouds are again powered by our partners and are operated by us.

The third piece is Business ByDesign, which is an entirely different category of software: an integrated suite for running an entire midmarket company, which is something nobody does. It is not like salesforce automation or talent management, or what Workday or NetSuite does, which is largely in application areas like HR and so forth.

Business ByDesign is a piece of software to run your entire business: financials, manufacturing, procurement, purchasing, CRM, integrated analytics—the whole thing.

You have to understand that most of our customers have very substantial investments in their data centers, and these investments are not going to go away any time soon. In fact, my assumption is that for the foreseeable future, because of these investments we will see a dual, hybrid world of private and public clouds.

So at these companies that have these massive data center investments, what's happening is that companies like VMware, Microsoft, Citrix, HP and IBM are already delivering services to these data centers to turn them into private clouds.

What that means is that they can bring in excess capacity from Amazon or one of these public cloud providers as a natural and seamless extension of their private cloud. And that is our fourth piece. We are working with them and some of our customers are already doing these things to bridge the public-private cloud divide that has emerged.

CIO.com: As a technologist, does the marketing hype and related confusion around cloud computing bother you?

Sikka: I sometimes find it amusing. When [vendors] call their little salesforce-automation application a "platform," that does actually bother me, as a technologist, to be honest with you.

CIO.com: There's a perception that SAP hasn't yet delivered on the cloud, due mainly to delays with Business ByDesign. Is that bothersome?

Sikka: When I engage with people on SaaS and what the cloud is, I say that SAP has been offering a subscription model to customers since the 1990s, for some 15 years. We've had multitenancy in our software since R/2. Actually, most of our suite is already multitenancy, and we have customers that run it in a multitenant mode.

So, multitenancy? Yeah, we have that. Subscription? Yeah, we've had that a long time. Well, guess what? If you tried to do analytics on Salesforce.com, you've got to export your data and go do it somewhere else. And if you run a 50 Terabyte data warehouse, like some of our customers do, and you run that in memory, you cannot make that multitenant. That's because it is an incredibly computationally intensive operation that you have to perform on large amounts of data that sits in main memory.

That's not multitenant, and I think customers don't want it multitenant. For example, we have large manufacturing and CPG companies that prepare their production plans, and some of them have thousands and thousands of products that they have to plan the manufacturing of. That process itself takes hours to days, on machines that are several hundred thousand dollars and with Terabytes of main memory on them.

When you run a portfolio of mission-critical products like we have, there are patterns of utilization that cross all kinds of assumptions, and one size just doesn't fit all. So when you talk to people about that in kind of a hype situation, people will say, "Oh you are not running it like this or like that," it's largely a reflection of not understanding the breadth that we cover and scale at which we operate.

What's one thing you would want people reading this to know about Business ByDesign and SAP's plans for on-demand software?

Sikka: That it's a mission-critical, integrated application suite. To get it to the point where [a customer] is running that as a service, you need to ensure that the first requirement of customers—which is integrity and stability—is met. You cannot afford an 8-hour downtime in a service or some security lapse. You're dealing with financial, payroll or customer data, and if things don't work, people can go to jail.

You have to get it right—and not only from a cost and go-to-market perspective, but from an integrity perspective. For us, it is far more important to roll this out in a controlled way to make sure the customer comfort is there and grows with the software, rather than to go out there and meet some arbitrary definition of some guy's take on cloud computing or SaaS.

So we will get it right, and we will take our time. Yeah, it took a little bit longer than we thought, but we can afford to.

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