SAP and EMC Jump Into the Cloud Together

Speculation of a burgeoning partnership between SAP and storage provider EMC to offer a suite of hosted business applications and storage services kicked off on Feb. 13th. In an interview with Reuters, Doug Merritt, president of SAP Labs North America, alluded to a potential partnership between the German software giant and U.S. storage giant.

Though Merritt was not forthcoming with any technical or financial details (he would “not discuss specifics of the collaboration”), the gist was clear: Customers would be able to access SAP’s heavy-duty business applications, which would be safely ensconced in EMC’s bulbous data centers, via the Internet.

The articles that soon followed contained all of the buzzwords to titillate the enterprise computing masses: cloud computing (Internet-based shared computing), virtualization (the cool tech EMC would employ to help make this work) and software-as-a-service (or SaaS, accessing shared applications via the Internet), just to name a few.

Late last year SAP launched its Business ByDesign on-demand enterprise applications (financials, HR, sales) for small and midmarket companies (costing them $149 per user per month for software, infrastructure services and support). At the announcement in September, SAP planned to host ByDesign applications and then move that responsibility to its partners. This EMC partnership seems like a first step in that direction.

Because the companies are in “early-stage talks” and aren’t providing any more on the proposed deal, one is left to speculate that this new initiative would enable the offering of heartier and more complex applications to provide greater breadth of functionality similar to SAP’s on-premise systems (those massive deployments that are installed at its customers’ facilities).

And EMC’s ability to provide large amounts of storage using its virtualization and security technologies as well as its own SaaS product for its storage hardware and software lines may give CIOs even more reason to at least look into the hosted application model. (Our recent survey on ERP showed that most SMB CIOs were reluctant to go this route: Just 9 percent of respondents reported using an alternative ERP model.)

But what is most noteworthy and beneficial for SAP customers and all enterprise application customers is this: Business users are starting to see more choice. More flexibility. More options from their vendors. And that’s a breath of fresh air for CIOs, particularly midmarket CIOs, who have less and less appetite for SAP’s traditional costs and complexity.

For so many years, enterprises have had little choice when it comes to enterprise applications: CIOs picked from a dozen or so vendors, they haggled on the price (high licensing and maintenance costs, which just kept on spreading the angst, year after year), and worked their butts off on configuration, customization and integration (sometimes with success; many times without).

The rise of software-as-a-service providers like Salesforce.com, NetSuite and Workday have exposed the weaknesses and failings of the on-premise applications world. And the enterprise vendors have finally realized that their fat margins on licensing and maintenance for their applications are in danger. They are threatened. And they are changing—slowly but surely.

So while the pessimist might note that SAP is providing more choice because it’s being forced to do so, the optimist could say that SAP is finally listening to its customers.

Whatever the case, this is no sure thing. There are many, many hurdles to overcome before this supposed partnership sees the light of day. As noted by several analysts in a Boston Globe article, the same reasons that make on-premise installations so time-consuming, complex and costly (because each business brings its own unique needs) won’t magically go away with on-demand SAP offerings.

But just the fact that SAP is offering an alternative to the “way we’ve always done it” is one gigantic step in the right direction.

Right now, I’ll give this news a half-hearted “Hooray.” There’s still much more work on the enterprise vendors’ part that needs to be done.