Next week, SAP will kick off its Annual ASUG and Sapphire customer conference in the U.S.. Typical of these events, product and other announcements are the order of the week.

SAP started the ball rolling this week by pre-announcing an SAP HANA Enterprise Cloud Service program which is designed to provide customers a cloud deployment option for applications running on the SAP HANA platform. During the press announcement event, SAP Founder and Supervisory Board Chairperson Hasso Plattner termed this announcement as the biggest since the prior introduction of R3 ERP. He declared: “After 41 years of SAP standard software, this is as it should be.” In essence, SAP is betting that select customers will opt to run HANA based applications in a public cloud environment managed by SAP.

It has been over two years since this enterprise software vendor first introduced HANA to the market. Our initial Supply Chain Matters viewpoint was optimistic, terming this technology a game changing for supply chain and B2B applications, provided SAP could springboard its development schedule and not place the engineering burden on the backs of its customer base. We observed signs of delayed innovation with the initial announcement of the Sales and Operations Planning Powered by HANA application, but we have had a subsequent briefing and are now hearing that development efforts have broadened, along with systems integration partner expertise. This latest announcement is yet another step in the HANA innovation effort.

What was really interesting to watch in the press announcement event was Plattner’s articulation of all the customer benefits of both HANA and cloud computing.  This was an area that SAP was initially cautious to embrace, fearing a cannibalization of its legacy revenue streams.  Many of its most influential customer IT teams were expressing a stronger interest in private cloud deployment options especially when it related to mission critical business support needs. According to Plattner, by hosting HANA based applications such as ERP, CRM, Business Warehouse and other applications, SAP will gain the benefit of being able to optimally engineer its hosting infrastructure to make individual applications run faster, along with gathering direct user feedback on ease-of-use and response aspects of the applications.

In essence, SAP is now embracing an “engineered systems” approach to applications computing.  If that sounds familiar, it should. Rival Oracle adopted this type of strategy a couple of years ago after its acquisition of IT hardware provider Sun Microsystems.  Oracle is moving rather quickly down the path of engineered systems designed for multiple computing options, including private and public cloud support. We now have two of the largest Enterprise ERP providers endorsing both an engineered systems in the cloud approach for their applications, along with pitching the benefits of cheaper, faster and more responsive computing.

The market is changing quickly in adopting the cloud paradigm.

During the press Q&A session, both Plattner and Vishal Sikka, SAP’s CTO and Executive Board Member, were asked if this new option would support customer needs for private clouds.  The answer was no,  since this option only support a complete HANA hosted application environment. Sikka pointed out that many current IT landscapes include heterogeneous systems running multiple or customized applications.  Perhaps that will be a future option, but the answer points out, at least to us, that SAP is targeting this new service to up and coming enterprises that are willing to take the leap into full cloud computing. It also plunges SAP into providing global based IT hosting services under its direct management.

We anticipate that further details will be provided next week, along with any additional announcements. Open questions will obviously be in areas of pricing, support, and timetable of specific applications supported. Do not be surprised to hear competitors of SAP offering up counter views as well.

Bob Ferrari