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Cloud will render BI stack irrelevant: SAP

By Jeff Jedras,
December 08, 2010 10:42 AM ET - While Oracle Corp. (NASDAQ: ORCL) may be a late convert to cloud computing, rival SAP AG (NYSE: SAP) said Tuesday that the cloud will render Oracle's differentiator of owning the entire business intelligence hardware and software stack irrelevant, as it will all exist up in the cloud.

Speaking to press and analysts gathered for SAP's Influencer Summit via satellite from Dresden, German, SAP co-CEO Jim Hagermann-Snabe said cloud computing isn't good news for Oracle, or for its own the stack mantra. Snabe said there are two choices in the industry -- consolidators who buy companies to own the stack, and innovators. Putting SAP in the latter category, Snabe said SAP believes the stack -- Oracle's approach -- is falling apart.

"With cloud computing, the hardware will move into the cloud and become commoditized. The front-end will become a mobile device of any form factor, and that's what we're innovating for," said Snabe. "That will change the value-proposition and the stack gets lost in the shuffle, so we don't need to acquire all the pieces in the stack when we can change it through innovation."

While he sees validity in Snabe's hypothesis, Michael Pearson believes the everything in the cloud model is a long ways off yet, and will never truly be realized. Pearson, president of Toronto-based SAP partner Contax Inc., said moving to the cloud will be an evolutionary process.

"We won't see customers moving in mass from on-premise to cloud," said Pearson. Rather, he sees it happening on an application or appliance basis, as it makes business sense to move a specific process or function to the cloud.

"It's not going to go to 100 per cent," said Pearson. "There are some customers where the cloud doesn't work for them. Health care, patient records, it will be a long time before that information can be stored in the cloud. It will never be a replacement for on-premise; they will co-exist."

And the stack will still be relevant in the cloud context said Joel Martin, research director with London, Ont.-based Info-Tech Research Group. The stack doesn't go away just because the application is delivered and consumed in a different way.

"The need for technology across the OSI level to run the applications isn't going away (with the cloud)," said Martin. "SAP talks about being a platform company, and that's what they are. They partner with people to complete the stack."

What SAP is trying to do though, said Martin, is to articulate a value proposition around the application platform, rather than the homogeneity of a stack, shifting the discussion to one it sees as more relevant to the line of business decision maker: what the applications deliver in productivity, process improvements, efficiency, and other measurables. Talking about the stack is more of an IT department discussion.

And it's not as if SAP is about to turn its back on on-premise anyway. Snabe emphasized that on-premise remains the core of SAP's business and a key development priority. The vendor's strategy is to offer the customer choice of delivery method, be it on-premise, on-demand or on-device.

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