In a follow up move to its announced partnership from May this year, Microsoft and SAP extended their partnership to the HR area, something that could have been expected, but was not necessarily a given when considering the complex multi-vendor landscape both on the SaaS and the IaaS landscape.
 
 

But let’s dissect the press release in our customary style, it can be found here:
REDMOND, Wash. – Oct. 18, 2016 – Microsoft Corp. on Tuesday announced an expanded partnership with SAP to provide public cloud services for the SAP® SuccessFactors® HCM Suite. SAP will make its cloud-based human capital management solutions available on Microsoft Azure over the next five years. This is SAP’s first move to supplement its own infrastructure and operate SAP SuccessFactors solutions in a third-party public cloud, recognizing the experience both companies have in supporting global enterprise clients. With the addition of Azure, SAP has a trusted, global cloud and a powerful data platform to help it drive companies’ human resources transformation, and the potential to dramatically improve business outcomes.

MyPOV – Good summary, correctly referring to an ‘expanded’ partnership. The timeframe of five years seems to be pretty long, but both vendors have been found to be conservative, when it comes to timelines. The concern is that 5 years is the ‘half time’ of a good architecture, so whatever SAP will use as the base for the cutoff to support Azure – it will take some time and the platform may have some years of age already. But that number also reflect a medium term commitment of both vendors to each other. But you never know how long this will take - getting demo environments in Q1 of 2017 is a good start. Good also to see the focus on global, where Azure is doing well and that is crucial from a data residency perspective for many customers.  

 
“Microsoft and SAP share a commitment to empowering digital transformation across every aspect of business,” said Judson Althoff, executive vice president, Worldwide Commercial Business at Microsoft. “The combination of SAP’s market-leading, innovative human capital management solutions with Microsoft’s intelligent cloud will equip companies around the world to help maximize the potential and skills of their most valuable asset, their people.”

MyPOV – Good statement of new on board head of worldwide commercial business, Judson Althoff.

SAP will have significant additional capacity to run operational workloads of SAP SuccessFactors solutions on Azure, beginning with demo environments, to support its continuing client user growth. Azure provides enterprise-grade security, an open developer platform and advanced data services that organizations of all kinds can use to innovate and grow. With nearly 90 percent of the Fortune 500 as customers, the Microsoft Cloud is offered in more worldwide datacenter regions than any other major cloud provider.


MyPOV – Good to learn something about the start – and its conservative – with demo environments. Demo environments are a typical first use case for similar exercises, as they are not critical from a production grade perspective. But certainly critical for the success of a vendor, and with rising demo needs and demand (e.g. from SAP SuccessFactors Partner for Profit program) – it is key for SAP to find a cheap, elastic demo platform. At the same time the create, demo and throw away nature of demo environments give Microsoft and SAP plenty of chances to learn to setup these environments, something important for the next step that usually is development and test (see e.g. where Workday is with IBM here) and then off to the ultimate goal – production. Again rightfully the press release quotes Microsoft’s coverage of large enterprises, when they are comfortable to run Office on a IaaS, they will most likely be comfortable to run HR systems on the same IaaS, too. 

“SAP SuccessFactors is the fastest growing core HR solution, and offers an unmatched depth and breadth across the entire HCM suite, of any vendor in the industry,” said Mike Ettling, president of SAP SuccessFactors. “We’ve seen exponential growth in the past two years, with 42 million users now benefiting from our market-leading solutions. In selecting Azure, we will be able to expand our reach even further, with the reliability that is required of these mission-critical applications, and continue to innovate and enhance services to meet client needs across additional environments.”
MyPOV – Good quote of Ettling, touting growth of SuccessFactors. And one of the first areas where vendors feel growth pain is… demo systems and the pieces are adding up here. Demo systems and sand boxes are vital tools for vendors to ramp up their pipeline, something that SAP SuccessFactors is working hard to do at the moment, especially when it is done via the partner channel (also the case). 
This deal builds on the longstanding partnership between Microsoft and SAP, including integrations between Office 365 and SAP SuccessFactors HCM Suite, as well as SAP Fieldglass® Vendor Management System, SAP Ariba® and Concur® solutions. The Microsoft and SAP partnership also includes broad support for the SAP HANA® platform on Azure to enable companies to deliver mission-critical applications and data analytics from the cloud. Microsoft recently announced the general availability of Azure large instances, hardware configurations specifically designed for the largest and most demanding SAP workloads. SAP now enables its customers to build and deploy custom mobile hybrid SAP Fiori® apps on SAP HANA Cloud Platform that can be managed, deployed and protected with Microsoft Intune.
MyPOV – A ‘well we have been doing this since a longtime’ paragraph – that is often found in press releases, when vendors want to show continuity, experience working together and generally make the partnership look like a big deal. Wasn’t necessary in my view, as he first pick of an IaaS by SAP SuccessFactors would be enough of headlines, but so be it. The HANA statement is key, as SuccessFactors is under the ‘Hasso Mandate’ of moving to HANA, and if Azure had not been able to run HANA, some observers would have questioned it… but that’s not the case with Azure’s recent commitment to large memory instances… and that is essential to capture long term SAP load to move to Azure. Once the SAP customers move, they most likely will be on HANA based systems on premises, or move to HANA based systems in the cloud, Microsoft wants to make it a move to Azure. And of course Microsoft has a lot more to offer to SAP and other ISVs, beyond 'just' using Azure. 

Overall MyPOV

We live in the ‘age of the load landgrab’ – which is the fight of IaaS providers like Microsoft Azure here, to capture on premises load (here from SAP). That gets overlaid by SaaS load that is looking for a new home due to a generational or platform update (here SuccessFactors moving to HANA and maybe some more things) and fueled by even large enterprise vendors like SAP, to not put up the CAPEX needed for large datacenter / IaaS rollouts. On the flipside IaaS providers (here Microsoft Azure) are more than willing to put in the CAPEX as they are bound for growth no matter what at the moment and any uniform load from on premises software or SaaS software is highly welcome, in comparison to one customer at a time projects. And SAP signaled already at Sapphire this year that its own IaaS ambitions have been scaled down (see my blog here), as the partnership with Azure was already announced in May, this is the conjugation of this very partnership towards SAP SuccessFactors load.

For customers this is generally good news. Instead of waiting for their enterprise software vendor to figure out IaaS (or not), they can move to the cloud with the help of an IaaS provider who runs cloud infrastructure for a living. An alignment with other load of the enterprise will be of course welcome, as too much fragmentation across too many IaaS provider can quickly become a headache from a performance, compliance and commercial perspective. The good news for here is that most enterprises will be in Azure due to Office gravitas one way or the other. On the concern side customers need to pay more attention now to their SaaS vendors not picking up dependencies on specific cloud infrastructures – as it will limit future portability. For SaaS vendors eager to expand their functionality e.g. in the areas of Machine Learning and AI, this maybe a tradeoff they may be happy to take in the short term, but for customers it is something they may not want to live with middle or long term. So customers need to pay attention to the IaaS capability uptake of your SaaS vendors, in this case e.g. SuccessFactors using capabilities that only Azure offers.
 
It also marks an inflection point that a 'born in the cloud' load like SuccessFactors is looking for its next 'home' - no longer in its own cloud infrastructure, but looking for a stand alone IaaS partner, in this case Azure. Those options were not around for the early SaaS pioneers, who all sit on aging, often proprietary or now 'frenemy' platforms, moving to a partner's IaaS should free up CAPEX resources and ultimately provide a better return of R&D to SaaS vendors making the move, which should translate either in (higher) profitability and / or more functionality in the product. Both are positive developments for a SaaS vendor's customers.

But for now good to see the continuity of the Microsoft / SAP partnership, at the moment it’s a win / win / win for customers who get more live software demos and likely more sand boxes (always ask for them), Microsoft gets a shot at more SAP SuccessFactors load, starting with demo systems and SAP SuccessFactors gets a lot of demo environments and a proven IaaS partner (that SAP overall had chosen already before).

Stay tuned for more on this and more enterprise vendor / SaaS player with IaaS player partnerships, below are a few of the most recent and prominent ones.

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