The first rush into the cloud was cloud native with the clear objective to replace as much on-premises technology as possible, and for some it still appears the only way to go forward with cloud and digital transformation. Everything as a Service, from infrastructure to software, and everything that goes with it. One primary benefit and selling point for these models is the shift from CAPEX to OPEX, and many business leaders have eagerly open ears for that.
Others, mainly those that might appear to be the slow starters in the cloud market, see more benefits of a hybrid approach to cloud and continue to embrace the on-premises technology in full. Interestingly enough they are also the ones with a strong foothold in on-premises technology and by enabling the hybrid approach they open additional revenue stream from services-as-a-service without replacing the majority of their revenue from on-prem tech.
IBM has always been very vocal about their focus on hybrid cloud. So vocal that for many cloud-native advocates they have missed the boat on cloud technology, but an objective view shows that IBM already did hybrid cloud before we even started to call it cloud. A full-scale transition into the cloud-native industry would mean that IBM would abandon its enormous customer base in on-premises technology. So, it makes a lot of sense that IBM continues to lead the market in mainframe, storage capacities, etc. in its spinoff, and in addition continues to drive hybrid cloud solutions forward.
Microsoft walked into the cloud sphere with a similar on-premises background with their portfolio of operating systems (well over 70% of all corporate owned systems!), office applications, and server tools. It took Microsoft some time to establish an ecosystem with Azure, and there even have been some failed attempts to push an “Azure First” model, but the entire model is based on enhancing the on-premises portfolio with cloud offerings, and gradually transition parts of the on prem customer base to cloud services, without losing them to competitors.
SAP is often criticized for not being cloud focused enough, and some even suggest that SAP already missed out completely on the wave of cloud transition. Let us start by emphasizing that SAP already delivered Software-as-a-Service several years before we started to give it that label. We also need to add that SAP continues to be the market-leader for ERP and there has not been a negative impact on that by not being a cloud first company. In fact, SAP’s foothold in the conventional on-premises ERP world is strong, while adding customers to their cloud offering.
That is the result of the smart bet SAP made on a Hybrid Cloud & On-premises portfolio. The most important factor to consider is that SAP is the undisputed market-leader and heavy-weight lifter in the manufacturing sector. And in the manufacturing sector, the availability and integration of all kinds of subsystems are essential. So essential that in fact SAP itself is by design a collection of subsystems bound together and customized by the configuration and processes.
Interfaces and data exchanges with these subsystems in production facilities, with suppliers and with customers have always been a strong part of on-premises SAP domains and most manufacturing corporations would not be able to manage and operate their business without them. Besides the complexity of the system integrations, these are also liabilities and responsibilities which can not simply be packed and dropped elsewhere in a cloud environment.
What we are seeing is growth of SAP cloud versions in the service industry, where on-premises technology hardly plays a significant role, and a continued footprint of on-premises SAP domains in the manufacturing and production industries, where, by design, the largest part of the IT infrastructure is on-premises. By embracing cloud in a hybrid business model, SAP and IBM have made strategic decisions that are paying off! Especially for the European market where cloud will continue to not be the first choice for many corporations.