On November 14, 2012, Saugatuck held its 2^nd annual Cloud Business Summit at the Westin Times Square in New York City. As with our inaugural event, this year’s conference brought together large-enterprise CIOs, CTOs and senior business leaders to explore what is possible, what is real, and what is not in the Cloud today.

In this Featured Fireside Chat video, Shawn Reynolds, Global Senior Director, Cloud GTM Strategy at SAP shares his insight into how the Cloud is helping to reshape SAP, the trend toward co-innovation with customers, and the rise of hybrid architectures. The Fireside Chat also explores the evolution of supplier / customer relationships, and how providers are getting involved with customers earlier in the planning cycle – especially in scenarios where customers recognize the impact that the Cloud is having on the reshaping of key business processes.

What is Happening? — As 2012 marches to a close, a new focus on the enterprise Finance function is clearly taking place – with a range of viable and powerful Cloud-based solutions coming to market in support of upper-mid and large enterprises.

As our ongoing buyer demand research has consistently highlighted, Customer Relationship Management (CRM) and Collaboration (and to a lesser extent Social Networking) have clearly led in terms of early Cloud customer adoption (Wave I as shown in Figure 1). Following this flow, upper-mid-sized and large enterprises have begun to steadily embrace Cloud-based Human Capital Management (HCM) solutions over the past two years (Wave II), as the first of several “core” systems of record being adopted in the Cloud.

What is Happening? Less than a week after laying out and demonstrating commitment to its comprehensive, Cloud-centric business and technology strategy at its Sapphire user event, SAP AG announced that it has agreed to buy collaborative commerce platform provider Ariba Inc. for $4.3 billion – about $45 per share of Ariba’s outstanding stock.

According to the company, Ariba's global trading platform connects and automates more than $319 billion in commercial transactions between some 730,000 companies. Ariba reported $444 million revenue for fiscal 2011, a 39 percent increase over fiscal 2010. Estimates from leading Wall Street analysts such as Jason Maynard of Wells Fargo Securities pegged fiscal 2012 and 2013 revenues at $532 million and $608 million respectively, prior to the announcement. This implies that SAP is paying approximately 8x estimated forward fiscal 2012 revenue for Ariba. In comparison, SAP paid approximately 7.5x estimated forward fiscal 2012 revenue for SuccessFactors.

After sifting through all my notes from sessions, emails, in-person meetings, the blogosphere and twitter, since Monday, here’s my net take on SAP, and the Sapphire event – the detailed version will be available to Saugatuck CRS clients in a Strategic Perspective to be published late tomorrow.

1. SAP's future business builds on HANA; HANA is at least as key to SAP’s future as R/3 was to its past. And the HANA strategy is all about Cloud.
2. SAP is making logical and expected moves to Cloud. Quite a bit of what has been announced or unveiled here at Sapphire has already been seen, expected, or is already in use. What we’re seeing at Sapphire is SAP’s coordinated, strategic position on everything Cloud and everything SAP – and SAP has made it clear that those are one and the same.
3. The breadth and depth of SAP’s Cloud moves, however, are of such magnitude that they could have an effect on how we think of Cloud - similar to the effect that IBM’s entry into desktop/personal computers had on the business legitimacy of PCs and their associated applications and networking.
4. What is most impressive about SAP’s approach to me is SAP’s strong emphasis on getting things done and delivered. A great deal of credit for this goes to Lars Dalgaard and the Successfactors team, which is Cloud-native and business savvy, not to mention driven.
5. But at least equal credit must go to SAP leadership for recognizing the need for change, and for initiating and enforcing change from the top down in a manner that retains and, in cases, increases the value of existing investments by SAP, its customers, and its partners. It cannot have been an easy or simple series of decisions to install and foster the combination of personality, organization, and business approach that so fundamentally alters SAP’s trajectory.

But the bottom line is that SAP’s future is not about some generic or me-too strategy with the word “Cloud” in it. SAP is more “all-in” on Cloud than any other legacy IT provider at this point; company leadership has bet the future on widespread, common, and de facto business use of Cloud in all aspects, from core systems of record to lite mobile interactions. If SAP is to succeed, Cloud must be the core business IT worldwide. Soon. 

Saugatuck’s Bill McNee and Bruce Guptill participated in SAPs annual user group conference (SapphireNow) conference this week in Orlando, Florida.

This blog post highlights Bill McNee’s top six takeaways from the event. For a companion blog post, see Sapphire 2012: SAP Betting the Ranch on the Cloud. On Friday, Saugatuck will publish a Strategic Perspective authored by Bruce Guptill that will provide a broader thematic view of what the event may mean longer-term.