Expect SAP To Play Off IBM, Microsoft: Analyst

IBM got a leg up on Microsoft this week at the CeBIT show in Hanover, Germany, when it performed a "groundbreaking technology demonstration," moving a live SAP application from one cloud-based server to another.

This would hardly be considered groundbreaking in the context of an on-premise data center--it's called virtualization.

But the fact that the demonstration occurred remotely may mark a seminal moment for cloud computing, which promises to save customers money by allowing them to rent as much or as little infrastructure as they need, managing it via the Internet as easily as if it were in their own data centers.

It certainly does demonstrate the power of IBM's platform. As James Urquhart noted in his blog,

Promising to enable a truly elastic online marketplace of information technology services--increasingly known as "the Intercloud"--technologies like the one IBM previewed Tuesday promise to revolutionize both the cost and the capabilities of cloud computing for enterprises and consumers worldwide.

But while Microsoft won't bring Azure to market until the end of 2009, several analysts agree that it "could dominate cloud services like no other player could."

Joshua Greenbaum, an analyst with Enterprise Applications Consulting who follows SAP closely, told me "Microsoft's Azure strategy is very solid" and added that "I would expect [SAP] to do a deal with Microsoft too."

"SAP will want to have two providers to play off one against the other," he said.

SAP and Microsoft do have a long history of partnering together (even if they compete in some areas, like enterprise resource planning (ERP) suites for mid-market companies).

SAP has other options than IBM and Microsoft, but Greenmbaum said that cloud computing platforms from rivals Google, Amazon and others have not proven themselves robust enough for enterprise needs.

Greenbaum agreed with my suggestion that the IBM demonstration shows that SAP has finally bought into cloud computing, having lacked conviction in the past when it came to cloud computing.

He noted that the company wooed John Wookey away from rival enterprise software vendor Oracle late last year and gave him "a very powerful mandate" to spearhead this type of effort.

Rather than push its traditional enterprise applications into the cloud, though, Greenbaum said that SAP will use the cloud to provide customers with value-added services to complement their on-premise applications.

One such application could combine SAP's on-premise ERP suite with a real-time logistics tool in the cloud. The advantage of using the cloud for the add-on service is that aggregating that kind of data in real-time would require more processing power than most companies could afford to maintain on premise.