On October 21, 2019, SAP announced Microsoft Azure as the key cloud platform for SAP S/4HANA. Building on the “Embrace” project SAP announced at SAPPHIRE NOW in May 2019, this new cloud partnership between SAP and Microsoft focuses on creating industry-specific bundles to simplify migration to SAP S/4HANA on Azure, creating a joint sales and support model, and jointly developing migration roadmaps.
This announcement is the third major cloud initiative connecting SAP and Microsoft in 2019. The first was at Mobile World Congress in February, where SAP and Microsoft announced an integration between Azure IoT Hub and SAP Leonardo Internet of Things, and the second took place at SAP TechEd, where SAP announced the interoperability of Azure Blockchain Service and the SAP Cloud Platform Blockchain service.
Based on the survey data SAPinsider collected from customers while preparing our report on deploying SAP S/4HANA, Azure has taken an early lead amongst the hyperscalers with 52% of survey respondents saying that they used Microsoft for cloud solutions — 10% more than those using Amazon, and more than double those using Google. In addition, over 70% of those who are SAP S/4HANA early adopters are doing their deployments in the cloud. This data helps explain why SAP is moving toward Microsoft as a preferred cloud provider even though Amazon is the top cloud infrastructure provider.
Impact on SAP S/4HANA Implementations
SAPinsider research shows that all organizations must take some specific actions to ensure a successful SAP S/4HANA deployment. This new announcement doesn’t change those recommendations, but SAP customers should look at their current plans, evaluate where they are in their migration process, and determine whether any adjustments make sense.
Given the complexities of an SAP S/4HANA transition, SAP’s partnership with Microsoft aims to provide a simplified path to a successful implementation on Azure, hopefully helping to accelerate cloud adoption among SAP customers at the same time. Customers will be assisted by jointly developed content, tools, and services, which were part of the announcement. In addition, the combined support model for Azure and SAP Cloud Platform is designed to help make it easier to get assistance when it’s not always clear where a roadblock is occurring.
The key steps in an SAP S/4HANA implementation still include discovering the impact a migration will have on innovation and business processes, and thoroughly understanding the business case before planning the project. This starts with understanding existing skills and infrastructure with an approach that combines the perspectives of business and IT. Even if current plans do not involve Azure, customers must be informed about the Azure platform given the emphasis that has been placed there by SAP.
For those customers still planning their SAP S/4HANA implementation, the partnership between SAP and Microsoft offers an opportunity to leverage the significant additional material that will be created as part of the agreement. While it will likely take a few months for some of these offerings to become available, this time can be utilized to determine whether Azure is an appropriate candidate for their implementation. In addition, if Azure does make sense for your cloud migration, then there is an opportunity to educate and prepare the implementation teams and fully plan for the deployment.
SAP and Microsoft: What Lies Ahead?
This agreement is a significant investment by SAP in its relationship with Microsoft. Given that this is in addition to announcements earlier in 2019, expect to see more collaboration around other solutions and technologies that will bring Microsoft and SAP closer. For example, integration between SAP Analytics Cloud and Microsoft Analytics Platform System or Power BI could be possible, especially given the recent acquisition of Tableau by Salesforce, which affects both companies.
Also, while SAP’s first major collaboration around project “Embrace” was with Microsoft, expect to see announcements for partnerships with other hyperscalers in 2020 and 2021. When SAPinsider spoke to Sven Denecken, Senior Vice President of Product Management, Co-Innovation SAP S/4HANA at SAP SE, he said: “While we work with all major hyperscalers, Microsoft is one of the most prominent with significant global reach. That’s why we said this is where we’re going to start.” Although Azure has a strong presence, Amazon is the second-most-used cloud vendor among SAP customers in addition to controlling nearly 50% of the cloud infrastructure market, and to not pursue collaboration with vendors like Amazon or Google would be leaving significant opportunities behind for SAP.
Whether future collaborations will have the same depth of relationship as has been revealed with Microsoft is unclear, but project “Embrace” is intended to facilitate the move to SAP S/4HANA in the cloud across all the hyperscalers, working in conjunction with global strategic service partners to deliver the program. The goal of shorter negotiations, streamlined teaming, and faster, risk-managed implementations ties closely to SAP’s overall cloud strategy and desire to have as many customers as possible moving to the cloud and achieving their SAP S/4HANA migrations in that space.
What This Means for SAPinsiders
Whether customers are just starting their SAP S/4HANA journey or are already moving forward rapidly, this announcement will have a significant impact. Here are some key points to focus on around your SAP S/4HANA implementation and cloud transformation projects:
- Make education a starting point. With SAP announcing Azure as its preferred cloud platform, knowing more about Azure and the way that it works is critical. Being prepared is a fundamental part of any project, and being sufficiently knowledgeable to make an informed decision about whether to run SAP in Azure and leverage the assets that this relationship with Microsoft will provide, or to move forward on another platform, will be critical. SAPinsiders will need to focus on building their cloud strategy, knowledge, and skillsets.
- Prepare for acceleration of cloud-based solutions and offerings. SAPinsider has stated before that the future of SAP is in customers moving to both SAP S/4HANA and the cloud. Given the timing of this announcement, it should be expected that SAP will continue to be aggressive with rollout of cloud solutions and services, with more major announcements likely in the future.
- Expect an increased push to migrate to SAP S/4HANA. The release of this announcement on SAP’s Q3 2019 earnings call makes this topic a focus for SAP in Q4. With Azure as the preferred cloud platform for SAP S/4HANA, and the emphasis on reducing complexity and minimizing costs for SAP customers, there will be an even greater incentive and pressure for customers to sign up for services this year and into the first half of 2020, and to start their migrations as soon as it is feasible.