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SAP Digital Business Services enables customers to create their own intelligent enterprise

After SAPPHIRE NOW in June, a burning question remained: How does SAP’s professional services organization fit into the company’s new intelligent enterprise vision? SAP’s Digital Business Services (DBS) Analyst Day provided the answer: DBS is the enabler to the intelligent enterprise, which is a system of SAP and non-SAP applications, underpinned by a digital platform and made intelligent by the SAP Leonardo technologies.

As the enabler, DBS will have several responsibilities including helping to create business cases, and road map, architect and implement the customers’ version of the intelligent enterprise. SAP certainly has the technical expertise in-house to architect and implement the intelligent enterprise and has reskilled and hired over the last few years to bolster its advisory capabilities, particularly as it relates to emerging technologies such as artificial intelligence. Critically, SAP’s partners have ample opportunity around the necessary change management responsibilities that are undoubtedly needed to ensure successful business process transformations.

Repeatedly during the two-day event SAP leaders emphasized that DBS helps the company accelerate clients’ time to value and reduces risk for all involved — the client, SAP, and any consultancy or SI partners. By being close to software-related services, not necessarily project-related, such as change management, SAP DBS plays to its core strengths and competencies and brings the value clients expect. More broadly, DBS assures clients that a large partner-led engagement meets SAP standards, often through a separate SAP Value Assurance contract between SAP and the client apart from the partner or project arrangements. This clear vision of what DBS does well, why, and how built on last year’s DBS Analyst Day, particularly when reinforced consistently by the DBS leadership team.

Earnings recap: Amazon, Microsoft and Google grow fast and keep hold on the market — for now

Although the market is consolidating around AWS, Microsoft Azure and GCP, the trailing vendors are unable to match AWS’ quarterly revenue gains

Consolidation is occurring across cloud segments, with the most notable convergence occurring around the five leading PaaS and IaaS players, blending the lines between PaaS and IaaS. Customers and applications vendors are flocking to the leading players Amazon Web Services (AWS), Microsoft Azure and Google Cloud Platform (GCP). This is evidenced by these three vendors collectively growing 58% year-to-year in 2Q18, while the total PaaS and IaaS market is expected to grow only 16% year-to-year in 2018. This consolidation is helping the largest players continually capture greater market share and, as a result, largely dictate the growth of the PaaS and IaaS markets.

With the leading vendors’ CY2Q18 earnings results now public, it is clear that AWS continues to rule the PaaS and IaaS spaces, sitting at almost three times the size of second-place Microsoft Azure and sustaining greater quarterly revenue additions. Google sits in third place in mindshare for many customers, but trails AWS and Microsoft Azure in revenue by a large margin. These three vendors face increasing competition from Alibaba, which continues to expand its global reach, and IBM, which has seen more success in private cloud and hybrid IT.

AWS maintains its public cloud lead through continuous innovation, but faces growing opposition as new and existing competition strengthens

AWS accelerated revenue growth for the third consecutive quarter in 2Q18, up 48.9% year-to-year to $6.1 billion, further extending its lead in PaaS and IaaS. AWS’ position as the far-and-away market leader causes the competition to fiercely innovate and expand to challenge the vendor. However, AWS’ mindshare has been secured, and paired with its portfolio breadth, innovation pace and global availability, inserts the vendor into the bulk of customer and partner evaluations. AWS’ determination to innovate with and ahead of customer needs continues to drive service and feature releases, aimed at winning new workloads without compromising profits. Halfway through 2018, AWS has released 800 new services and features, an accelerated pace of service innovation from 2017’s record level.

Microsoft Azure continues its fast-paced growth, but will remain behind AWS in revenue for the foreseeable future

Microsoft’s Commercial Cloud revenue, which includes public cloud and private cloud versions of Office 365 commercial, Dynamics 365 and Azure, approached $6.9 billion as Microsoft nearly doubled the number of Azure agreements worth $10 million or more over the last year. Azure revenue grew 89% year-to-year to $2.2 billion in 2Q18.

Microsoft’s combination of traditional software, public cloud and on-premises private cloud positions the company to be the backbone of customers’ hybrid environments — a label few competitors, especially AWS and Google, can claim. As such, Microsoft is uniquely positioned to help customers extract the value from their integrated data and has put itself at the forefront of innovation and commercialization of emerging technologies such as artificial intelligence (AI) and Internet of Things (IoT) to capitalize on this leading position.

Google will be unable to retain its third-place position as it fights to shift market perception and fend off strengthening competition

Relative to AWS and Microsoft Azure, GCP is far behind in the PaaS and IaaS space but is trying to prove to customers that it is as enterprise-ready as its main competitors. As Google solidifies its cloud portfolio and builds out key offerings, the company has also prioritized improving its large enterprise go-to-market efforts under its One Google strategy. Google Cloud, which consists of G Suite and GCP, increased revenue by an estimated 56% year-to-year, nearly reaching $1.42 billion. TBR expects Google Cloud revenue will increase to $1.6 billion in 3Q18 as the vendor continues to execute its One Google strategy.

While Google is investing in its go-to-market activities and shows progress through growth, its overall reputation in the market has been slow to adapt from consumer-grade to enterprise-ready. To combat that market perception, Google Cloud focuses its innovation on mastering four areas of expertise: machine learning and analytics, security, application developer tools, and connected business platforms. Recent investments in hybrid enablement and improved rendering capabilities demonstrate Google’s ongoing commitment to becoming a leading cloud vendor in differentiated areas of high-growth opportunity. While Google will succeed in these discrete areas, TBR expects Alibaba to emerge as the third-place general-purpose PaaS and IaaS provider.

TBR launches new Cloud Customer Research reports covering infrastructure and applications adoption

Recognizing that a more mature cloud market needs deeper customer insight, Technology Business Research, Inc. (TBR) is launching two new programs: Cloud Applications Customer Research and Cloud Infrastructure Customer Research. While the vendor landscape is solidified from a leadership perspective, customer behavior has become even more difficult to decipher. TBR’s new programs will help subscribers to plan and take action to win more cloud business.

Many of the simple workloads, such as development & test, CRM and productivity, have moved to the cloud, but exactly what services will move next and how remain difficult questions to answer. TBR’s Cloud Customer Research reports address these new market realities, providing direct feedback on leading and emerging vendors and focusing the analysis on specific workloads in both the applications and infrastructure domains.

Insight provided through in-depth customer interviews allows subscribers to understand the nuance involved with customers’ cloud usage and leverage that information to directly influence their positions in the market. The result of the research is clear identification of market size, leading vendor share, vendor perception, vendor strengths and weaknesses, and case studies on workload adoption.

The two new Cloud Customer Research streams deliver insight that can be used internally to plan business strategies and field guides that can be used externally to initiate and close more competitive deals. While the two research streams will cover different markets (applications and infrastructure), they have a similar structure: analyzing market opportunity, customer behavior, vendor position and perception; offering engagement scenarios and field guides; and providing interview excerpts. TBR will conduct 400 surveys and 100 interviews annually as part of this program and will publish the two reports in September and March.

For additional information about this research or to arrange a one-on-one analyst briefing, please contact Dan Demers at +1 603.929.1166 or [email protected].

 

Complexity is the price of admission for hybrid, multicloud environments

Cloud started as a simple alternative to the stifling complexity pervasive in traditional IT deployments. It was quick and easy to deploy and simple to manage and track. While small implementations retain these quick, simple characteristics, most organizations are realizing that complexity is creeping in as the number, size and hybridization of cloud solutions grow. This rising complexity creates a number of challenges for customers, including inefficiency, cost uncertainty and difficultly tying cloud investments to business outcomes.

TBR launches Alibaba Cloud vendor report amid changes in public cloud PaaS & IaaS markets

As Alibaba Cloud continues to prove itself as a relevant public cloud PaaS and IaaS challenger, Technology Business Research, Inc. (TBR) is launching a new report focused on the vendor to provide subscribers with ongoing insights into the business’ performance. As Alibaba’s cloud business progressively moves beyond the company’s traditional China and Southeast Asia presence to compete more directly with the leading public cloud PaaS and IaaS vendors TBR covers regularly, it has become relevant to include Alibaba Cloud in our vendor coverage.

Alibaba has proved its public cloud legitimacy by capitalizing on the highly restrictive cloud services market in China. With more than one-third of the top 500 Chinese companies as customers and two-thirds of China-based unicorn startups running on Alibaba Cloud services, the business has demonstrated that it has a broad appeal as it looks to translate local success to new geographies. Although Alibaba Cloud has successfully expanded from China to the broader Asia market, its transformation to a truly global provider faces greater barriers.

Western vendors dominate global public cloud mindshare and are adapting their strategies to specific geographic needs to rapidly expand their own international presence. As such, Alibaba Cloud has begun to innovate around regional needs and high-value artificial intelligence and Internet of Things cloud services to drive higher-margin and more differentiated workloads to its platform.

Alibaba aims to challenge more globally dominant public cloud vendors, such as Amazon Web Services (AWS), Microsoft Azure, IBM Cloud and Google Cloud, to cement its position among these leaders. In October 2017 Alibaba Cloud President Simon Hu claimed that the business was “on track” to overtake AWS as the global leader in cloud by 2019.

This is undoubtedly an exaggeration, as Alibaba’s cloud business only generated 8% the volume of revenue that still-growing AWS generated in 2017, but the statement affirms Alibaba’s commitment to scaling its cloud business. TBR estimates that Alibaba Cloud will not overtake AWS, but as shown in Figure 1, that it will grow fast enough to close the gap between itself and AWS and Microsoft. Amid global growth efforts, Alibaba’s dominance of the Chinese cloud market will remain a key driver of its overall performance.

TBR will initially publish the Alibaba Cloud report semiannually, following the company’s first- and third-quarter earnings. For additional information about this research or to arrange a one-on-one analyst briefing, please contact Dan Demers at +1 603.929.1166 or [email protected].

 

ABOUT TBR

Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, and telecom vendors and operators. Serving a global clientele, TBR provides timely and actionable market research and business intelligence in a format that is uniquely tailored to clients’ needs. Our analysts are available to address client-specific issues further or information needs on an inquiry or proprietary consulting basis.

TBR has been empowering corporate decision makers since 1996. For more information please visit www.tbri.com.

Hybrid, multicloud, reunited partners featured in TBR’s upcoming cloud & software research

Going into the second half of 2018, TBR’s Cloud and Software Practice anticipates providing additional research around a few issues that have been top of mind among TBR’s clients and our analysts. The common theme across the three issues highlighted in this report is the growing focus on how cloud and software are jointly being used to deliver real solutions for customers. Highlights of the research center on how establishing hybrid capabilities is a primary challenge for enterprises and a growth driver for vendors, from the initial design and integration through to the ongoing management and optimization of the increasingly complex environments. Additionally, offering multicloud is the first priority for customers and creates opportunities for vendors other than category leaders such as Amazon Web Services (AWS) and Salesforce. Lastly, partnerships that were previously threatened by cloud are now realigning for new opportunities created by on-premises hybrid delivery and solution bundling. Look for more insight into these topics in our upcoming research.

Hybrid enablement is an increasingly critical predictor of vendor success
There is no question that cloud and software solutions are being increasingly deployed into hybrid environments and have been for some time now. The real customer pain point in regard to a truly hybrid environment — one or more cloud assets integrated with one or more on-premises assets for the seamless flow and sharing of data — is around enabling each of the solutions to fit into the environment and integrate with the others for optimal utilization.

Cloud and software vendors alike are investing to capitalize on this growing opportunity around empowering enterprise IT departments to integrate sprawling environments on their own, with the help of automated tools and platforms. Salesforce’s acquisition of MuleSoft is one of the more noteworthy examples as it has vast implications for both Salesforce and the market. This is because MuleSoft offers licenses alongside its subscription offerings despite Salesforce’s “No software” mantra, and because many organizations utilize one or more of Salesforce’s cloud offerings, which will soon feature and/or be integrated with Salesforce Integration Cloud, a solution that will be based on MuleSoft’s well-known Integration Platform as a Service (iPaaS).

Software vendors are making similar investments, such as Red Hat announcing its own iPaaS — Fuse Online — and VMware’s continued updates to the vRealize cloud management suite. Additionally, many continue to expand their partnerships with cloud vendors and systems integrators to improve their hybrid technology and hybrid enablement portfolios, increasingly going to market with a software-led services approach.
Cloud brokerage and hybrid integration pure plays continue to generate buzz as well, providing attractive solutions for enterprise IT departments struggling to keep pace with integrations, orchestration and skill sets. We expect some of these vendors to be acquired over the next couple of years as cloud and software vendors look to quickly build out their hybrid integration and enablement tool sets.

Consolidation around leading PaaS & IaaS vendors does not reduce competition
The public cloud IaaS market, substantially made up of businesses that complement scalable infrastructure with general purpose PaaS, has consolidated around the four leading U.S.-based cloud vendors — AWS, Microsoft, IBM and Google — and one international vendor, Alibaba, which has been successful in the highly exclusive Chinese market and is diligently focused on effectively competing with these U.S.-based vendors on an international stage.

Among the insights gleaned from TBR’s upcoming Cloud Infrastructure & Platforms Customer Research, it is becoming evident that even in discrete use cases and niche industries, the general-purpose nature of these vendors has enabled them to be considered across needs. Many customers agree that there is a delicate equilibrium yet to be found in first balancing on-premises and cloud deployments, and then balancing vendor lock-in concerns, usage volume discounts, vendor specializations and multivendor environment complexity. TBR will closely watch and assess how each vendor overcomes its perceived downfalls and positions itself to help customers best weigh the benefits and drawbacks of increasing cloud adoption.

In particular, customers almost universally recognize Google Cloud as the third option behind AWS and Microsoft Azure, citing TensorFlow as a key technology that will drive Google’s growth into a more prominent cloud vendor, but in the same breath identify that Google’s enterprise vision has not matured from “talk the talk,” particularly outside of the executive office of Google Cloud CEO Diane Greene. Meanwhile, Azure has become a viable alternative to AWS for many customers that note general ubiquity in each vendor’s ability to support various enterprise needs. TBR expects the closeness in AWS and Azure functionality, strained by the maturation of Google’s enterprise vision and Alibaba’s increasingly competitive entry into Western markets, will cause the converging market to grow quickly around this competition.

Partnerships are being both stressed and created as the cloud market evolves
The increased focus on cloud delivery methods has certainly stressed many long-held partnerships between traditional hardware, software and service vendors. The model of solution creation, distribution, installation and support was one that had multiple participants in the traditional model but became more focused on the cloud provider in the transition to cloud. Cloud is also an opportunity for new or nascent vendors to take share in markets such as business applications, where SAP and Oracle have been dominant. SaaS vendors fill portfolio gaps and augment vendor offerings for verticalized use cases, enabling legacy players such as Microsoft and SAP to adapt and compete with born-on-the-cloud providers. An example of this shift in vendor landscapes comes with the release of Dynamics 365 Business Central, which will help Microsoft gain footing over SAP in the SMB space for business applications and provide new opportunity for Microsoft’s SaaS partners. However, as each vendor expands its cloud portfolio, its respective ecosystem will be required to adapt. SAP’s acquisition of CallidusCloud will improve the vendor’s position in the cloud front-office space, but it also places SAP in direct competition with its ecosystem of Configure, Price, Quote (CPQ) providers. Now more than ever, the market will see vendor shares susceptible to ongoing changes as the market for core business applications remains relatively immature for cloud.

Hardware and services partners were previously hard hit in the transition to cloud but will have more opportunities with a growing mix of public and private cloud options becoming available. Microsoft will continue to leverage hardware and services partners to deliver and implement its hosted private cloud, Azure Stack, which has already doubled its geographical reach in recent months. This new opportunity for longstanding hardware partners such as Dell EMC and Hewlett Packard Enterprise to collaborate in delivering Microsoft’s Azure Stack offering does little to offset the erosion those vendors have seen as Microsoft built out its own Azure public cloud offerings, reducing customer demand for hardware.

Note: TBR provides extensive, sustained coverage of the strategies and select performance metrics of all the vendors mentioned above, as well as their competitors and key technology partners. Contact the authors for additional details.

By Allan Krans, Practice Manager and Principal Analyst; Cassandra Mooshian, Senior Analyst; Meaghan McGrath, Senior Analyst; and Jack McElwee, Research Analyst

Analysis: When expectations do not match the actual cost in cloud

In the relationship between customer and business, expectations are everything. In a lot of ways, the shift to cloud computing has evened the playing field for what is expected in terms of cost, responsibilities, and the services exchanged between IT customers and providers. With cloud services, customers can experience far more of a service before buying it, see a clear unit price from the outset and understand the constraints of the service-level agreements. However, uncertainty still lingers in the exact specifications for many solutions, as the complexity of the design and variability of the actual utilization continue to make accurately predicting real-world cost for cloud solutions difficult for many customers. — Allan Krans, Practice Manager and Principal Analyst

Hybrid: How much is hype vs. reality

Going inside customers’ minds to predict the future of cloud

Looking at customer spending may tell where cloud has been, but going inside the minds of cloud customers can predict future changes. This insight comes at an important point, as the maturation of enterprise cloud adoption and vendor offerings have created a new reality for the cloud market. Purchase decisions are becoming more focused on the workload and use case rather than on the deployment model, and top vendors have solidified their positions on workload leaderboards.

Given these shifts, customer buying behavior and decision making have become more nuanced. TBR’s Cloud team has shifted its end-user research to better capture the new intricacies of the cloud market. Join Allan Krans, Cassandra Mooshian and Meaghan McGrath as they discuss the most recent insights from TBR’s cloud applications customer research and cloud platform & infrastructure customer research.

 

Defining a new hybrid landscape

TBR brings together analysis of hybrid-influenced and hybrid-enabling vendors and technologies, examining and defining the hybrid landscape

Many hybrid players legitimize their presence in hybrid engagements through partnerships with vendors in adjacent markets. Vendors with entrenched legacy assets are well-positioned to cross-sell integrated solutions that fuel hybrid-influenced revenue opportunity. — TBR’s 4Q17 Hybrid Benchmark