For the better part of two years, SAP has been talking up an innovation strategy based on in-memory, mobile, and on-demand computing, but it gave the first two categories most of the attention. In an exclusive interview with InformationWeek last week, co-CEO Bill McDermott said SAP is now preparing a "comprehensive, strategic direction" that will step up its cloud computing initiatives considerably.

McDermott stopped short of quoting revenue targets for cloud computing, saying the broader plan is "still in the early stages" -- expect announcements early next year. That's a marked contrast with SAP statements about its in-memory and mobile computing initiatives.

Discussing SAP's third-quarter financial results last week -- highlighted by record revenue, a seventh consecutive quarter of double-digit growth, and a claimed double-digit gain in enterprise apps market share against arch-rival Oracle --McDermott went out of his way to point out that the Hana in-memory appliance has a 600 million Euro (USD 822 million) pipeline and that its mobile computing products, including Sybase Unwired infrastructure, have a 400 million Euro (USD 548 million) pipeline.

SAP's co-CEO also stopped short of offering any specifics on the bolder, broader cloud strategy. He did say SAP's September acquisition of Crossgate will be part of the story, providing the basis for business-to-business data connectivity. That bit of detail hints that SAP's cloud strategy will have a supply chain twist.

In the wake of Oracle's OpenWorld announcement several weeks ago of an Oracle Cloud, it's easy to guess that an SAP public cloud is on its way. The big questions would then be: How does that cloud coexist with SAP's hosting partnerships, and how does it compare and compete with what Amazon, IBM, Microsoft, Oracle, and others have to offer?

Oracle's recent USD 1.5 billion deal to acquire customer service SaaS vendor RightNow offers yet another reason McDermott might want to let it be known that SAP has bigger cloud plans. But I wouldn't expect SAP to acquire any SaaS players, as that would stray from the company's vaunted "consistent core" strategy. (Oracle, by contrast, can't seem to say no to overlaps and redundancies. It already had Oracle CRM OnDemand and its cloud-ready Fusion Apps, touted by Oracle president Mark Hurd just a few weeks ago as offering "the most modern code in the CRM world today." So why does Oracle need RightNow other than to buy customers and get in rival Salesforce.com's face?)

No, I'm guessing SAP will stay consistent on the apps front, even if, as McDermott's comments suggest, competition with Oracle is a big motivator. "We will completely and unequivocally assert our will [in cloud computing], especially against companies that have made bold statements about all the bad things they're going to do to our company," McDermott said. "We're going to fight back with everything we have."

I, for one, have been critical of SAP's baby steps into the cloud, mainly its promise to have just 1,000 customers on its Business ByDesign midmarket software-as-a-service enterprise apps suite by the end of this year. To be fair, SAP's cloud strategy doesn't rest entirely on Business ByDesign, launched in July 2010 after a two-year delay. SAP also has BusinessObjects BI OnDemand and the StreamWork OnDemand collaborative environment. In recent months it has also added on-demand salesforce automation and carbon reporting apps, and it's planning one for talent management.

But even when throwing in SAP's subscription-based hosting of conventional application software, the company's cloud business in the last quarter added up to 93 million Euros (USD127 million) in revenue. (Citing that figure, McDermott said: "That's a rounding error compared to where we expect to be.")

Meantime, Salesforce.com expects to grow its cloud business -- mostly CRM SaaS but also platform as a service -- from USD 1.3 billion in revenue in the fiscal year that ended January 31, 2011 to over USD 2 billion in its current fiscal year.

Microsoft, too, has stepped up its SaaS efforts, launching Microsoft Dynamics CRM Online early this year. Microsoft says two thirds of the 7,000 CRM customers it gained thus far in 2011 chose the online version, so that works out to more than 4,000 customers within nine months.

Source: InformationWeek USA