Why SAP and Oracle Have Such Problem Building their Clouds

Executive Summary

  • Oracle and SAP have built virtually nothing in their cloud services.
  • We cover why Oracle and SAP appear incapable of creating competitive clouds.

Introduction

While currently, both vendors cannot talk enough about the cloud, both vendors fought against the cloud for many years (and we have the evidence in this book). These vendors behaved this way as they knew that the cloud cut against their on-premises business model. Moreover, once they embraced the cloud (not that they wanted to, but Wall Street told them they did not have an alternative) their approach to the cloud has not been to improve IT efficiency or to reduce prices. Instead, it has been merely to lift and shift their business model to the cloud, and then to deceive their customers and prospects as much as possible about the cloud.

For instance, for years, Oracle has been crediting cloud sales to customers who use the same on-premises version of the application. Information from actual projects as well as Oracle sales reps is that the cloud version of the Oracle application is not implemented (but booked as revenue) while the on-premises version is not booked as revenue, but is used.

This is explained also by Seeking Alpha.

“Oracle management likes to talk a lot about new customers and competitive wins. I get that. I am sure that there are workloads new to Oracle on the cloud. How much these are I cannot say. But the fact is that core IT applications are simply not growing by all that much-they have long since been saturated. Most of the time when Oracle sells a cloud application, it is selling it to someone who has the selfsame application running on-prem.”

Thus the customers of both of these vendors are prime candidates to harness AWS and Google Cloud to improve their value.

The following quotation on this topic comes from Ahmed Azmi.

Why does AWS, Google, and Alibaba have a good cloud product while SAP, Oracle, and IBM don’t? Because AWS, Google, and other cloud-natives had to build global scale infrastructure to support their internal workloads for e-commerce, search, and ads. They are now offering surplus capacity and a subset of their own tools to “external” customers. They understand the problem domain better than anyone else and they’re a decade ahead.  Oracle, SAP, and IBM never had to operate a global e-commerce platform or host software at scale. They’re software houses who built (mostly acquired) then sold packaged software to customers and customers did the hosting on-premises. The institutional knowledge is not there.

Ahmed’s point about SAP and Oracle’s lack of experience in implementing software internally is a good one. SAP and Oracle have only ever talked about and sold technology to others.

What are Oracle and SAP Really Investing in Cloud?

Both Oracle and SAP have tried to argue that they have made major investments in the cloud. Let us take a closer look at these claims. SAP’s lack of investment in the cloud has been well documented, one source being the book SAP Nation 2.0.

  • SAP’s Steve Lucas stated that they were not going to open their application to the cloud as it would be a “race to the bottom.” But then SAP introduced their multi-cloud strategy as covered in the article SAP’s Multicloud Announcement, where they essentially changed strategy from proposing that they would not open their solutions to the other cloud providers, to doing a 180 and stating their solutions would be to being complimentary with AWS, Google Cloud and Azure. Currently, SAP Cloud connects to AWS, Google Cloud and Azure.
  • Oracle, on the other hand, has promoted its investment into the cloud and to directly challenging AWS. As we will discuss further on in detail, Oracle has had to answer pointed questions as to why for a company which such enormous resources their investment in the cloud has been so small compared to the major cloud providers.

Our conclusion is that neither Oracle nor SAP have any particular technology interest in the cloud. (Of course they have a very real monetary interest in the cloud, but this is to defend their on premises ecosystems.) Rather they rightly viewed the cloud as a threat to their account control within their enormous respective account bases. And this is why both companies have a history of being so dismissive to the cloud, particularly in the cloud’s early period.

This video from 2009 shows Larry Ellison getting a lot of laughs applying a straw horse logical fallacy where he implies cloud is simply hosting.

In this amusing rant, it is difficult to critique the performance. However, he misses on the shared resource aspect of cloud, the multi-tenancy of cloud, the sever-ability of cloud terms. Instead, Larry prefers to focus on arguments that were not particularly prevalent at time-related to the cloud having “no hardware”.

Moreover, nine years later, the Oracle Cloud is a non-factor on Oracle accounts. At the time of this video in 2009, while Oracle and SAP were “running down” (a bit of deliberate FUD perhaps?) cloud, AWS, and Google Cloud were investing in their offerings. Larry thought he and Oracle could ride the on-premises model forever. Now after doing little aside from cranking up the cloud marketing machine for over a decade, Oracle is lost in making progress in its cloud. In September 2018, Thomas Kurian, the head of Oracle Cloud stepped down. Thomas Kurian’s exit from Oracle (it is at least strongly rumored) was due to his view that existing Oracle customers should be able to choose which IaaS they wanted to run their software on, which conflicted with Larry Ellison’s vision. After all this time, and so little progress, Oracle is still trying to figure out its strategy, and appears headed in an unsustainable direction with respect to the cloud.

The Threat to SAP and Oracle from the Cloud

How is cloud a threat to both Oracle and SAP? Well, cloud naturally undermines the on-premises assumptions around which both these vendors developed their business model. That is everything from their internal skills to their contracts and internal incentives. Cloud companies are not configured like Oracle or SAP and would impose a great deal of unwanted change if they had to adapt. Change, particularly when one is so financially successful doing things for decades one way, is historically put off as long as possible.

Cloud also threatens their consulting partners that are also based around the on-premises model. Once the cloud is employed, the number of consulting resources drops and hence consulting revenues. This is a primary reason why SAP and Oracle partners fought the cloud. Behind closed doors they still fight the cloud, although they can’t admit it publicly. SAP and Oracle and their consulting partners would like to move with the times, but the problem is they want to move with the times while keeping their inefficient and dated methods of operation, and their margins, perhaps even increasing them as we will see later in the book. We have reviewed internal SAP consulting company slides that promoted the idea that cloud would help them increase their revenues. Perhaps this consulting company does not fully appreciate how the cloud works, but the cloud reduces the number of resources required for a project. Moreover, consulting companies function by the following formula.

Deloitte Revenues = The Number of Resources on the Project x The Number of Weeks on the Project

Cloud reduces both of the inputs.

Fewer resources are required, and they are required for a shorter period of time. This is not good news for consulting companies. Senior members of SAP and Oracle consulting partners have stated to the authors that they would never “recommend the cloud.”

Why?

Because if they did, they would not be able to staff a sufficient number of resources, to bring in enough money, to maintain their position in their companies.

The marketing these same companies do around the cloud looks much different. In public communications, SAP, Oracle, Accenture, Deloitte, etc.. are “all in on the cloud.”

However, what do all of these entities really want, and how do they plan to react to the cloud?

It is all very simple. They will superficially promote the cloud while keeping everything else the same, which means defending their on-premises revenue model. If a customer is utilizing entities that only have a history in on-premises software, the likelihood that they will benefit from real cloud efficiency rapidly shrinks. There are no precedents where entities passively accept lower revenues without fighting that change. As we will discuss, the fact that so many people are still employed in IT consulting is evidence that we are still early in the cloud transformation of IT.

SAP and Oracle can only slow the process and they must do what they can to either co-opt cloud (i.e., pretend they are more involved in it than they are) or adopt it. So far they have chosen to co-opt the cloud rather than become true cloud vendors.

What is the Difference Between Real Cloud and Faux Cloud?

While SAP and Oracle and their partners dislike the arrival of cloud, they are financially incentivized to “pretend to move to the cloud.” They have spent most of their efforts trying to cloud wash or to co-opt the cloud, which means to miscommunicate either their on-premises revenues or support revenues as the cloud. SAP and Oracle will tell Wall Street anything they want to hear. If cats are popular on Wall Street, SAP and Oracle loooove cats. If its dogs….well you get the picture. The fact is that most of what SAP and Oracle offer customers is a faux cloud, as we covered in the article How to Understand Oracle as Faux Cloud Versus AWS.

We have investigated true cloud versus faux cloud in depth for several clients. What we discovered was shocking to us. The vast majority of notably bigger companies that say they are cloud/SaaS are not cloud. Salesforce, a company that started as cloud, now has restrictive cancellation clauses and other account control terms & conditions. Cloud computing has a specific meaning and a particular set of requirements. While reviewing all the marketing literature, it is very tempting to forget what the actual definition of cloud, which is why we always refer back to earlier research we performed on this exact topic.

Cloud is frequently diluted to mean the service merely is off premises. So, let us take this opportunity to get clear on what the cloud is, and what features are necessary for an offering to be considered cloud.

The following eight conditions must be met for a service to be cloud.

  1. One code base
  2. No customization
  3. Vendor provides the hosting (i.e., the vendor provides and maintains all infrastructure for the application)
  4. Flexible cancellation
  5. Published and transparent pricing
  6. Using a cloud salesforce
  7. Using self-guided demo systems
  8. Vendor-provided Software maintenance

Multitenancy

One code base is what allows for multi-tenancy. This means that multiple customers use the application logic and in some cases the same database. Multi-tenancy flows directly into the topic of no customizations. No customization is necessary because if different customers were allowed to make customizations, then the application could no longer be multi-tenant.

To provide the IaaS capabilities, vendors invest in their own data centers. However, as we will cover further on in the book, only a few companies are interested in making these investments. If we look at SAP, while they tout cloud, in many cases they have other entities hosting their applications and databases. In the past, this was more commonly a consulting partner like CapGemini. Also if your hosting is with Deloitte or Accenture, that have shown no cloud true capabilities, even to manage multitenancy one has to wonder about the effectiveness of this strategy.

Definition of Multitenancy

This is the first time we have used the term multitenancy. Multitenancy means more than one “tenant,” the tenant, in this case, being a customer. Multitenancy is critical to understanding cloud. Multitenancy can be considered the core characteristic of the cloud. It allows resources and costs to be shared across a pool of users. It means that in the case of database multitenancy, the data from many customers can be kept in a single database instance, and the database can be maintained at very low overhead and high economies of scale. At the application level, it means that updates can be implemented for all users at once. We will discuss multitenancy in depth further in the book.

Objectivity on the Cloud

Think about it in these terms, does anyone go to Deloitte or Accenture or CapGemini for cloud IaaS if they are not pushed there by SAP? This appears more geared toward giving business to partners rather than doing something that is in the customer’s best interests.

In summary, it seems that SAP is not all that interested in investing in data centers. This raises questions about how a vendor like SAP deals with third parties hosting their software.

SAP’s marketing materials show many cloud acquired applications. SAP’s marketing investment into cloud is certainly large. However, SAP maintains what has been described by others as a “puny” data center investment and capability. SAP’s acquired application typically suffer from habitual data center underinvestment.

This is explained in the following quotation.

“There is another concern about SAP’s S/4 public cloud. The data center in Sankt LeonRot Germany, while close to SAP’s impressive Walldorf headquarters, does not itself inspire much confidence. It has been called puny and primitive compared to the data centers of infrastructure as a service providers like Amazon, Microsoft Azure and Rackspace. Indeed competitors like Info and Unit4 are using infrastructure-as-a-service (using data centers from Amazon and Microsoft respectively) rather than trying to compete with their scale.”

“Even where SAP offers public cloud options-for example with its SuccessFactors and Concur customers– the individual data centers are undersized and often supported by co-location vendors around the globe. SAP’s about 82 million cloud users are fragmented across products and across geographies. Little attempt appears to have been made to date, to consolidate data centers that support them. While compliance requirements dictate regional diversity in such facilities, they are further reminders of Balkanization in the SAP economy.”

The Truth Around S/4HANA

Most of SAP’s database and applications revenue is from on-premises applications. S/4HANA is an internally developed application. There is an on-premises and a cloud version of S/4HANA. Yet out of 1500 “live” implementations we estimate around 10% are S/4HANA Cloud. On quarterly calls, SAP does everything it can to distract from this reality. The reality is that outside of the acquired applications, SAP does not have cloud application business of any significance.

The cloud customer should have a month-to-month contract with the software vendor or service provider which allows for flexible cancellation. This relates to preventing lock-in, although it should also be acknowledged that some applications have more lock-in than others. ERP systems, by their nature, have more lock-in than other applications, like CRM applications which are far easier to switch between. Although regardless of the application, there is some stickiness factor that reduces the actualized flexibility in switching to a different system.

AWS and Google Cloud offer highly flexible cancellation terms. It is the ability to bring up and bring down services and to pause services. For example, we can close down any one of our AWS or Google Cloud services at any time. The services are billed in hours or minutes or second or millisecond. When the service is turned off, the billing no longer runs. This is not a “month-to-month” cancellation capability, but an immediate canceling capability. The account stays active at AWS and Google Cloud, but that is separate from the services that are billing or not billing as the case may be. We have become used to this type of flexibility, but it is easy to forget how unusual this is in the history of enterprise software.

SAP and Oracle are not experienced in working this type of business model.

SAP has only very recently begun to offer month to month subscriptions to their products. We reviewed this same pricing page in June of 2018, and at that time the price was listed as monthly, but it had a yearly term. The vast majority of SAP’s products have secretive pricing. We were not able to verify if a monthly term applied to S/4HANA Cloud if a discount was applied. SAP responded that they would only answer that question if we provided a customer name.

Being Forced to Adjust to the Cloud

Clearly, SAP is having to respond to market pressures. SAP could have done this years ago, but they didn’t. SAP is being forced to adjust to the cloud; and these changes are being fought tooth and nail by SAP (and by Oracle). And, as our example of SAP’s unwillingness to verify the interaction between a discounted price and the monthly cancellation term, often when one gets into the details, it turns out that the promised cloud terms are not cloud at all.

Even now SAP and Oracle operate on the on-premises model where projects are made about software capabilities, usage, implementation difficulty, product maturity, and other product features without testing the item. Some might respond to this by contradicting the statement and pointing to proof of concepts. However, proof of concepts is run by the vendors. Vendors run the POC to “prove the concept” not to “test the concept.” The POC intends to convince the customer to purchase the software. It is not at all like when the customer tests the software themselves. By contrast, cloud puts the customer in the “driver’s seat” rather than trying to control the process of evaluation.

On the topic of the necessity for a self-guided demo system, generally, on-premises application sales teams tightly control exposure to the application. The prospect is only allowed to see a demo of the system for short periods of time. Specialized resources called pre-sales consultants to walk prospects through a demo. This approach does not provide or allow a thorough evaluation of the usability of the system. Demonstration consultants, who are very familiar with the application, can do many things that average users often cannot. Alternatively, when cloud vendors provide access to a cloud demo environment, the experience becomes self-guided. This gives the prospect more control and allows them to understand whether the application is a good fit for them in a shorter period.

Published Versus Secret Pricing

Published pricing is a fundamental feature of cloud providers. For AWS and Google Cloud, they chose to outsource much of the pre-sales effort to its customers. They do this by doing what was in the past unthinkable; that is by publishing their pricing and making it virtually non-negotiable. In doing so, AWS and Google Cloud remove an enormous obstacle for customers to adopt their services. Also, then customers can begin testing the capabilities and the cost without even needing to, in many cases interact with AWS or Google Cloud representatives.

As any reader of this book will likely know, SAP and Oracle have unpublished pricing. Just a few pages ago we showed an example of published pricing for SAP’s S/4HANA, but this is new, in part faux cloud pricing, and most of SAP’s product catalog is still secret. The same applies to Oracle. And when we say secret, we don’t just mean unpublished. We mean secret. On the first page of SAP’s pricing page, it states that sharing the pricing spreadsheet could expose the person sharing the pricing sheet to legal jeopardy.

“All rights reserved. The contents of this work are confidential and proprietary information of SAP AG. Improper and/or unauthorized reproduction in whole or in part of the information contained in this work is a violation of SAP’s proprietary rights and could cause irreparable damage. No part of this work may be reproduced or copied in whole or in part in any form or by any means (including without limitation graphic, electronic, or mechanical, including photocopying, recording, taping or information storage and retrieval systems) without the prior written permission of the publisher.”

Interesting isn’t it? According to SAP, its pricing is protected information. Furthermore, if one is in possession of this pricing spreadsheet, the recipient has certain responsibilities.

“This SAP Software Price List may only be distributed by an employee, agent, or representative of SAP AG / SAP subsidiary. If you have received it by any other means, you are hereby notified to return it to SAP AG to the attention of the Contracts Manager.”

Oh yes, a company that writes these types of clauses around its price list is TRULY ready for the cloud!

Complicated Pricing

Both SAP and Oracle’s pricing is so complicated that sales reps for each company seem to spend at least as much time working out pricing as focusing on technology. For example, we had to completely revamp the SAP pricing sheet before we were able to use it because as it is originally given to salespeople and pricing consultants it is extremely difficult to use. Secondly, even if the pricing sheet is obtained, there are so many discounts that the pricing can’t be known with certainty. This applies equally to Oracle.

It even goes even beyond this. If you go through an official SAP representative, there are still frequently problems getting a firm price. At clients that we advise, SAP sales often postpone giving out pricing even when the customer specifically asks for a price. For some reason, the pricing has to be run-up to the higher levels in SAP….or at least that is what customers are told. It is quite odd when you can’t even get a price for weeks because of a large number of behind the scenes mechanizations and scheming that have to take place. However, this is the world that SAP and Oracle have created for their customers. And these are the type of things people outside of the field don’t find out because it is not the sort of thing that is published.

AWS and Google Cloud have estimates per configuration. The example we have in this screenshot is for SAP HANA, express edition. This for the HANA database that can be run without a base edition, platform edition or enterprise edition license. SAP does this to encourage development on HANA. Because the only charge here is from Google Cloud, the pricing is transparent. However, as soon as one switches to the SAP HANA “Bring-Your-Own-License,” while the hosting costs are the same, the overall pricing immediately becomes secret. In that case, neither AWS or Google Cloud have anything to do with the pricing of the license. That license pricing is set by SAP, and now “the games begin,” as one must work through an archaic and time-consuming process called the on-premises sales model.

The Low Cost Distribution and Sales Model

The original cloud vendors followed a low-cost distribution and sales model. This means employing fewer salespeople, focusing less on relationships and on manipulating relationships. It means cloud salespeople are closer in many ways to presales resources than sales resources. This dramatically lowers the cost of sale, and it also reduces the amount of inaccurate information being communicated to customers. This also happens to be how AWS and Google Cloud operate.

When considering this context, while SAP and Oracle declared they were moving more to the cloud, they did not reduce their sales force.

SAP and Oracle are both highly aggressive sales cultures with vast numbers of salespeople. Oracle employs 35,000 at last count. That should tell anyone who is paying attention that SAP and Oracle are not migrating to the cloud anywhere near as fast as they are saying. If a company is following a cloud model, the need for salespeople steeply declines, as the primary means of interaction is through the website, not through phone calls and on-site visits. (And the skills of the salespeople also change.) If one compares the revenue to employees in AWS and Google Cloud versus SAP and Oracle, AWS and Google have a higher ratio or revenues to employees.

Cloud Service Providers and Support

Cloud began with the cloud vendors providing the maintenance. This means that this is taken off of the customer’s plate. Under SaaS, the customer only uses the application; they don’t worry about the infrastructure, database, updates, etc. The updates are supposed to be so automatic and well managed that the customer does not notice the update being made. An excellent example of this is Gmail, which is a cloud application that most people use. Gmail has gone through many updates, but Gmail users do not observe the changes occurring. The story with AWS and Google Cloud is a bit more complicated because customers are not using AWS and Google Cloud just for applications (SaaS), but for their development and infrastructure (PaaS, IaaS). But this applies very readily to AWS RDS and Google Cloud SQL, where much of the maintenance of these databases is managed for the customer, and the customer can focus on using the database.

The following quotation explains this from Google.

“Let Google manage your database, so you can focus on your applications. Cloud SQL is perfect for WordPress sites, e-commerce applications, CRM tools, geospatial applications, and any other application that is compatible with MySQL or PostgreSQL.”

SAP and Oracle Sell Technology Rather than Use Technology

Neither SAP or Oracle ever built anything themselves. Internally they have roughly the same technological accomplishments of a large consulting company.

Say a Deloitte or Accenture. They have an HR system, systems for recording sales and expenses, invoicing, etc… Anything of any significance that is accomplished with SAP and Oracle products is accomplished in their customers.

SAP’s Underinvestment in Cloud Infrastructure

The underinvestment in SAP cloud infrastructure is covered in the following quotation.

“There is another concern about SAP’s S/4 public cloud. The data center in Sankt LeonRot Germany, while close to SAP’s impressive Walldorf headquarters, does not itself inspire much confidence. It has been called puny and primitive compared to the data centers of infrastructure as a service providers like Amazon, Microsoft Azure and Rackspace. Indeed competitors like Info and Unit4 are using infrastructre-as-a-service (using data centers from Amazon and Microsoft respectively) rather than trying to compete with their scale.”

The next quote gets into how the SAP data centers are undersized.

“Even where SAP offers public cloud options-for example with its SuccessFactors and Concur customers– the individual data centers are undersized and often supported by co-location vendors around the globe. SAP’s about 82 million cloud users are fragmented across products and across geographies. Little attempt appears to have been made to date, to consolidate data centers that support them. While compliance requirements dicate regional diversity in such facilities, they are further reminders of Balkanization in the SAP economy.”

The following quote covers the enormous costs of the SAP cloud.

“Customers also report that SAP’s recent software economics (as against business network economics described above) are uncompetitive whether it is proposing on-premise or its cloud solutions. For example, in a recent deal, its five-year software cost was three times as much as the winning competitor cloud bid. SAP’s annual maintenance cloud by itself exceeding the subscription cost of the competition, which also included hosting, apps management and upgrades in its price.”

Did SAP Successfully Implement its Learning from SuccessFactors on the Cloud?

The following is a quote from a paid placement by SAP into Fortune.

But it has put some of the right pieces in place—the CEO of recently-acquired SuccessFactors, Lars Dalgaard, has joined the company’s executive board and is now tasked with running all of its cloud efforts. Cloud revenue is small but growing at a much faster rate than traditional software sales: SAP reported that the SuccessFactors business grew bookings by 69% compared to the first quarter of 2011. And the company is pouring marketing muscle and manpower into HANA and other innovative efforts like mobile apps.

The idea was that SAP would learn a lot about cloud from SuccessFactors, and talking to those inside of SAP, they did. Yet, the exposure has not translated into any of the expected improvements in SAP’s cloud offerings, which is very much lagging the market.

Next month, at a conference in Florida, SAP is expected to unveil more details on its cloud strategy. It’s sure to talk up HANA, mobile and analytics as well. But what about its core business, enterprise resource planning software? It’s long-overdue for a serious overhaul on its less-exciting core product, which accounts for the bulk of current revenue. Of course, redesigning complex software isn’t easy and takes time. But it’s a necessary step for SAP to truly become the innovation leader in the enterprise.

Whatever SAP announced it has not resulted in anything of substance over 5 years later.

Coercing Companies into the Cloud

SAP and Oracle have been in the position of having to coerce companies into the cloud as we cover in the article How SAP and Oracle Coerce Customers into the Cloud.

Upcharging for Private Clouds

SAP has a very small cloud capacity and relies upon very low-quality partners that work under their HEC brand which we cover in the article Our Comparison of SAP HEC with Virtustream Versus AWS Analysis. SAP really just marks up the cloud services of these companies as we cover in the article How to Understand SAP’s Upcharge as a Service Cloud. As with Oracle, none of these private cloud offerings are multitenant, as we cover in the article Why Oracle Cloud is Not Multi-tenant.

SAP and Oracle and Consulting Partner Information Quality

Migrating from SAP and Oracle, or portions of SAP and Oracle to AWS has many implications. Some of them are related to corporate strategy, contracts, and related factors. We will cover as many of these as we can.

Customers have for decades chosen SAP and Oracle applications and databases. In some cases the selections made sense. However, in many cases when there was no logical reason to select the options presented by SAP or Oracle except they felt like safe choices. This is buying on the basis of brand rather than an actual analysis of the pros and cons of the purchased items. SAP and Oracle have not only extensive sales and marketing budgets, but an army of consultants built up that both implement, but also serve to promote more and more SAP and Oracle sales.

Brightwork Research & Analysis frequently performs analysis of statements by SAP and Oracle consultancies to their clients is that the average information quality provided by them is low. As it happens, right now, we are aware of Oracle partners who are lying to companies about Oracle Cloud. They are falsifying the customers they have live on Oracle Cloud. They are doing this so they can sell Oracle Cloud and get experience in Oracle Cloud.

SAP and Oracle spend mightily to influence people, and it works which we cover in How SAP Controls IT Media. The vast majority of SAP sales reps and SAP consulting firms spend their time talking about how SAP “could be used” (according to a brochure), not how it is used. Brightwork Research & Analysis is one of the only entities that discuss how it is used in reality. Moreover, discussing this topic is very bad for sales, which could cause you to “lose the deal” and to then get fired as a sales rep for these companies.

The problem is financial bias.

Implementation companies don’t implement things from many vendors. They implement software from a few vendors. If the consulting company has a financial bias, it is logical and is borne out by observations that they will recommend what is best for them financially. SAP and Oracle consulting companies are not fiduciaries as we cover in Do Consulting Companies Have a Fiduciary Duty. They are under no obligation to place their client’s financial interests ahead of their own.

While they may be safe politically, they are in many cases not safe in reality. Here are several examples of why this is the case.

  • Immature Products: SAP has a history of bringing out immature applications that have major implementation failures and have to be written off. SAP implementations have so undermined some companies that they were sufficiently weakened to become acquisition targets.
  • High Cost and Maintenance Database: The Oracle database (Oracle 18, 12, 11) has many upper-end features, but it also historically has the highest maintenance overhead of any database in its class (until SAP released HANA that is, which took the crown). Furthermore, many of the Oracle DB’s more advanced features go unused by customers. Like SAP, Oracle accounts suffer from high TCO. SAP and Oracle’s high TCO is how they can pay at the top of the market for sales reps.
  • A History of Overpromising: Both SAP and Oracle have a long established history of overpromising what their applications and databases can do often promoting the upper level of functionality that is very rarely reached by customers because of the effort and maintenance overhead in getting their offerings tuned. The result is the “average usage” is far below the potential theoretical usage. So what customers see in the sales phase is not anywhere close to what customers get.

All of this is possible because, under the on-premises model, the application or database is purchased first and then tested after. Customers buy cloud services by the SLA not by the sales pitch.

Conclusion

Both Oracle and SAP’s clouds are based upon smoke and mirrors and not long term investment. They significantly lag other cloud service providers and they provide extremely false information to customers about their clouds.

The Problem: A Lack of Fact-Checking of Oracle

There are two fundamental problems around Oracle. The first is the exaggeration of Oracle, which means that companies that purchased from Oracle end up getting far less than they were promised. The second is that the Oracle consulting companies simply repeat whatever Oracle says. This means that on virtually all accounts there is no independent entity that can contradict statements by Oracle.

The Necessity of Fact Checking Oracle

We ask a question that anyone working in enterprise software should ask.

Should decisions be made based on sales information from 100% financially biased parties like consulting firms, IT analysts, and vendors to companies that do not specialize in fact-checking?

If the answer is “No,” then perhaps there should be a change to the present approach to IT decision making.

In a market where inaccurate information is commonplace, our conclusion from our research is that software project problems and failures correlate to a lack of fact checking of the claims made by vendors and consulting firms. If you are worried that you don’t have the real story from your current sources, we offer the solution.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

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References

https://en.wikipedia.org/wiki/List_of_acquisitions_by_Oracle

https://fortune.com/2012/04/25/sap-throws-down-the-gauntlet-in-database-wars/

https://blogs.oracle.com/profit/rise-of-the-hybrid-cloud

https://docs.aws.amazon.com/AmazonS3/latest/dev/bucket-encryption.html

*https://www.amazon.com/SAP-Nation-2-0-empire-disarray-ebook/dp/B013F5BKJQ

https://www.forbes.com/sites/danwoods/2018/10/29/four-common-mistakes-in-understanding-oracles-cloud-troubles/#49247c281df8

AWS and Google Cloud Book

How to Leverage AWS and Google Cloud for SAP and Oracle Environments

Interested in how to use AWS and Google Cloud for on-premises environments, and why this is one of the primary ways to obtain more value from SAP and Oracle? See the link for an explanation of the book. This is a book that provides an overview that no one interested in the cloud for SAP and Oracle should go without reading.

Will Thomas Kurian Bring Oracle’s Sales Sleaze to Google Cloud?

Executive Summary

  • Thomas Kurian, the head of Oracle Cloud took the reins at Google Cloud.
  • The WSJ covered Kurian’s plans at Google Cloud. We ask a specific question from this coverage.

Introduction

The Wall Street Journal wrote an article (What’s Been Lacking at Google’s Cloud? Enough Humans), where the WSJ delves into Thomas Kurian’s plans as the recently named head of Oracle Cloud.

In this article, we will review the most important quotations from the WSJ article and provide our take on the likely changes to be put in motion by Kurian.

Thomas Kurian’s Observation on Google Cloud

The WSJ article begins by pointing out Kurian’s observations on Google Cloud after leading the organization for several months.

“Weeks into his new job as head of Google’s cloud business, Thomas Kurian identified a chief complaint from big business customers: They often didn’t have account managers to call.

Understanding corporate customers is precisely why Google hired Mr. Kurian, who spent two decades at longtime adversary and competitor Oracle Corp. , including running product development. Customers are happy with Google’s technology, he said, but not their lack of access to sales managers to cater to their needs—a basic business tactic.””

Oracle is not really an adversary of Google or any other cloud service providers because of the fact that they have a nearly unmeasurable cloud services presence.

Something left out of this observation on the part of the WSJ is how do Oracle customer’s feel about the Oracle Cloud, the division of Oracle that Thomas managed before he left to work for Cloud.

So how do they?

  • Customers were unhappy with the technology and customer service. You could access Oracle customer service, but it was and is exceedingly poor, with high turnover.
  • Secondly, because the Oracle Cloud lacks self-service capabilities, you end up having to reach out to people. Oracle’s solution to the cloud seems to be people people people. It is ridiculous in that everything seems to require some engineer setting things up for you. This is one (among many reasons) that Oracle’s claims to have reached equivalence with AWS and GCP have always been ludicrous.

Oracle Cloud seems less like something built, and more like something that is built when requested. As Ahmed Azmi states “if they come we will built it.”

Unsurprisingly, Oracle’s CAPEX for the cloud is tiny as covered in the article The Problem with the Oracle Cloud and Colocation. AWS and GCP have built something, they are not just using their clouds to attract people and then put people to work building stuff after someone has asked for it.

Under Kurian, Oracle Cloud and now has no understanding of how to manage a cloud services operation, and they also have no idea how to build one, despite hiring people from AWS and GCP. This is something the WSJ should alwasy keep in the back of their mind as they are listening to Kurian.

The WSJ continues.

Simplified Contracts?

“Mr. Kurian said he has simplified contracts for different types of businesses instead of a one-size-fits-all approach, and has moved to more predictable pricing, in a way corporate buyers appreciate. He intends to dramatically boost Google Cloud’s sales and support staff.

Google Cloud already had a simplified contract. Secondly, Oracle is known for the most byzantine contracts in enterprise software, and Kurian brought simplified contracts to Google?

That is a bit of a pill to swallow. Let’s spit that pill out.

On pricing, Google’s pricing has always been predictable and auditable, unlike Oracle Cloud’s. All of this is easy to verify. Let us go to our Google Cloud account.

Google Cloud like AWS has predicted costs for various instances. The price auto-adjusts as soon as you make a change to the deployment. Oracle Cloud has never had this. 

And Google Cloud already has far more transparent billing than does Oracle Cloud. 

WSJ should recognize that Thomas Kurian will say that he will do some things, but only a portion of those statements will be true. 

The WSJ continues.

Kurian = Customer Expert?

“There are certain things that you learn having dealt with enterprise customers for 22 years,” Mr. Kurian said in an interview.”

Kurian may have dealt with enterprise customers for 22 years, but it is not clear that he satisfied them. If you check Oracle’s customer satisfaction, it is the lowest in the software industry. So why does Kurian have any credibility when he makes this statement? Southwest Airlines knows how to satisfy customers. The Marriot Hotels know how to satisfy customers.

But Oracle knows how to satisfy customers?

The WSJ continues.

Kurian is Bringing Oracle Support Knowledge

“Google Cloud had prioritized developing technology over sales and support, said Gene Reznik, strategy chief at the consulting firm Accenture PLC, which helps clients deploy tech from major cloud services including Google’s.

“There is a lot of hand-holding required” with big corporate customers, Mr. Reznik said. But Google often had product engineers rather than account managers handle customer calls. “It really wasn’t their day job,” he said, adding that Mr. Kurian brings a corporate credibility to Google’s “consumer-centric culture.””

It is difficult to see who besides Gene Reznik thinks that Kurian brings credibility for customer support from Oracle to Google.

  • Oracle routinely receives the lowest rating for support. Comments on Oracle support are frequently laced with profanity for how Oracle support let them down.
  • Oracle’s support has a 90%+ margin because Oracle prefers to make its support revenue almost entirely margin versus investing anything in it or its support resources as we covered in the article How do SAP and Oracle’s Support Profit Margins Compare to Pablo Escobar?
  • Oracle spends a disproportionate amount of its money on salespeople versus people that “hold people’s hands.”

It is a bit curious how Gene Reznik missed all of this. Its almost as if Gene Reznik has no idea how Oracle operates.

The WSJ continues..

The Disaster Area That is the Oracle Cloud Can Be Overlooked Because of the Oracle Database?

“Mr. Kurian, who regularly met with customers at Oracle even as a top engineering executive, said he recognizes the challenge. He has his first big chance to lay out his vision for closing the gap with Amazon and Microsoft when Google begins its annual cloud-computing conference Tuesday in San Francisco.

There, he plans to pull from the playbook of Oracle, which has struggled in cloud computing but has been a leader selling database software.”

The assumption here seems to be that Oracle has been successful with their database because they are a leader in customer service or pleasing customers.

This is not true.

Oracle has very well documented monopoly power in the database market, it is not used because Oracle has demonstrated superior or even adequate customer service capabilities.

Time for Oracle’s Sales Sleaze?

“Mr. Kurian will detail a dramatic ramp-up in Google Cloud’s sales team and unveil new technology enabling programmers to develop applications that can run on Google Cloud as well as on services from Amazon and Microsoft—comparing it to Oracle’s widely used Java computing language.”

Well….of course. And where will these salespeople be primarily drawn from? Well, it begins with an “O.”

  • The pattern with Oracle is for companies that receive Oracle executives to be quickly inundated with ex-Oracle employees.
  • This normally rapidly decreases the ethics within this organization, and soon the pre-existing employees begin to refer to the new ex-Oracle employees as “the Oracle mafia.”
  • People who are good actors will often seek to leave a company after it has been infested by Oracle employees.
  • The overall moral tends to decline.

As for technology, it is doubtful that Kurian is enabling anything technologically within Google. Remember, the Oracle Cloud technology was and is terrible. Kurian had a number of hires from AWS and Google Cloud, but he was not able to get much out of them.

The WSJ continues..

Kurian’s Sales Changes

“Mr. Kurian declined to provide specific figures but estimated his sales force is between one-10th and one-15th the size of sales forces at Amazon Web Services and Microsoft’s Azure, which don’t disclose such figures. Within two years, Mr. Kurian expects his sales staff to be about half their size.

Some customers, though, hope Mr. Kurian won’t bring Oracle’s famously high-pressure sales approach. “As much as he brings the enterprise focus to the table, there are some who worry that he brings Oracle to the table,” said Andy Zitney, chief technology officer at the tech unit of McKesson Corp., referring to hardball sales tactics some Oracle customers had criticized.”

But the problem is that Kurian will bring not only high pressure and hardball tactics but a sales force that make fallacious claims.

Oracle type claims.

Oracle by all accounts has the most dishonest sales force in enterprise software, beating out SAP which holds the number two spot in our rankings. Kurian has 22 years working for a company which sets the low bar for honesty in software.

Why would Kurian not bring this sales approach to Google Cloud?

Alienating the Google Cloud Engineers

And this is alienating to engineers. Google Cloud has some very good engineers. How will they appreciate being held responsible for statements made by fresh Oracle sales reps who are lying out of every orifice in their bodies?

I can say as a person who has been in this position, they won’t like it.

When I worked out of the Singapore of i2 Technologies, I was covered on all sides by highly sleazy salespeople. This group would say anything to get a sale. The only experience any of them had with the software was reading marketing literature. One day one of the salespeople stuck their finger in my chest and told me..

“You need to get with the vision that the VP of Sales is creating for this company!”

He was hopped up on some sales extravaganza she had just attended. And took her ignorance out on my chest.

That particular office was just known for that. I was one of the few consulting resources in that office. The rest of the consultants in that office had been beaten down after years of abuse by these salespeople.

So what did I do?

I promptly found projects that were in other countries where I could get away from the sales team out of that office.

That is what unethical salespeople do to those with domain expertise, make them want to leave either the office or the area that they inhabit. And recall, Google Cloud engineers are extremely marketable. They can be snatched up at a premium over their current salary. This means that Kurian’s legion of Oracle sales cheezeballs imported from Oracle has a very good chance of reducing the technical talent within Oracle Cloud. The ex-Oracle salespeople will be looking for technical yes men, so there should be some turnover in Google Cloud organization as the less talented meeker replace some of the best talent that Google Cloud has.

In light of this, we developed the following advertizement for Oracle, which they can use against Google.

This could be an effective advertising campaign for Oracle against Google Cloud. Its a little confusing but it could work. 

Kurian’s History at Oracle

As well as the underhand tactics being used to create and prop up cloud sales, the suit also notes that 22-year Oracle stalwart Thomas Kurian, then President of Product Development at Oracle – and responsible for leading their transition to the cloud, started selling a significant number of his personal shares. During the class period (March 15, 2017 to June 19, 2018) he sold almost 4 million shares which amounted to over $191 million. The court documents detail how a number of these stock sales came shortly before Oracle announcements which caused the share price to drop.

Potentially relevant is that Kurian took a leave of absence at the start of September 2018, and then resigned before the month was out. Apparently, this related to a falling out with Ellison over whether Oracle should open up more of their portfolio to run on Amazon AWS and Microsoft Azure. – ITAM Review

What Google Cloud Actually Needs

Google Cloud does need improvements, but it is not necessarily adding unscrupulous salespeople from Oracle that will only increase business in the short term. We have little doubt that Google Cloud will see some growth in the next few quarters as their newly Oracle infused salesforce makes all manner of promises that can’t be kept. However, Google Cloud is losing business right now because they could invest more money into making Google Cloud more self-service than it is. Google Cloud is decent in this area, but with their internal skills, they could get better.

This is the same issue that we see with AWS. Standing up Google Cloud and AWS instances in various areas would be made more logical and self-service. For example, just doing basic things, like connecting a backup to the Google Drive API takes too long, and is overly complicated. This should be dead shot easy, but it isn’t. This is on our mind as we were doing this just recently. And we decided to go with a different backup provider because it was too complicated in Google Cloud. We were investigating ElasticSearch on AWS, and ran into the same issue when attempting to create a sitewide search engine with more sophistication than is generally available. But again, this will be another research project for us. There are many opportunities to compete against the hyperscale providers, even if the price is higher, buy making the technologies more usable.

Why have these things not been made more straightforward?

So we have to spend hours reading the documentation to figure out how to get this done. We don’t want to talk to anyone at Google, and we don’t want our “hands held.” This should be worked out so that the customer can figure out how to do to this.

Self-service is what separates cloud services from on-premises vendors that have tried to offer cloud services. It is not adopting the high sales orientation and high consulting and service support of vendors like Oracle. That is the exact opposite of what the cloud is supposed to be all about.

Conclusion

The quality of information provided the customers went down when Thomas Kurian joined Google Cloud, and the more he brings in “his people” the worse it will become. And it won’t stop at just impacting the sales side, overzealous and unethical salespeople alienate technical resources. This is a major reason that Oracle has not developed anything outside of their database where they have a particular and historical advantage in development. Oracle has not made 137 acquisitions because it is good at internal development.

  • This article by the Wall Street Journal did not analyze the statements made by Kurian to see if they fit with Kurian or Oracle’s history.
  • Kurian’s strategy is going to make Oracle Cloud more like the offerings of the major on-premises vendors, with more sales, more overhead, more sales exaggeration, and less of an emphasis on what makes cloud services self-service. The idea of cloud services was to work against the on-premises vendor model, not to copy it.

The Problem: A Lack of Fact-Checking of Oracle

There are two fundamental problems around Oracle. The first is the exaggeration of Oracle, which means that companies that purchased from Oracle end up getting far less than they were promised. The second is that the Oracle consulting companies simply repeat whatever Oracle says. This means that on virtually all accounts there is no independent entity that can contradict statements by Oracle.

The Necessity of Fact Checking

We ask a question that anyone working in enterprise software should ask.

Should decisions be made based on sales information from 100% financially biased parties like consulting firms, IT analysts, and vendors to companies that do not specialize in fact-checking?

If the answer is “No,” then perhaps there should be a change to the present approach to IT decision making.

In a market where inaccurate information is commonplace, our conclusion from our research is that software project problems and failures correlate to a lack of fact checking of the claims made by vendors and consulting firms. If you are worried that you don’t have the real story from your current sources, we offer the solution.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

Search Our Other AWS and Google Cloud Content

References

https://en.wikipedia.org/wiki/List_of_acquisitions_by_Oracle

https://www.forbes.com/sites/danwoods/2018/10/29/four-common-mistakes-in-understanding-oracles-cloud-troubles/#49247c281df8
https://www.itassetmanagement.net/2019/09/19/oracle-cloud-class-action-lawsuit-a-deep-dive/

AWS and Google Cloud Book

How to Leverage AWS and Google Cloud for SAP and Oracle Environments

Interested in how to use AWS and Google Cloud for on-premises environments, and why this is one of the primary ways to obtain more value from SAP and Oracle? See the link for an explanation of the book. This is a book that provides an overview that no one interested in the cloud for SAP and Oracle should go without reading.

How Appealing is the Oracle Global Startup Ecosystem?

Executive Summary

  • Oracle developed a program to specifically push Oracle Cloud for startups.
  • We review the logic of this program.

Introduction

Oracle came up with the idea to increase cloud sales by marketing to startups. This story illustrates both the disorganization within Oracle, but also a misunderstanding on the part of Oracle regarding the capabilities of Oracle Cloud.

Marketing the Oracle Cloud to Startups

We can still see Oracle’s Startup Ecosystem page.

Below, Oracle explains that they understand startups because they were once a startup.

Collaborate and Co-Develop with Oracle?

We Get It. We Used to be a Startup. In the global marketplace, one size does not fit all. That is especially true for today’s vibrant, diverse, and competitive startup ecosystem. Oracle is reimagining enterprise and startup relationships through true partnerships that foster collaboration and codevelopment while inspiring global innovation.”

This terms at the end of the paragraph are key, they are collaboration and co-development. Just imagine co-developing something with Oracle?

There are several problems with this.

  • Co-Develop with a Company That Cannot Itself Develop Products: Most people who know something about this consider Oracle to be primarily a marketing/sales organization combined with a law firm with a tiny technology component mixed in. Outside of its database, Oracle does not have a history of developing anything. Oracle lauds salespeople and attorneys while pushing down its developers. If you intend to co-develop with Oracle, you will be dealing with depressed and marginalized developers. Therefore, why is Oracle a good partner with which to “co-develop”? Oracle is a better partner if you want to learn how to sell products based upon false statements or how to sue companies, not if you want to develop a successful product.
  • Trust and Expose Your IP to the Worst of the Worst?: Oracle is widely considered the least ethical company in technology. Even their customers can’t stand them. How could any company reveal its IP to Oracle? Imagine who is going to walk away with the IP, you or Oracle. With Oracle’s litigation capabilities, how do you win a case against Oracle for IP infringement? How much would that case cost to take even to settlement?

Do you really want to co-develop with Oracle? 

If Oracle is not evil, then what is the definition of evil? If you have to change the definition of evil to not be called evil, you are probably evil. We could run a survey to get views on who is the evilest entity in the software industry, but really what is the point?

Quotes from the Oracle startup program page continue…

“Startup Ingenuity. Enterprise Expertise. Global Resources.

Oracle’s mission is to build a thriving global startup community to drive the digital economy based on collaborative partnerships that enable next-generation growth, business development, and drive cloud-based innovation for startups throughout all stages of growth. The Oracle Global Startup Ecosystem works with startups at various stages, from founders in university-affiliated incubators to early stage to scaleups.”

No, this is obviously false.

Oracle is trying to sell its Oracle Cloud.

Cut and dried.

Anyone who has worked for Oracle can tell you that the top leadership and most of the company only cares about money. It did not care about any of these things listed in this explanation. Oracle does not care about the growth of other companies.

We quote from Larry Ellison.

“It is not enough to win, all others must lose.”

Filed Under “Amazing”: Oracle Requires No Equity in Return for Customers Using The Oracle Cloud?

Apparently, the fact that Oracle is not asking for equity is a selling point of the startup program. However, as we will see, the entire program is made up of highly suspicious promises. The program amounts to is getting startups to use Oracle Cloud in return for nothing some empty promises to promote the startup.

See the quote from Oracle below.

“What Makes Oracle Different, We don’t take equity”

Considering how little Oracle did for startups, it would be very odd for Oracle to take equity. This would be like Home Depot declaring that they do not ask for equity for you to come and buy building materials from their store. Right. You shop at Home Depot, they don’t take equity. In the common vernacular this is called being a customer.

Run by Oracle’s Global R&D Team?

Oracle tries to promote the idea of access to their R&D team.

“The program is run by our global R&D team

The program will most likely be run by Oracle sales. Really, Oracle’s R&D team has enough problems and lacks the bandwidth to support such a program, and if we know Oracle they will not give the R&D team more resources to support the program.

Oracle Has a World Class Product?

Oracle claimed on the startup program page to offer the following…

Startups benefit from world-class product and partner ecosystems”

This statement regarding having world class product is strange because Oracle’s database is world class, but it is not appropriate for startups and is described as follows.

“Oracle is kind of like an F1 racer – you need a full pit crew with years of training to keep it running at peak proficiency. Or you can just buy a Porsche (SQL Server).”
This is why the database is very rarely used by startups, it is simply too high in maintenance overhead. This is in addition to being many times more expensive than open source alternatives that can do almost everything that Oracle can do, but more importantly, can do 100% of what virtually any startup needs.
Oracle promises the support of the Oracle partner ecosystem. But this is a promise on which Oracle we predict will never follow through. The Oracle partner ecosystem is self-serving, they exist to bill Oracle customers and have no interest in promoting startups for free.

Helping Startups Grow, Providing Access to Oracle’s 430,000 Customers?

Possibly Oracle’s biggest promise that we doubt will ever happen is the access to its customer base.

“Startups gain from engagement opportunities with Oracle’s 430,000+ customers.

Exposure to global marketing, events and PR resources”

And

“And it offers engagement opportunities with Oracle’s 430,000+ customers in 175 countries—providing pathways to growing a startup’s business locally, regionally, and globally.”

And

“This is a multimillion-dollar investment with the global resources and expertise of our mentors, customers, partners, technologies, and more. Additionally, Oracle will further support startup ecosystems through active participation with global and local sponsorships, events, PR, thought leadership, and other resources.”

Now, this is the promise, that Oracle would help the startups grow by allowing startups access to Oracle’s customer base. Anyone who knows about Oracle knows that they are a poor fit for startups, and their cloud is not functional and entirely uncompetitive with AWS, GCP or Azure, however, this is offering something that all startup need, and here Oracle is promising some type of exposure to Oracle’s massive customer base.

You can get a sample pitch on the startup program from this podcast.

Free Oracle Cloud Credits?

A big selling point of Oracle Cloud for startups is that in the beginning, it would be free with cloud credits.

Free Oracle Cloud credits

This is key.

Startups were going to need cloud credits to use Oracle Cloud. By using the cloud credits startups could be claiming to use Oracle Cloud, and Oracle could count them as a customer. And Oracle really needs to report customers for its cloud. But the cloud credits have been tiny…in the 5k to 10k range.

Oracle is constantly offering free starter access to the Oracle Cloud. Oracle compensates employees for clouds sign-ups, they offer various goodies in return for signing up, but they have put the cart before the horse. You first have to build a usable product before free trials have any effect. This demonstrates how extreme the Kool-Aid drinking at Oracle has become. They cannot evaluate the capabilities of their own products. This happens when executives with no product exposure don’t know what they are promoting. Even today if you engage with Oracle resources on LinkedIn, they will tell you Oracle Cloud is good! And “you should try it!”

  • Oracle resources persist in telling us to try Oracle Cloud before we judge Oracle Cloud, even on articles where we explain we tested Oracle Cloud.
  • Most Oracle resources have ruined their credibility with us because they continually tell us things that we know to be false. No reality seems to penetrate Oracle.

And the problem with Oracles cloud credits has been brought up by Palisade Compliance.

“Under the “Monthly Flex” payment plan Oracle is pushing most aggressively, customers pay Oracle in advance for cloud services, which they may or may not fully utilize. Ask Oracle what happens to those services you don’t use.

Those same terms mean if you over-utilize, you will incur a penalty – much like overage charges on a mobile phone plan with limited minutes. Rather than getting a volume discount, the more you use the software over your cap, the more you’re going to pay.

You can pay more than what your contract appears to require. The rules on when discounts do and do not apply are complex and tend to result in customers paying more than they would expect, according to Palisade’s analysis.

Make sure you understand whether, in the process of adding cloud credits to your contract, Oracle will be adding or changing other terms of your existing licensing agreements for software not in the cloud.”

Cloud…..But Without Multitenancy, Self Service or Flexible Termination?

All of this points discussion in by Palisade Compliance are odd because one of the defining features of a true cloud is flexible termination. If one uses AWS or GCP, services can be shut down immediately and billing ceased. Oracle offers none of this and is why (along with other reasons related to lack of multitenancy – one of which we covered in the article Why Oracle Cloud is Not Multi-tenant – and a lack of self-service capabilities) why we have declared that Oracle Cloud and Oracle’s other cloud offerings are not actually cloud.

Those that are possibly lulled into getting started with Oracle Cloud should consider the quote from Mark Hurd.

“When a customer who is on-prem paying us support moved to the cloud, they pay us more money, They don’t pay us one to one, they don’t pay us two to one, they pay us more like three to one. In some cases more than three to one.” – Mark Hurd

Oracle (and SAP’s) Coercive Cloud

One should really consider this sentiment, as it is a problem with both Oracle and SAP and the cloud, and why both have been so unsuccessful. Both Oracle and SAP (and Deloitte and Accenture, etc..) view the cloud as a way to increase the cost of sale to customers. That is their plan is to in essence hijack the cloud, make the cloud inefficient, provide services that are not at all cloud, in order to further upcharge their customers. We covered the coercive aspects of this in the article How SAP and Oracle Coerce Customers into the Cloud.

SAP’s entire strategy for cloud services is now about up-charging other cloud service providers as we covered in How to Understand SAP’s Upcharge as a Service Cloud. Companies should stay away from entities that view the cloud through this lens.

Migration Credits and Technical Support?

Quotes from Oracle’s website on the startup program continue.

Migration credits and technical support

The technical support that is promised is already severely lacking for current Oracle Cloud customers, as all the entities that have used Oracle Cloud have reported to us up to this point. Oracle Cloud is unlike AWS and GCP in that you can’t set things up without reaching out to someone at Oracle. Oracle Cloud is not cloud, it is hosting.

Oracle created a number of blog posts that were designed to promote the startup program, but they did not matter because Oracle Cloud does not work. Media like this can only be leveraged if your product works. 

Thomas Kurian, Strategic Genius?

Thomas Kurian would have had his hands all of the Oracle Cloud Startup Global Ecosystem program before he left Oracle and to eventually join Google Cloud. We hear a lot about how effective Thomas Kurian is as a leader, but this program appears to be doomed. It seems to be based upon the idea that Oracle has a usable cloud.

Who outside of Oracle thinks that is true? If one reads the Oracle message boards, Oracle Cloud is one of the most lampooned items in the enterprise software space.

Up to this point, Oracle Cloud and Oracle’s other cloud products like the ex-Fusion applications that are known as Oracle Procurement Cloud, Oracle Manufacturing Cloud, etc.. is that they don’t have to go beyond brochureware.

Oracle is not able to develop applications, and Fusion required development, which outside of the Oracle database, is not something that Oracle can do (all of Oracle’s applications are acquisitions, which stagnate in development after acquisition). The concept or dare we say the strategy is to sell on-premises applications and the same application in “the cloud.” Then to report the cloud sale, while the customer uses the on-premises application. This is widely known in the Oracle community at this point.

Faux cloud has always been Oracle’s cloud strategy. Therefore, any program that moves towards customers actually using the cloud is not going to work. Oracle is a cloud company, but only for PR and Wall Street purposes.

In the movie, The Matrix Morpheus declared that…

“No one could be told what The Matrix is, you must be shown.”

Oracle Cloud is the opposite of The Matrix.

Oracle can talk about Oracle Cloud all day..

  • Oracle can talk about how they are ahead of AWS and GCP.
  • Oracle can promote Oracle Cloud with customers and Wall Street analysts.

…but the Oracle Cloud cannot be shown. (or should we say….should not be shown)

You can’t have a strategy where the customer actually uses Oracle cloud products. Thomas Kurian should have realized this. How could he have known? Well, he could have signed into Oracle Cloud and used it. We have to ask. As the head of Oracle Cloud, how many hours did Thomas spend actually using Oracle Cloud versus how many hours did he spend in meetings with other Oracle executives? The previous quotation from Larry Ellison was that…

“We eat our own dog food.” 

However, this does not seem to be the case.

What is the point of having such a fearsome reputation and being paid so much in yearly compensation if you can’t figure something like this out? Their top people are just not getting the job done.

Give us a call Oracle.

Problems with Oracle’s Startup Program

There are a few problems with the program that became immediately obvious.

  1. The Program is Anticompetitive: Oracle would gain users of its cloud by providing the lure of access to markets rather than on the basis of the quality of the cloud offering. This is a type of tying arrangement. The startup gets something, in a completely unrelated field, for using SAP’s cloud. If this works, Oracle will report its cloud number to Wall Street as if the startups had selected Oracle Cloud without its relationship to accessing Oracle’s customer base. This was the thrust of the lawsuit filed by the Fireman’s Fund, that Oracle did not make investors aware that many Oracle customers were coerced into the cloud as we covered in the article Oracle Sued for Making False Claims About Cloud Growth.
  2. The Program Sells Out Oracle’s Customers: Oracle is not promising access to customers because they think the startups had a good product or a product that matched their customer’s needs. Notice the offer is made to any startup that signs up for the program. So no matter how poor the startup’s product, will it be pitched to Oracle’s customers if they use Oracle’s Cloud. This means that Oracle is selling out the interest of their customers to gain startup cloud customers.
  3. Oracle’s Disaffected and Disillusioned Customer Base: Oracle has many customers, but few satisfied customers. Many Oracle customers already feel as if Oracle takes too much money from them, with many customers essentially dodging their sales reps, and hoping they don’t call. Many Oracle sales reps consider their unreturned calls on the part of customers rudeness, but there is a reason their customers don’t want to talk to them.
  4. The Program’s Perverse Incentives: This program creates an incentive to sign up for Oracle Cloud, but not use the program beyond the credits. Oracle can’t convince even large companies with little focus on technology to use Oracle Cloud, their ability to convince technologically savvy startups to use Oracle Cloud is far lower. But startups will sign up to use “something” if they could get access to Oracle’s customers.
  5. Oracle’s Customer Service and Bureaucracy: Anyone can begin using AWS or GCP immediately without speaking to anyone. Instances can be brought up or down without any human interaction. The Oracle Cloud does not work like this. Everything in the Oracle Cloud is manual and you have to speak with an Oracle resource to get things done. Startups will not have the patience for dealing with the high manual component of Oracle Cloud.

Conclusion

The Oracle Startup program looks exceedingly unappealing. First, the solution being offered is highly uncompetitive, and we very much doubt any of the enticement that Oracle is stating regarding helping startups to sell into Oracle’s customer base will come true.

The Necessity of Fact Checking

We ask a question that anyone working in enterprise software should ask.

Should decisions be made based on sales information from 100% financially biased parties like consulting firms, IT analysts, and vendors to companies that do not specialize in fact-checking?

If the answer is “No,” then perhaps there should be a change to the present approach to IT decision making.

In a market where inaccurate information is commonplace, our conclusion from our research is that software project problems and failures correlate to a lack of fact checking of the claims made by vendors and consulting firms. If you are worried that you don’t have the real story from your current sources, we offer the solution.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

Search Our Oracle Cloud Content

References

https://seekingalpha.com/article/4168895-oracles-cloud-transition-match-success-stories

https://www.computerweekly.com/opinion/Why-Software-Giants-Are-Failing

https://www.oracle.com/startup/faq.html

https://blogs.oracle.com/startup-cloud-accelerator-oraclenext-podcast

https://www.riministreet.com/blog/oracles-cloud-programs-beware-a-wolf-in-sheeps-clothing

https://www.reddit.com/r/programming/comments/7imzth/that_time_larry_ellison_tried_to_have_a_professor/

AWS and Google Cloud Book

How to Leverage AWS and Google Cloud for SAP and Oracle Environments

Interested in how to use AWS and Google Cloud for on-premises environments, and why this is one of the primary ways to obtain more value from SAP and Oracle? See the link for an explanation of the book. This is a book that provides an overview that no one interested in the cloud for SAP and Oracle should go without reading.

A Comparison of SAP HEC with Virtustream Versus AWS

Executive Summary

  • SAP is aggressively pushing HEC or HANA Enterprise Cloud and other private cloud providers.
  • We compare HEC versus AWS.

Introduction

Virtustream and AWS are two differently positioned cloud service provider. AWS is the largest cloud provider in the world by far and was the early pioneer in public cloud. Virtustream is a niche private cloud provider. AWS provides support for a wide variety of applications, which Virtustream is focused on SAP.

The Comparison

AWS supports some SAP applications. However, there are extra complexities to running SAP on AWS. One of the easiest items from SAP to run on AWS is HANA. SAP offers some images of HANA on both AWS, GCP and Azure under a free development license to entice people to use HANA. This does not extend to SAP’s applications.

Virtustream bristles as the comparison of AWS as a direct competitor. This is explained in the following quotation by the CEO of Virtustream.

While AWS focused on serving scale-out cloud native applications, we architected our cloud platform to solve a different engineering problem: to run scale-up, I/O-centric enterprise applications that require higher availability and security.– Diginomica

Part of this quote is more marketing positioning than a reflection of reality. Here are some interesting points.

  • Scalability: It is unlikely that Virtustream can scale up more than AWS, that it has higher availability than AWS.
  • I/O: The points around I/O might be correct.

Security: Private cloud/hosting is considered to be a good fit for customers with the highest security requirements. But is difficult to make the argument of higher security than AWS considering all of the security clearance focused government entities that use AWS.

The previous points combined with the fact that Virtustream is a private cloud means that Virtustream is a premium priced offering over AWS. Virtustream uses miniaturized virtual machines, with their product call uVM that it claims improves resource utilization. Virtustream claims 250 production instances (that 1000 SAP total instances, but 250 in production) of HANA and S/4HANA. This seems to be relatively small for a company that makes a big point about how it specializes in SAP.

The Comparison Matrix Provided

We found this comparison matrix sent to a client of ours.

Something of note is that no “cons” are listed with using HEC and Virtustream. However, there are in fact cons to using them. The only compared item that has any cons is AWS. The message from this comparison matrix is that AWS is the clear laggard of the compared providers.

This matrix was received from the firm contracted with to perform analysis for the procurement.

This matrix does not do a good job of drawing the distinctions between the various cloud providers listed in the matrix. It appears designed to dilute the differences. And second, some of the differences listed in the matrix are inaccurate. The first impression is that this matrix was rigged to push the client down a predetermined pathway. That is the only way the matrix could be so specifically inaccurate.

Let us review each of the line items for accuracy.

  • Instance Size?: According to the matrix, AWS only supports “medium instances?” First, AWS offers very large instances, and these are priced right on their website. We will show the large instance sizes available right from the AWS website further on in this document. Secondly, AWS has very large customers running large instances. All of this is extremely well known among those that work in or research cloud service providers
  • All Cloud Providers Lead AWS in Automation?: According to the matrix, AWS only has planned automation, while the other providers have automation currently. What services are considered automation in HEC, HPE, and Azure? It’s difficult to understand what is meant here without more specifics. However, there are many automated services in AWS. Something to consider is that AWS is the leading innovator of the cloud service providers. There is virtually nothing that other cloud service providers have that AWS does not have. Examples of automation in AWS include Chef for infrastructure automation. Another is AWS System Management Automation. And a third is Ansible for AWS. Overall Brightwork ranks AWS in the leader category in automation.
  • All SAP Products Work on All Service Providers?: This matrix proposes that all SAP products can be run on all the cloud service providers. That is incorrect. Not all of SAP’s products will run in the cloud. In fact, SAP has very little in the way of production instances in the cloud, particularly as a percentage of their on-premises numbers. SAP’s application have specific limitations in this regard, which need to be overcome during the migration/implementation. There are overall, a low volume of SAP internally developed applications current residing in public cloud or even hosted (private cloud). The vast majority of internally developed SAP applications are still delivered on premises. Products like SuccessFactors or Ariba, primarily acquisitions, that were in the cloud before they were acquired by SAP are designed to run natively in the cloud. The majority of S/4HANA on-premises versions of the application are on premises rather than private cloud/hosted.
  • Greenfield Implementations?: Why does AWS only support Greenfield implementations? If the issue is one of hybrid cloud, both Cisco and VMware have introduced hybrid cloud extensions of AWS. This matrix may be dated as both VMware and Cisco hybrid extensions are recent developments.
  • All of the Cloud Service Providers But AWS Support EMEA and APAC?: Which three cloud service providers have the highest CAPEX in the world? The answer is AWS, Google Cloud and Azure.

Where are the (supposed) missing data centers for AWS in EMEA and Asia?

The following few pages provides coverage of the testing of latency, which contradicts the statement regarding AWS’s limitations internationally. For those interested in the main topic of the overall comparison, just scroll past this section.

International Latency Testing

However, of the three hyperscale could service providers, AWS does lag both Azure and Google Cloud in their network connectivity. This topic is covered in the research by ThousandEyes, which is a company that works in networking and network analysis.

Why AWS chooses to route its traffic through the Internet while the other two big players use their internal backbone might have to do with how each of these service providers has evolved. Google and Microsoft have the historical advantage of building and maintaining a vast backbone network. AWS, the current market leader in public cloud offerings, focused initially on rapid delivery of services to the market, rather than building out a massive backbone network. Given their current position, increasing profitability and recent investments in undersea cables, it is likely that their connectivity architecture will change over time. Enterprises considering a move to the public cloud should consider connectivity architectures to evaluate their appetite for risk while striking a balance with features and functionality. Enterprises should also be aware that even though public cloud backbones are each maintained by a single vendor, they are still multi-tenant service infrastructures that typically don’t offer SLAs. Furthermore, public cloud connectivity architectures continuously evolve and can be subject to precipitous changes at the discretion of the provider.”

However, even though there are differences that give the advantage of Azure and GCP over AWS, in testing the bi-directional latency was quite similar.

From the US to other regions, the results are quite close, with AWS lagging somewhat in 4 of the 5 comparisons. But the differences are small.

From Singapore, there is no discernable pattern of advantage between the three providers.

Azure appears to lag both other providers. Each provider only has one location in Central and South America.

Therefore, while AWS lags the other service providers in the physical infrastructure sense, the outcome is that AWS records a very similar performance to Azure and GCP.

There is no possible scenario where Virtustream would compare against AWS or the other two hypercloud service providers listed in the Thousand Eyes study as Virtustream has far fewer data centers than do any of these providers. Even Oracle has only four regions and has historically had a small cloud CAPEX versus the hyperscale providers.

Therefore why is Virtustream listed in the matrix as having a larger geographic scope than AWS? It certainly appears nonsensical.

Conclusion on the Matrix

The matrix provided that is designed to compare HPE to Virtustream to AWS and Azure is has low accuracy. It is inaccurate to the degree that it develops a natural curiosity as to the reasons for why the matrix was developed as it was. Is this a matrix designed to show the technical capabilities of the cloud service providers or is this a matrix intended to highlight those companies that have the most robust partnership with SAP? Finally, why are so many critical technical details missing from this matrix?

Without any partnership or financial relationship with SAP or any of the cloud service providers, the Brightwork matrix of comparison looks quite a bit different.

These criteria are far more relevant for the client when choosing a cloud provider, and this matrix also illuminates the distinctions between a private cloud offering and a public cloud offering.

What is Private Cloud (in Real Terms) Again?

A final problem with the matrix is that it treats public cloud (HPE & Virtustream) and public cloud (AWS & Azure) as if they are almost the same thing. However, they are entirely different.

Private cloud is merely a new word for what has historically been known as “hosted.” For example, IBM and CSC have been very dominant in this market for decades, before public cloud ever existed. However, IBM and CSC are very small in revenues in the public cloud. Private cloud/hosted and public cloud providers tend to not play in each other’s spaces. However, nearly all the growth in the cloud is public cloud, not private cloud/hosted. Private cloud/hosted does not scale well and is often referred to as just “moving the location of the hardware.”

Technology providers know they have to break into the public cloud market, as that is where the overall market is headed. (hence the IBM acquisition of Red Hat/Open Shift).

Private cloud is not cloud. The term “private cloud” was created by entities that offered hosting, as a way to rebrand their offering into something that was “cool,” and to piggyback on the concepts of innovation and growth that is primarily in the public cloud.

One cannot get any sense of this from reviewing the matrix above.

The Issue of Private Pricing

One of the requirements of public cloud (sometimes referred to as just cloud) is that it has transparent pricing. Though this public pricing it can be determined that SAP has been marking up AWS cloud services in some cases that we checked by a factor of 10x. This client was aware of the price difference between Virtustream direct and Virtustream through SAP, but only because Virtustream has provided a separate quote from SAP on Virtustream services. Ordinarily, SAP would prefer that Virtustream not give a quote to this client. SAP would consider a referral back to SAP if this client were to reach out to a private cloud/hosting provider as “good partnership behavior.” If Virtustream repeatedly circumvented SAP to sell directly to SAP customers rather than giving them a markup, Virtustream would immediately disappear from SAP’s recommended providers listing.

The benefit of the public cloud options is that as the pricing is easily determined (online actually from within the cloud service provider consoles) the markup from SAP is a known quantity.

This slide from a presentation by AWS shows a complementary relationship between AWS, SAP and a number of partners. However, the reality is quite a bit different. Not only SAP, but many of the partners on this slide intent to significantly intermediate between AWS and the final customer.

This slide (by AWS) shows what is feasible, but not necessarily what is desirable for customers. Under the scenario where the SAP Cloud is the origination, the prices are dramatically higher. The table to the right shows that AWS claims a far more complete offering than GCP or Azure.

All of SAP’s recommendations for cloud come with a markup over the cloud provider, which SAP does not discuss and pretends does not exist.

Why SAP should be marking up cloud services at all is an interesting topic as they will not be doing the work. For example, SAP does not make a margin on the IT department for an on-premises implementation (that is SAP cannot say, pay us 2x of your internal cost to host our applications), so it is odd that SAP would ask for compensation for something that has nothing to do with.

The Issue of Dedicated Servers and the Public Cloud

As stated, a primary issue is not explained in the matrix, which is that SAP’s internally developed products (not acquired products like Ariba or SuccessFactors) have traditionally run on dedicated servers. This should not be all that surprising. ECC and BW were developed prior to the public cloud being a delivery mechanism or what we describe as a  “hardware modality.” Therefore there are several challenges entailed in moving these applications to the private cloud.

How SAP Uses a Dedicated Server

The primary issue with SAP’s need to use a dedicated server and a primary reason for this is that SAP applications use a dedicated IP address. Private clouds use primarily dedicated servers. However, AWS now also offers dedicated servers.

Amazon/AWS allows for dedicated instance, which means that the instance runs on dedicated hardware. One pays a price premium for this, but dedicated hardware is appropriate in some circumstances. It is desirable to choose a cloud service provider that has both cloud/shared and dedicated capabilities. Some people will comment that AWS only offers shared, but that is no longer true. Although there is little doubt that the vast majority of AWS’s revenues come from shared services.

Notice the instances recommended by AWS for SAP. They lean towards “Memory Optimized” or “EC2 Bare Metal” or dedicated.

Bare Metal is a recent addition for AWS (notice 2H of 2018 in the slide). However, bare metal is far easier to manage than shared resources. It is more of a matter of installing the bare metal infrastructure.

The dedicated instance pricing with AWS is also transparent.

There are instances of S/4HANA that can be used that have transparent pricing. This is called BYOL, or “Bring Your Own License.” A license from SAP could be run on AWS following the BYOL model, which would provide pricing transparency. Under this approach, there is no intermediary.

The price paid by the client would be the AWS price, which is far lower than if SAP plays the middleman.

The screenshot above is the largest S/4HANA instance before one moves to bare metal (which of course costs more) in AWS. This configuration has 4 TB of memory and 128 virtual CPUs.

AWS Dedicated Instances

Dedicated instances are available from AWS. As for the need of dedicated instances, we will address this issue from two directions.

  • Experience from the company AutoDeploy, which migrates customers from on-premises to the public cloud, is that this issue of SAP requiring a static IP is overstated, there are some straight ward things that can be done to adjust for this restriction that can be changed.

This need for a dedicated server is waning. The evidence for this is that SAP instances can be brought up directly onto cloud/shared instances.

Even though AWS is the largest cloud services provider in the world, they do not have very many images for S/4HANA. And the ones they do have are previous versions rather than the latest.

This paucity of images extends to BW as well.

Some of the images for SAP aren’t much more than Linux images that have been tuned for SAP. In discussions with companies that move applications out to AWS, it is likely they would not use these images, as they are restrictive. Instead, they would just build their own.  

  • Something interesting to note is that there are very few images for SAP on AWS outside of HANA and Adaptive Server. This brings up the question of “why.”
  • SAP databases aren’t used outside of supporting SAP applications and SAP reporting, so this shows a large discrepancy between the SAP database and the SAP applications available on AWS. (And BTW, GCP has like no SAP applications.)

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*Document Note

The coverage on Containers and Firecracker is of a more technical nature than may be digestible for some readers. It is informational for those with the right background. For those less interested in how to optimize bringing up SAP on the cloud, just scroll through this section.

_______________________________________

Using Containers & Firecracker

Placing an SAP application on AWS, one would most likely use containers to reduce the number of VMs (virtual machines). Reducing VMs normally has the effect of reducing the price. This is something that could be tested before or during the implementation.

  • Firecracker is a very lightweight virtualization technology or virtual machine manager that is new but already very highly regarded.
  • A new item adopted recently open-sourced by AWS is Firecracker, which could also be tested for improving the cost and performance of placing SAP on AWS.

Firecracker combines the virtues of both virtual machines and serverless (or autoconfigured servers).

Firecracker creates extremely lightweight VMs (called MicroVMs) for the Linux Kernel Virtualization Machine (KVM).

“The number of Firecracker microVMs running simultaneously on a host is limited only by the availability of hardware resources.” – Github

However, from within SAP Cloud it is feasible to bring up a variety of SAP applications and HANA, where one has a choice of AWS, GCP and Azure.

Including BPC 11.

 

  • We brought up S/4HANA 1809. It took 1.5 hours to be available. We found some missing login information restricting our ability to access the application.
  • This trial was brought up for testing purposes, but Brightwork recommends against going through the SAP Cloud for moving SAP applications to AWS, GCP or Azure.

Virtustream’s Internal Changes as a Company

The cloud area is growing very rapidly, but Virtustream is not growing in US employment in the US, and in fact, appears to be shrinking. Virtustream is moving to a lower cost model for its employees with less experience and more offshore resources. Overall, Dell’s acquisitions have been a negative for the company and for Virtustream customers. (acquired through the EMC acquisition).

The following comment found off of GlassDoor is unheard of in the public cloud space.

“No one is sure of the direction Dell is looking to take this company in, seems they are trying to dissolve. Extremely cut throat atmosphere, major layoffs happening (I heard in the ballpark of 20%). When the most common word that pops up in the company reviews is ‘circus’ that should probably tell you something…”

This quotation also gets to the reputation of Virtustream as a sales oriented organization that significantly overpromises the ability to deliver.

  • Customers should expect to have lower performance in operations than in the past, as Virtustream is turning over its more experienced technical resources.
  • What Virtustream was before, as they readied for acquisition, is not the company that they are presently, or will be in the future.
  • This will be an issue for the client as delivery will lag the promises of Virtustream.

Company Profiles

In this section, we will provide a profile of each company.

AWS

“AWS continues to invest and innovate in the cloud services that it offers. It has evolved to include sophisticated tools for development including machine learning capabilities, a wide range of storage options, IoT and mobile platforms and others. AWS has taken a very proactive approach to compliance with GDPR. AWS global footprint continues to expand to satisfy the needs of its expanding customer base and services offered. It now has: fifty-three availability zones across 18 geographic regions, one local region, and has announced plans for 12 new availability zones and four more regions: Bahrain, Sweden, Hong Kong, and a second US GovCloud region.

The AWS Migration Acceleration Program (MAP) is designed to help enterprises migrating existing workloads to AWS. MAP provides consulting support, training and services credits to reduce risk, to build a strong foundation and to help offset the initial costs. It includes a methodology as well as a set of tools to automate and accelerate common migration scenarios.

AWS has a clear and open approach to security and compliance. It has a very wide range of independent certifications for compliance. AWS has led the CISPE code of conduct to provide clarity to cloud customers around the shared responsibilities for compliance with GDPR and to confirm the steps they are taking to support this.

AWS remains the leading IaaS Global service provider, offering the widest range of services across the greatest number of geographies.” – Ahmed Azmi

AWS Strengths

Strong basic IaaS platform

Rich DevOps capabilities

Speed of innovation of new services

Global footprint for availability and compliance

Hybrid / Private deployment support to cloud enable existing workloads

Independent certifications for a wide range of compliance

Strong security – Ahmed Azmi

AWS Challenges

While AWS has made significant progress in attracting enterprise customers, to retain this leadership position, it must continue to enhance its attractiveness to these customers

Competition from other CSPs that are evolving to challenge AWS position. – Ahmed Azmi

Summary

There is a large amount of public information available regarding AWS. This combined with the ability to directly test AWS, an advantage to all public clouds provides a low risk option for the client.

Virtustream

Virtustream is a U.S.-based subsidiary of Dell Technologies, is focused solely on cloud services and software. Virtustream was founded in 2008. It was acquired by EMC in July 2015, and EMC’s managed services and some cloud-related assets were moved into Virtustream before EMC was acquired by Dell in September 2016.

Virtustream’s xStream cloud management platform and Infrastructure-as-a-Service (IaaS) are intended to meet the requirements of complex production applications in the private, public and hybrid cloud. Virtustream is headquartered in New York, NY with major operations in 10 countries.

Virtustream Enterprise Cloud uses patented xStream cloud resource management technology (μVM), to create secure, multi-tenant cloud environments that deliver assured SLA levels for business-critical applications and services. Virtustream provides managed services to help organizations to migrate legacy applications to their cloud platform. It also enables production and mission-critical applications to take advantage of technologies such as Big Data analytics such as SAP HANA and Hadoop, as well the advantages like agility, backup, and disaster recovery offered by cloud computing.

Virtustream Enterprise Cloud offers assured application level SLAs with up to 99.999% availability. High levels of security are provided as standard including 2-Factor authentication; Intel TXT Trusted Computing, separate application zones, integrated GRC, and continuous compliance monitoring. Flexible deployment options from the private cloud (on-premises), virtual private cloud, public cloud, public plus private cloud (hybrid) and trusted federated cloud exchange. The Virtustream offering is SAP certified and is independently certified as being compliance with a wide range of regulations and laws. – Ahmed Azmi

Virtustream Strengths

Innovative platform for migration and deployment of complex applications

Managed services available to support this migration and deployment

Strong security and compliance characteristics

Backing from Dell Technologies – Ahmed Azmi

Virtustream Challenges

Focus on enterprise workload migration rather than DevOps.

Differentiating their offering against the major CSPs evolution towards enterprise solutions. – Ahmed Azmi

Summary

Virtustream has a limited footprint and inadequate devops and automation compared to AWS. The rate of innovation is low and internally, the company is facing sustainability issues due to its management.

The key to Virtustream’s differentiation is bundling services like migration, maintenance, and upgrades with hosting, so the customer needs to deal only with Virtustream. AWS has a far superior IaaS, global presence, and automation capabilities. Also, AWS offers a much more full range of services in analytics, database, and more so the customer will get access and can grow on AWS integrated products. However, AWS provides services via partners so customers will have to work with two providers rather than one.

Offerings

Virtustream Enterprise Cloud is hypervisor-neutral but typically supports VMware and KVM. It is offered in both single-tenant and multitenant variants; furthermore, it can support single-tenant compute with a multitenant back end, as well as bare metal. VMs are available by the hour, bare metal is available by the month, and both paid-by-the-VM and SRP models are available. The offering embeds a tool for governance, risk management and compliance (GRC) leveraging capabilities from Virtustream’s Viewtrust software. A similar offering, Virtustream Federal Cloud, targets U.S. federal government customers. The Virtustream Storage Cloud offers S3-compatible object storage that can integrate with some EMC storage products. Managed services are optional. Virtustream also offers its CMP, xStream, as software. – Ahmed Azmi

Locations

Virtustream has multiple data centers in the eastern and western U.S., the U.K., France, Germany, the Netherlands, Australia, and Japan. It has a sales presence in the U.S., the U.K., Ireland, Germany, Lithuania, Australia, India, and Japan. Virtustream’s service portal is provided in English, German, Japanese, Lithuanian, Portuguese and Spanish. Documentation and support are provided in English only. – Ahmed Azmi

Cautions

Virtustream’s roadmap is inextricably tied into other Dell entities, such as VMware, EMC, and Pivotal, which each have their own sets of differing, and possibly competing, priorities. Customers should treat Virtustream as a specialized provider for the workloads that suit the strengths and weaknesses of its technology platform.

Although Virtustream supports self-service capabilities, it primarily targets complex, mission-critical applications where it is likely that the customer will purchase professional services assistance for implementation, and managed services on an ongoing basis.

Virtustream is a compelling and unique provider for particular enterprise application use cases, but it is better suited to implementations where an environment will be carefully and consultatively tuned for the needs of particular applications, rather than general-purpose environments where workloads are deployed without oversight. Prospective customers should ensure that they have a clear understanding of roles and responsibilities and that their expectations match what is actually written in the contract. – Ahmed Azmi

Gartner’s View of Virtustream and AWS

Observe the discrepancy between AWS and Virtustream. In many Gartner Magic Quadrants, the fees paid to Gartner are instrumental in determining the ranking, however, these MQ’s match our viewpoints and neither AWS nor Google are significant contributors to Gartner. The funds paid by Microsoft show their impact, because we do not see Microsoft anywhere near AWS, and they are significantly behind Google/GCP in the offering, although Microsoft/Azure is larger due to Microsoft’s ability to cross-sell existing customers into Azure.

Conclusion

Whichever way the client decides to go, Brightwork thinks it is critical that the client has an accurate representation of these two providers.

A large part of the decision is also related to how much the client wants to take control of their cloud services, versus having everything managed for them. Virtustream by the nature of their business model will provide less transparency than AWS as to the cloud services, as AWS is entirely open to customers. With Virtustream the infrastructure and the services are combined with one company. With AWS, one can select from many partners ranging from “white-gloved” to smaller partners that tend to provide more specific technical support. Virtustream and AWS are appealing to a very different type of customer.

The Problem: Bad Advice on the Cloud

It is not only Virtustream, but all of the private cloud providers are extremely expensive compared to the public cloud. This is explained in the following quotation.

For this very reason, “Cloud Only“ is a predicament: There are just too many questions left unanswered. What is more, HEC, HCP and SCP are much more expensive than clouds from AWS, Microsoft and Google, but do not have more or even any consulting services that would justify this difference.

Some SAP partners have been noticing the first customers turning away from SAP clouds and to AWS, Azure and Google with their help.

They are entirely competitive, and private cloud makes the customer dependent on the private cloud provider. This is the problem with taking cloud advice from SAP or any SAP consulting partner. The result will mean a terrible outcome for the customer and will mean a high degree of profits and account control for SAP and the SAP consulting partner.

Being Part of the Solution: Getting Independent Advice on SAP Cloud Proposals

SAP only recommends cloud options that SAP can mark-up. And SAP consulting companies simply repeat whatever SAP says to customers no matter how bad the value is, as they are obligated to as SAP partners.

This means there is no independent advice giving entity which will contradict what SAP says on the vast majority of SAP sales proposals. Gartner only provides generalistic advice and stays out of negotiation support as they are paid by SAP. We offer completely independent research and advice on SAP and have the largest SAP research database anywhere. This advice has been our client’s secret weapon when evaluating SAP’s cloud options.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

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References

https://marketo-web.thousandeyes.com/rs/thousandeyes/images/ThousandEyes-2018-Public-Cloud-Performance-Benchmark-Report.pdf

*https://e3zine.com/2018/12/07/sap-erp-cloud-computing/

https://en.wikipedia.org/wiki/Virtustream

https://www.virtustream.com/solutions/solutions-for-sap

https://diginomica.com/2018/05/08/virtustream-dells-forgotten-cloud-designed-legacy-enterprise-applications/

https://www.crn.com/news/cloud/300084167/googles-new-sap-agreement-puts-heat-on-growth-hungry-virtustream.htm

https://www.virtustream.com/blog/five-gotchas-when-migrating-to-hana

https://autodeploy.net/

https://www.chef.io/partners/aws/

https://docs.aws.amazon.com/systems-manager/latest/userguide/systems-manager-automation.html

https://aws.amazon.com/blogs/opensource/firecracker-open-source-secure-fast-microvm-serverless/

https://github.com/firecracker-microvm/firecracker/blob/master/docs/design.md

https://serverless.com/blog/firecracker-what-means-serverless/

https://www.ansible.com/integrations/cloud/amazon-web-services

https://www.slideshare.net/AmazonWebServices/track-1session-2sap-on-aws-running-your-critical-workloadspdf?

For example, Brightwork estimates that roughly 10% of S/4HANA implementations are S/4HANA Cloud.

AWS and Google Cloud Book

How to Leverage AWS and Google Cloud for SAP and Oracle Environments

Interested in how to use AWS and Google Cloud for on-premises environments, and why this is one of the primary ways to obtain more value from SAP and Oracle? See the link for an explanation of the book. This is a book that provides an overview that no one interested in the cloud for SAP and Oracle should go without reading.

How to Understand SAP’s Fictional Cloud Revenues

Executive Summary

  • SAP presents fictitious cloud revenues that are blindly accepted by Wall Steet.
  • Wall Street shows close to zero interest in understanding SAP’s cloud revenues.

Introduction

SAP released the following explanation for a recent layoff.

“Yet key indicators showed signs of weakness in the fourth quarter, with growth in new cloud bookings slowing to 23 percent from 37 percent in the third quarter.

Underlying non-IFRS operating margins, at constant currency, were squeezed by 1.5 percentage points in the quarter to 33.2 percent as SAP implemented hyperinflation accounting for crisis-hit markets in Latin America such as Venezuela.

Mucic noted that margins were stable at 28.8 percent for 2018 as a whole following years of declines as the company invested in its transformation. “Now we are at the point where we can start to see rising margins,” he told a news conference.”

Repeating Fiction

Something none of the analysts mention is that SAP’s cloud revenues are pure fiction. I find analysts strange. They report or comment on numbers as if they are real. Financial analyst firms hire from the most prestigious universities, yet its increasing evidence that they don’t bring anything to the table except repeat things said by companies. Companies that have a massive incentive due to stock options to misinform analysts (who can then go and misinform investors).

It is a bit like people talking specifics about unicorns (did you know they only come out on Thursdays, and they have a golden hue when the light hits them a certain way? Did you know they enjoy eating at Burger King?). SAP does not get significant revenues from cloud acquisitions (although they pay a big multiple for every acquisition).

SAP’s Cloud Markup Layer

SAP Cloud is just a markup layer on AWS/GCP which we covered in the article How to Understand SAP’s Upcharge as a Service Cloud, SAP HEC is markup machine on private cloud/hosting. SAP’s cloud revenues growth are coming from charging cloud services by using their account control. It is quite disgusting. It is a welfare queen’s strategy. Let someone else do the work, let them produce new services, make the investments. Then put a layer on top of their stuff and pretend you are a cloud provider. This is how Oracle also operates, it is called “cloud through PowerPoint.” While these companies are the cloud in their marketing literature, they are on-premises in their software. That is SAP and Oracle’s hybrid cloud strategy is PowerPoint Cloud/On-Premises.

SAP could come with a marketing campaign…

“Through our upcharge layer, you can access all of the innovation that you could also access just by going directly to the cloud service provider.”

Oh, and its worse than that, because if you spin up SAP through SAP Cloud, you get stuck with SAP’s cloud knowledge and configuration.

The analysts, completely unaware of any of this sit there saying

“SAP said ABC so XYZ.”

And that ladies and gentlemen is how you make a really good paycheck. Learn to repeat and copy statements from companies. However, it is unclear if the term “analyst” should continue to be applied. When information is not analyzed but just repeated, normally the term that is used is a copy device or a stenographer. Some might also call it a “parrot.” The parrot can make precise vocal intonations but does not know what they are saying.

Cloud growth! Cloud growth……wayyyyyyyyeee! 

How Accurate Are SAP’s Claims Around SAP Cloud?

Observe how SAP tries to propose the openness of the SAP Cloud Platform (now SAP Cloud) with the following quotation.

“SAP Cloud Platform is an open platform-as-a-service (PaaS) that delivers in-memory capabilities, core platform services, and unique microservices for building and extending intelligent, mobile-enabled cloud applications. The platform is designed to accelerate digital transformation by helping you quickly, easily, and economically develop the exact p Platform offers complete flexibility and control (emphasis added) over your choice of clouds, frameworks, and applications.”

Based Upon Open Systems?

First, by the nature of their business models, SAP and Oracle do not create open cloud offerings. Therefore, this claim is of a highly dubious nature. SAP and Oracle can’t market their clouds effectively without embellishing their closed nature with open terminology.

Now while it may be true that the SAP Cloud “can” be connected to non-SAP assets, that rest assured that SAP will do everything it can to direct customers to use more SAP if they use the SAP Cloud. For instance, for some time SAP has been proposing that the SAP Cloud improve SAP’s integration capabilities.

“Easily exchange data in real-time with SAP Cloud Platform Integration. Integrate processes and data between cloud apps, 3rd party applications and on-premises solutions with this open, flexible, on-demand integration system running as a core service on SAP Cloud Platform.”

How is this accomplished? Other questions naturally come to mind:

  1. Better Than Other Integration?: Why is this better than using another integration application? SAP has been guilty of making many previous exaggerated claims about its “platforms” that end up not being easier to use than competing offerings.
  2. On Demand Integration?: What does “on-demand integration mean”? Any integration harness or application is on-demand for the people that use it.
  3. Runs as a Core Service?: What does it mean that it runs as a core service as part of the SAP Cloud Platform? Isn’t it part of the SAP Cloud Platform anyway?

SAP goes on to say the following about the SAP Cloud and integration’s key benefits:

“Access a deep catalog of integration flows.
Integrate both processes and data through unified technology engineered for the cloud.
Get an integration service that is secure, reliable and delivered and managed by SAP in SAP’s secure data centers across the globe.
Lower TCO with an affordable, pay-as-you-go subscription model and minimal up-front.”

The Evidence for Lower TCO with SAP Cloud?

Does SAP have any independent studies that can demonstrate that the SAP HANA Cloud Platform lowers TCO, or is this just a sales statement that has nothing to back it up? That is, of course, a rhetorical statement. We know SAP doesn’t. SAP usually does not provide evidence of TCO claims. One of the few times they did, when they paid Forrester to estimate HANA’s lower TCO claim, the study was unusable.

SAP goes onto say more:

“With SAP Cloud Platform Smart Data Integration, you can replicate, virtualize and transform data from multiple sources and store it in your SAP HANA instance on SAP Cloud Platform. Smart data integration offers pre-built adapters to common data sources plus an adapter SDK that lets you get data from any source for a 360-degree view of your business. Thanks to a cloud-first architecture your data is securely transferred from on-premises applications to the cloud without putting your business at risk.”

How about the SAP Cloud Platform Smart Data Integration item? SAP capitalizes this as if it is a product, not a process within a product. On the Cloud Platform’s pricing sheet SAP Cloud Platform Integration is what pushes the customer into the $4,600 to $17,000 per month version of the SAP Cloud. However, we have seen very little use of this component or discussion of the component. SAP does not have a history of having developed a useful integration product, with their on-premises offering, SAP PO/PI becoming less popular with customers as time passes. Therefore it is no “slam dunk” that the SAP Cloud Platform Integration will become a desirable component to use. In fact, the probabilities are firmly against that ever happening. We cover this in more detail in the article How Accurate is SAP on SAP HANA Cloud Integration?

Also, most SAP customers don’t have HANA and looking at the low growth rate of HANA, most never will. So what if the customer does not want HANA, can they use the SAP HANA Cloud Platform to store in Oracle, MongoDB, PostgreSQL, Tibero or another non-SAP database? The fact they can’t is a problem. SAP is all in on its databases being used in SAP Cloud. However, SAP’s databases are not that widely used.

SAP has begun to offer a very limited number of non-SAP database options, including PostgreSQL and Redis.

However, when we select PostgreSQL, we find that it is not available for our environment, which is the more limited environment. Why? Because SAP does not offer it themselves, but through AWS, Google Cloud or Azure.

Once we switch into the Cloud Foundry, which has access to AWS, Google Cloud or Azure, we are able to progress a short way in bringing up PostgreSQL, that is until we get this error. These types of errors do not come up when attempting to create a PostgreSQL instance in AWS or Google Cloud directly. This makes us wonder how much PostgreSQL or Redis, that is non SAP databases have been added to SAP Cloud for marketing rather than for real usage purposes.

How Accurate was Fortune Magazine on SAP Cloud?

On Jan 22, 2016, published the article SAP Meets Cloud Sales Expectations, and Then Some.

In this article, we will review the accuracy of this article.

Article Quotations

“SAP convinced big businesses to sign up for cloud subscriptions to its business applications faster than anticipated during 2015—with a 103% increase in bookings to €883 million (or $955 million).”

SAP has a history of cloud washing, as it is what Wall Street wants to hear. The 103% figure is a doubling of cloud bookings. Which seems high.

SAP’s Cloud Growth Is Responsible for Margin Decline?

“But that growth is putting pressure on operating margins, which slipped to an estimated 25% compared with the 35% that SAP (SAP, +0.70%) used to earn traditionally, according to the company’s financial results.”

This seems to be the thrust of the article. SAP wants to convince people that their margins declined because they are transitioning to the cloud. However, the cloud portion of SAP’s business is not really very large. SAP gets most of its revenue from on premises applications like ECC and the BW. Secondly, over 50% of SAP revenue is from support, and not from software at all. Therefore, the explanation provided here sounds fishy.

“SAP executives say that’s to be expected, since the cloud model spreads out fees, which reduces short-term profits. They’ve already prepared investors for that eventuality, projecting margins in the 30% range during the multi-year transition period. “The margin is really uninteresting to me,” SAP’s CFO Luka Mucic said during a call to discuss the results. “There’s no reason cloud margin shouldn’t reach the level of on-premises software, but that will take substantially longer than this decade.”

A More Likely Explanation for Margin Decline

Yes, but that may not be the right explanation. Oracle and Microsoft and IBM are as a group facing lowered margins. But transitioning to the cloud is not the reason why. These are companies that have grown beyond their core offering that put them into their current positions. However, when expanding to new things, they do not have the same margins of the earlier offerings. For example,

  • Microsoft: Microsoft receives 3/4 of its margin from just Windows and MS Office. Microsoft could shed the rest of its business and be a much smaller company with enormous margins. Microsoft has Azure, which provides little in the way of profits. However, lower profits are a feature of all of Microsoft’s offerings outside of Windows and MS Office, most of which are on premises offerings.
  • Oracle: Oracle also has a lower margin outside of databases. Oracle receives 55% of its margins from its database business. Oracle expanded into a $38 billion behemoth, however, its investments in acquisitions did not have the profit margins of their databases — or their original product offerings.

Plenty of companies still prefer to buy traditional licenses for SAP’s software. That portion of the German software giant’s revenue generated 13% growth last year, reaching €14.9 billion (or about $16.1 billion).

SAP is mostly an on premises business, and outside of acquired applications that were already cloud, SAP does not do much in the cloud. Offerings like the HANA Cloud Platform are more for cloud washing than actual usage. And the quotation above makes it sound like customers have good options for the cloud for many other SAP offerings when they do not.

SAP Now Gets Over 60% of Revenue from the Cloud?

“When can we expect SAP to generate more value from cloud sales than traditional software licenses? That crossover could happen sometime in 2017. By that year, SAP expects revenue for cloud subscriptions and support to reach 63% to 65% of total revenue.”

That is completely inaccurate. It is currently past the midpoint of 2017, and SAP does not get anywhere near 63% of revenue from the cloud.

Conflating Cloud and Support Revenues

“SAP’s cloud momentum inspired the company to boost its 2017 revenue projection to €23 billion to €23.5 billion (or $24.9 billion to $25.4 billion). Its cloud subscriptions and support revenue should reach €3.8 billion to €4 billion (or $4.11 billion to $4.33 billion) during that timeframe.”

What does support revenue have to do with cloud subscriptions? Actually, support revenue is higher than this, but SAP is underplaying this number because it does not want to be seen as a Computer Associates type of company. But much of SAP’s software is out of date, and they are increasingly relying on the support.

SAP’s Core Offerings the Slowest Growing Part of Cloud?

“The fastest growing piece of SAP’s cloud business last year centered on the “business network” services provided by Concur (travel and expenses) and Ariba (procurement and supply chain services). Bookings reached €309 million ($334 million) in 2015, up 187%.”

So the fastest growing part of SAP’s cloud business is the acquired products like Concur and Ariba. These were cloud vendors before being acquired by SAP. This means the products that SAP internally developed that are cloud are growing more slowly. Fortune could point this out, but this is a puff piece so they are not going to do anything to contradict anything SAP says.

SAP Once Again Exaggerating S/4HANA

“Another big part of SAP’s cloud portfolio, the “Employee Central” component of the SuccessFactors human resources app, surpassed the 1,000-customer mark during the fourth quarter. SAP also reported more progress for S/4HANA, its next-generation suite of business applications. More than 2,700 SAP customers are using the technology, which means growth doubled quarter over quarter last year.”

That is really not that many customers for Employee Central. S/4HANA is seeing very little progress and a lot of implementation problems. This is natural as SAP has exaggerated the completeness of S/4HANA as is covered in the article Why the S/4HANA Suite is Not Yet Released. 

On Aug 10, 2012 published the article Competing For The Cloud: SAP.

In this article, we will review the accuracy of this article.

Article Quotations

Cloud computing has made life easy for millions of users. But it’s a different story for software companies providing those cloud-based services: the field is small, the game is fast and the battle for dominance is fierce. SAP is determined to win.

Nearly four decades ago, in center city Philadelphia on the East Coast of the USA, in a bohemian-chic historic little side street, stood a popular fantasy-filled boutique named “Vendo Nubes” – “I Sell Clouds”.

Today, in 2012, Jim Hagemann Snabe sells clouds, too, and he makes a lot more money at it than Vendo Nubes imagined was possible – not just for him but for the shareholders of enterprise software-maker SAP.  As co-CEO (he’s the engineer, in charge of product development), Snabe’s mission is to actually own the cloud – the next stage of online computing.

“We have declared our intent to be the leader for business software in the cloud,” Snabe told INSEAD Knowledge on the sides of the Global Business Leaders Conference in Paris on July 6, 2012.  “We are already the largest player today in terms of numbers of users consuming our services. We have more than 15.6 million users.”

But despite being Germany’s largest listed company by market capitalisation, SAP is not yet the number one player in the clouds. That spot is occupied by the legendary Salesforce.com. Snabe is duking it out with Larry Ellison, CEO of Oracle for the number-two position.

Forbes Pushing the Establishment View Regardless of Facts to the Contrary

This entire introduction reads like an establishment article that seems intent on reinforcing the positions of the largest software vendors. Salesforce is 100% SaaS, while SAP and Oracle are really not. And there are many vendors that are also SaaS and innovators in SaaS, so it is curious that Forbes would be talking about SAP and Oracle in this way. This article smells a bit like a paid placement on the part of SAP to make itself seem more “cloudy” than it actually is.

It’s a competition with a history of acrimony:  in November of 2001, SAP lost the largest software privacy suit in history – a US$1.3 billion – to Oracle, conceding it had “inappropriately downloaded” Oracle software via its subsidiary, TomorrowNow, Inc.  The verdict was overturned less than a year later but competition between the two companies remains.

Right, but what does that have to do with how much Oracle and SAP get in revenues from the cloud? Forbes moves from the contention on SAP and Oracle being competitors for the cloud, into the topic of their acrimony. This seems like a Kelly Ann Conway type pivot.

Buying Size and Expertise

Consequently, SAP is modifying its organic-growth policy to make key acquisitions in order to scale up fast: Sybase, Inc. as well as SuccessFactors, Inc., and this past May made a US$4.3 billion offer for California-based supply-chain global network operator Ariba, Inc.

Yes, SAP is buying its way into the cloud, as is covered in the article How SAP is Buying its Way into the Cloud. Although Sybase is not an example of this.

Combined with SAP’s resource planning and back office software, the system would be able to oversee operations all the way to network tracking and managing corporate purchases. Real streamlining. The U.S. Department of Justice thinks so, too – so much so that it’s concerned the Ariba purchase could accelerate an SAP-led price war and has asked for enough additional information under the Hart-Scott-Rodino anti-trust laws to nudge the deal’s closing into Q4 instead of Q3.

This is curious. Why is the FTC not doing this?

“Ariba is the next wave of cloud computing,” says Snabe. “We don’t believe in acquisition to consolidate the past. When we acquire, it’s been about identifying new categories where there was significant value-add for new customers. And the question we always ask ourselves is: are we able to get there faster through our own organic innovation or do we need a quantum leap to get into that market fast? Ariba run the largest marketplace for buying and selling between companies…they are the eBay for businesses (to date more than 730,000 customers), so it was obvious for us to go for the leader.”

That is the charitable explanation. Another explanation is that SAP’ lacks the ability to develop cloud offerings internally. I believe the second is true as SAP literally has no examples of successes in the cloud that were developed internally.

It was also not obvious to go after Ariba, as Ariba’s primary domain expertise is indirect procurement. SAP would have been better off purchasing a procurement vendor that has focused on direct procurement, as a direct procurement application can be connected to the current procurement functionality within SAP’s ERP system.

SAP is Growing in the SMB Space?

This acquisition also speaks to SAP’s changing customer base. When the company was founded in 1972 by five former IBM engineers in Mannheim Germany, ICI (Imperial Chemical Industries) was their first client. Early customers were specimens from the Fortune 500. Today, it’s small and medium-sized (SMEs) companies who are filling the order books. The kind of companies that really need help managing data, beyond traditional corporate data.

No that is false. SAP has been trying to capture this customer base, but SAP is still highly concentrated in the largest companies. As a longtime SAP consultant, I can say that SAP’s software is simply inappropriate for the SMB market because its TCO is so high and it is so complicated. Anything I need to do in SAP, I can do much more easily in just about any other application. SAP’s acquired products have a smaller customer size, but the internally developed products do not.

“In today’s world, you need to be able to analyse Twitter sentiments in order to understand your impact in this market and guide your efforts and promotions in the right directions,” points out Snabe. “In the cloud, the speed of innovation is extremely high and the deployment and delivery of services is hugely simplified.”

This is a comment about Big Data, which is a market SAP does not have much to do with and has little to offer companies. This is a throwaway conference type statement. And Forbes does nothing to validate any of these statements. By challenging nothing, even when the information is clearly false, they implicitly endorse it.

SAP has a history of cloud washing, as it is what Wall Street wants to hear. The 103% figure is a doubling of cloud bookings. Which seems high.

Yes, it does. SAP’s cloud sales are not growing 103% year over year.

SAP as UNICEF?

These kinds of new technologies are changing the way businesses are run and, says Snabe, the way we work and live. As an engineer, “What really gets me up in the morning is the opportunity for us to solve some of the resource-constrained challenges that this world has: we are now seven billion people; in the next thirty years we could be nine billion. We need to find new ways to solve challenges around water, energy, food, ways to optimise healthcare.” For example, SAP software can analyse the DNA of a cancer patient and identify the mutation to find the most effective medical treatment.

That is what gets Snabe up in the morning, or his extremely high compensation? If SAP is pitching the idea that they are focused on social good, they can drop the pretense. SAP is challenged in even treating its customers fairly. It has no history of doing anything but profit maximizing by any means necessary. So the idea that SAP is the new UNICEF is a bit difficult to swallow. Secondly, I study the quotations and the comments of the top executives at SAP, and this would be the last group of people I would want to come up with solutions to water, energy, food or optimizing healthcare. The top executives at SAP are about monopolizing areas so they can maximize profits for SAP. They also lack the domain expertise to offer solutions in these areas. Instead, I would suggest they stick to selling software.

One problem that particularly worries Snabe is youth unemployment today, particularly in Europe. “Many of the innovations of the future require young people’s open mindset, and the diversity of bringing young people together in solving problems around energy, etc. We are in the final stages of launching a programme where we will offer education in our technology to unemployed young people in Europe…we have a very strange dilemma: on the one hand, unemployed young people; on the other, in the IT sector there are a lot of positions we can’t fill. So we felt that one of the obligations we have is to offer education to unemployed people and with that increase the level of skills and technology in Europe.”

You have got to be kidding. But this quotation is good to have as it is useful for sharing for comedic purposes.

SAP’s global presence is far-flung: a strong engineering force in Germany, Canada and Brazil; a huge lab in Palo Alto, California; more than six thousand people in India and a rapidly growing presence in China – 32 locations in all. Snabe is also able to identify significant growth in Europe, “We are able to grow through an increase in SMEs, who are in many ways global companies; they’re just smaller, but they still need world-class technology, just as the large companies get.”

Again, SAP is not growing its SME business.

SAP has had nine consecutive quarters of growth and ambitious plans to double the size of the company by 2015. It won’t be easy: the company’s “Business by Design” cloud service is still very short of its 2011 goal of 10,000 customers needed to keep pace with Oracle. But Snabe is undeterred. He owes it to long-distance running (it clears his head and lets new ideas come in) and a love of classical music.

It missed that plan. I notice how Forbes did not discuss how short ByDesign is of SAP’s projections. It is estimated that ByDesign has around 1100 customers. So yes, that is quite a bit short of 10,000. Apparently, because Snabe likes long distance running and classical music, SAP should not be held accountable for repeatedly making inaccurate projections in the future. Right.

Leadership Rhythm and Self Indulgent Personality Preferences

“I like classical music because it’s on the one side a very structured form, where there’s no ambiguity about what’s being played; yet the real fantastic classical experience comes when there is an element of creativity in that system, coming from the individual musicians and the conductor.”

Wow, that is fantastic. We now know what it is like to be on a date with Snabe, but we are unsure what value this adds to the topic being covered. We are however waiting with bated breath to determine what Snabe likes about long distance running!

It’s an echo of his leadership style and one which underscores his goal to be the dominant player in the cloud. “I don’t believe in the leader taking all of the decisions,” he says. “It’s my role to bring the best people together. But I also believe you need to be a very ambitious-type leader who sets ambitious targets for the team. Because if you’re not competing to be number one, you’re not competing.”

This quotation sounds like it came from George W Bush.

How Accurate was Fortune Magazine on SAP Going All In on the Cloud?

On May 08, 2013 published the article SAP Goes All In With the Cloud.

In this article, we will review the accuracy of this article.

Article Quotations

“FORTUNE — In case you haven’t heard, SAP is serious about the cloud. On Tuesday the enterprise software giant announced it will offer HANA, its in-memory database, as a monthly subscription service, delivered via the cloud.”

Years later HANA is very rarely deployed from the cloud. We cover in the upcoming book How to Leverage AWS and Google Cloud for SAP & Oracle. SAP is trying to increase interest by offering a trial version of HANA on AWS, but it is still primarily an on-premises database in its deployment.

HANA Cloud?

“A limited cloud-based version of HANA was already available through Amazon (AMZN, +0.22%) Web Services. But SAP (SAP, +0.27%) says customers will now be able to access applications powered by HANA — think enterprise resource planning and customer relationship management tools — via SAP’s own cloud, which consists of seven data centers around the globe. Next week, the Germany-based company is expected to unveil more cloud-related announcements and share additional details on this new flavor of HANA at its annual customer conference in Florida.”

SAP had almost no customers for HANA on the web when this was written. Years later little has changed. Fortune could have investigated this but decided not to.

“Last month, in its lastest reported earnings announcement, SAP said HANA software revenue tripled year-on-year, contributing 86 million euros in the most recent quarter. Along with mobile and web-based software, HANA represents new revenue opportunities for the company, whose bread and butter is selling large, on-premise software installations — and charging costly fees to support and maintain them.”

That part about costly fees is true. That is about it.

Why Fortune Thinks SAP and Oracle are Cloud Software Vendors

“Of course, SAP’s not the only traditional software company trying to branch out and prove it’s “all in” on the cloud. Late last year rival Oracle (ORCL, +0.25%) unveiled its ambitious goal of owning the entire cloud computing “stack” — from the underlying infrastructure to the apps. And earlier this week Adobe Systems (ADBE, +0.68%) announced it is getting rid of packaged software; from now on, creatives will have to buy their digital tools via a cloud-based, subscription model only.”

And neither of these companies get very much revenue from the cloud. Both Oracle and SAP built their business for decades on the basis of on-premises software.

Getting False Information From Vishal Sikka

SAP says its new offering aims to enable faster deployments and lower, more flexible pricing.

“Customers want more and more options in how they take advantage of the value SAP HANA brings,” Vishal Sikka, SAP’s head of technology and innovation, said in a release issued Tuesday. “With the SAP HANA Enterprise Cloud, we are delivering HANA at scale with instant value and no compromise. We are simplifying customers’ experience and expanding their choice in how they want to adopt SAP HANA, now bringing it to a massive scale for enterprise mission critical applications — and we are doing this without disruption through the cloud.”

Vishal Sikka is a completely unreliable source of information on anything related to SAP. One of his primary jobs was to mislead people about HANA. SAP HANA Enterprise Cloud never obtained many customers. HANA has customers, but they are almost entirely only premises and concentrated in the SAP BW application. HANA has seen no broad scale adoption outside of BW.

As I write this article, four years after this article was written, HANA’s popularity is on the decline.

Simplified Experience?

SAP and HANA never simplified the user’s experience as is covered in the article Is SAP’s Run Simple for Real? Run Simple was a marketing program that was eventually dropped. It was deceptive because nothing that SAP did or introduced ever made SAP any more simple. In fact, HANA greatly increases the complexity of managing databases as HANA is such a high overhead database.

General Fortune Foolishness

“But SAP has yet to announce pricing for the new delivery method for HANA. And while getting up and running will be easier without having to invest in (and wait for) a dedicated, on-premise appliance, it isn’t as quite as quick and painless as ordering a book on Amazon.”

This is a fatuous statement as HANA takes a lot of effort to maintain. And earlier versions of HANA are not compatible with later versions of HANA as is covered in the article How to Best Understand Bloor Research’s HANA Paper. Why would Fortune compare this to buying a book?

Why would Fortune compare this to buying a book?

“In order to use HANA, customers first need to obtain licenses for HANA and applications that run on top of it. They then need to consult with SAP services workers, to help determine which applications are best moved to the HANA cloud, and to assist in “onboarding and migration.”

Why is Fortune explaining how a system implementation works?

Fortune Back on HANA Being Cloud Based

“And just because HANA is now available as a subscription, cloud-based service doesn’t necessarily make it easier or cheaper to use.”

The assertion is correct, but irrelevant because almost no customers buy HANA as a cloud product.

“It’s still the same product, just delivered via a different mechanism. The proof, as they say, will be in the pudding. For now, stay tuned to next week, when SAP unveils more details on the new, cloud-based HANA.”

No, you can’t rely on information released by SAP. One must research everything SAP says.

Conclusions

SAP’s cloud revenues will increasingly come from their cloud markup business. SAP’s largest cloud acquisitions, like Ariba and SuccessFactors bring in little revenue. The only play that SAP has to get profits from the cloud is to use account control to customers and markup the cloud investments of real cloud service providers.

The Problem: A Lack of Fact-Checking of SAP

There are two fundamental problems around SAP. The first is the exaggeration of SAP, which means that companies that purchased SAP end up getting far less than they were promised. The second is that the SAP consulting companies simply repeat whatever SAP says. This means that on virtually all accounts there is no independent entity that can contradict statements by SAP.

The Necessity of Fact Checking

We ask a question that anyone working in enterprise software should ask.

Should decisions be made based on sales information from 100% financially biased parties like consulting firms, IT analysts, and vendors to companies that do not specialize in fact-checking?

If the answer is “No,” then perhaps there should be a change to the present approach to IT decision making.

In a market where inaccurate information is commonplace, our conclusion from our research is that software project problems and failures correlate to a lack of fact checking of the claims made by vendors and consulting firms. If you are worried that you don’t have the real story from your current sources, we offer the solution.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

Search Our Other SAP Cloud Content

References

https://fortune.com/2016/01/22/sap-cloud-sales-expectations/

https://www.theregister.co.uk/2016/07/20/microsoft_q4_fy2016_azure_phones/

https://www.businessinsider.com/amazon-web-services-10x-the-revenue-of-microsoft-azure-says-analyst-2015-4

https://www.reuters.com/article/us-sap-se-results-idUSKCN1PN0GD

https://fortune.com/2013/05/08/sap-goes-all-in-with-the-cloud/

https://www.forbes.com/sites/insead/2012/08/10/competing-for-the-cloud-sap/

AWS and Google Cloud Book

How to Leverage AWS and Google Cloud for SAP and Oracle Environments

Interested in how to use AWS and Google Cloud for on-premises environments, and why this is one of the primary ways to obtain more value from SAP and Oracle? See the link for an explanation of the book. This is a book that provides an overview that no one interested in the cloud for SAP and Oracle should go without reading.

Categories SAP

Why Cloud is at a Crossroads

Executive Summary

  • AWS and GCP have pushed the envelope on value and innovation.
  • However, monopolistic vendors like SAP and Oracle want to redirect the cloud into upcharging and waste.

Introduction

While AWS and Google Cloud keep improving the value for customers, the fake cloud entities, SAP and Oracle are doing their best to confuse their customers about the cloud, and to try to make the cloud as expensive as possible and to maintain their account control. This is covered in the article How to Understand SAP’s Upcharge as a Service.

In this article, we will describe the battle of the pure cloud against those that would undermine the cloud, the fact that the hyperscale providers are partnering with highly corrupt consulting companies as well as the problems with executives leaving corrupt entities like Oracle to assume leadership positions in the hyperscale providers.

What SaaS or Cloud Actually Is

SaaS and Cloud emerged as a more efficient delivery method of software that leveraged the infrastructure of the web along with database capabilities called multitenant, which means that a single database could serve multiple customers. This allowed a significant reduction in the cost of managing each customer. SaaS and Cloud vendors focused on simpler applications, such as HR, travel, expense management, and CRM. These were applications that most companies could deploy without having to perform customization.

This is what I call the pure state of SaaS or Cloud. This is an important distinction between pure SaaS or Cloud and co-opted or faux SaaS or Cloud. There are several reasons, but one of the most important reasons why is contained in pure SaaS’s or Cloud’s multi-tenant architecture.

Multi-Tenant Architecture

This was an important point as customization meant breaking the advantage of having multiple tenants on a single server and a single database. SaaS applications should have just one code base for the software used by all customers. This is referred to as a multitenant architecture. SaaS and Cloud vendors were also defined by lower sales and marketing costs. These vendors would allow customers to test their software by offering trials and to purchase the software incrementally. They often allowed customers to purchase a single license on a month to month basis. True SaaS vendors want to get prospects to use their demo system as quickly as possible because it is their primary tool for turning a prospect into a customer. Faux-SaaS vendors use access to a demo system (either online or in the standard demo presentation) to move the prospect to a standard on-premises sales process.

Similarity to Gmail

Just as with a Gmail account, each entity uses the applications independently without conflict or issues, even while others are using the same applications. Multitenancy is accomplished by setting up a separate database schema per tenant. Multitenancy is an important component of SaaS. While the single-tenant design outsources the hosting of the application to a third party, multitenancy provides economies of scale to the management of users because only the data is separate. Pure SaaS vendors provide their own hosting, and this allows them to upgrade their application as needed. When another company performs the hosting, this may contribute to a staggered upgrade. When hosting is moved to a third party, it can indicate there may no longer be a multitenant environment.

Optimally, the customer should never even realize when their software is upgraded. For example, Gmail is often upgraded, but the users of Gmail don’t know when this happens because it is not apparent to the user. The same is true of Google Docs. Simply, a new feature is added or some backend change occurs, and you simply keep using the application. Over time you find out about the addition if you search through the help or if you receive an email from Gmail on the topic of how to leverage the change.

Fake Cloud

Many vendors who market their applications as SaaS are not truly multitenant, because they are not operating from one code base. There could be many different versions of the application running on each hosted instance. Good examples of this are SAP and Microsoft.  Accordingly, the one code base SaaS model is not as prevalent as so-called SaaS providers would have us believe.

SAP frequently talks about hosting applications itself, but the vast majority of its hosted applications are only the result of acquisitions that were originally designed for the cloud. The reality is SAP sells few of its internally developed applications as SaaS to be hosted by SAP. This issue, for instance, applies in spades when Bill McDermott makes comments about how SaaS or Cloud SAP is becoming, but leave out the analysis that S/4HANA Cloud only has very small customers. Or when Bill McDermott continually brings up its Cloud offerings such as SuccesFactors or Ariba, but leaves out how neither SuccessFactors nor Ariba offers flexible terms like pure SaaS vendors do. For instance, here are the terms for AWS.

“AWS offers a range of Cloud computing services. For each service, you pay for exactly the amount of resources you use. There are no minimum commitments or long-term contracts required. This pricing model helps replace your upfront capital expense with low variable cost.”

SaaS and Cloud Patterns

Those are pure SaaS or Cloud contract terms. But SAP does not offer anything likes this. SAP uses on-premises terms that they have become accustomed to, and that lock in the customer, but they apply those terms, as much as they possibly can to their SaaS or Cloud applications. Additionally SAP by in large does not provide pricing transparency. SuccessFactors was a well-regarded SaaS vendor even before it was purchased by SAP. However, SuccessFactors’ website has no pricing published and no public trial available. We checked back in 2010, prior to SAP’s acquisition and also found no pricing published and no public trial available. So while SuccessFactors followed some of the rules of being a SaaS vendor, it is another example of a vendor that did not follow all of the SaaS rules

I don’t want to overstate the optimality of pure SaaS or Cloud vendors as a dependency is created and of course they also don’t like customers to leave. This video by Craig one of the Founders of Arena Solutions explains quite well how pure SaaS effectively aligns the incentives of the customer with those of the vendor.

However, if the SaaS or Cloud offering is faux SaaS or Cloud, then these incentives are not aligned, and one goes back to the misalignment that has plagued on-premises software, where the vendor has the incentive to sell the most software as possible whether it is implemented or not. True SaaS or Cloud vendors live on their rate of subscription renewal.

Accepting Cloud Washing

Those that cover SAP also miss out on reporting that a very large amount of SAP’s offering is not deployed on from the Cloud. That is they allow Bill McDermott to present any story he wants without questioning it. And unsurprisingly these same media entities also in most cases receive funding from SAP. In the example of S/4HANA, due to it ongoing development it is not feasible for SAP to offer multitenant due to versioning. That is different customers are using different versions of S/4HANA. This is why the following comment is entirely incorrect.

“However, there is no reason why a partner couldn’t duplicate this offer for its customers – even exploiting HANA’s multi-tenancy feature included as part of SP9.” – Diginomica

It turns out there is a big reason why customers won’t be able to address this. And that is due to versioning. And does Diginomica just happens to be funded in part by SAP. So big surprise Diginomics simply repeats anything that SAP tells it to say.

The Crossroads

Companies now want to move to the cloud, and the question is whether the on-premises vendors with basically nothing to offer for cloud services (that is you SAP and Oracle) can use their marketing muscle and their control over their consulting partners, IT media and user groups to get their customers to make bad decisions.

These are powerful companies that will get a number of customers to engage in epic cloud waste. Several years from now articles will be written about how the cloud transition in many cases leads to no price increase or price increases. What will be left out from those articles is that SAP and Oracle added a major margin on the actual cloud service, and they added that margin for doing nothing.

SAP’s Two Cloud Areas (Not Offerings)

SAP has two distinct areas of cloud service coverage. One is SAP Cloud. SAP Cloud is the portal through which companies can be upcharged on cloud services from AWS, GCP and Azure.

The second area is called the”HANA Enterprise Cloud” or HEC, which is SAP’s name for what amounts to the outsourced cloud.

SAP has no interest in doing the hosting work themselves, and so they have opened the gates to any operator that will agree to allow them to keep a large margin.

Furthermore, because of the lack of quality control on the HEC cloud partner ecosystem, HEC is experiencing heavy failure rates. Oracle follows a similar cloud model to SAP. Is this the same thing happening with Oracle?

The Problem with Cloud Partners

Mark Graham states the following on this topic.

What I have found is movement to the cloud often involves getting a “cloud partner” to help transition and then manage the systems. 

What is little known at first is that these “cloud partners” have less expertise managing the systems than the companies had in-house.  The companies hoping to reduce overhead actually find they still cannot reduce or re-direct their in-house support.   Something else that happens is companies realize that the cloud is not as inexpensive as they once thought.  It takes in-house people to manage the usage of the systems to optimize cost savings.  Also, if a few errant programs/poor coding kick off they will find costs going up.  When they had “restrictive” hardware in-house they didn’t have to worry as much about this happening. The flexibility of the cloud environments is more limiting than they thought.  They have to pick what is available, get updates along with everyone else, and just can’t seem to get the cloud provider to work at 2:00 a.m. in the morning like they used to be able to do. The biggest reason to go cloud is to be able to scale and implement tools more quickly.  Of course if everyone is doing it you are not innovative. Finally, control over IP/data.

And Ahmed Azmi in response to Mark’s comment.

Thanks for sharing these lessons. I definitely relate especially regarding partner expertise. I have seen this unfold with some managed hosting providers. In one case, the internal IT backlog actually increased after the migration because change requests involved multiple teams in different time zones and no specialized product expertise. Your point about cost is spot on. Cloud is often more expensive than on-premises for many use cases. The real benefit is agility and lowering the cost and risk of experimentation via self-service and consumption based pricing with no upfront long term commitments.

SaaS or Cloud as Seen Through the Lens of the Big Vendors and Consulting Companies

To the big vendors and to consulting companies SaaS and Cloud are entirely negative.

  • The big vendors had tended to use large and expensive sales and presales teams. They most often did not allow their customer to use their software as a trial before purchasing.
  • For consulting companies, SaaS and Cloud software would mean a significant reduction of their consulting revenues. Consulting companies rely heavily upon implementation business for on-premises vendors and are now trying to recast themselves as indispensable for SaaS or Cloud. The overall delivery model is more efficient, and that translates into fewer inputs for the same or more output. If the software implements quickly and is primarily implemented by the vendor, this leaves the consulting companies cut out of the loop.

Therefore, both the big on-premises vendors and the consulting companies were aligned against SaaS. Therefore, both the big vendors and the consulting companies concluded that if SaaS and Cloud could not be blocked (which they tried to do by playing on security concerns) then the next best thing would be to co-opt the concepts of SaaS and Cloud but undermine the actual model of SaaS and Cloud. Also, there was a dramatic change in how Wall Street interpreted and therefore rewarded companies that self-identified as SaaS or Cloud, giving those companies that either was SaaS or Cloud, or posed as SaaS or Cloud substantial premiums in the marketplace. At that point, the decision on the part of the big vendors was clear, they could not obstruct the movement to SaaS or Cloud (which was strategy #1), so they need to move to the second strategy, which was to co-opt SaaS or Cloud.

Revenues from Cloud to Exceed the Revenues from Y2K?

One of my favorite quotations is a senior partner at a major consulting company who stated that he expected the revenues from SaaS or the Cloud to exceed the revenues from Y2K!

That is consulting companies would like their revenues to significantly increase by implementing software for which the history of the software delivery method has been to not have a consulting company involved. They want to adopt the marketing cache of SaaS or Cloud, but not be impacted by one of its primary benefits, which is to move consulting companies out of the environment. This intent is explained quite clearly in a quotation from Larry Ellison on this exact issue.

Larry Ellison once commented on the topic of cloud computing:

“The interesting thing about Cloud computing is that we’ve redefined Cloud computing to include everything that we already do.”

And…

“We’ll make Cloud computing announcements because, you know, if orange is the new pink, we’ll make orange blouses. I mean, I’m not gonna fight this thing … well, maybe we’ll do an ad. Uh, I don’t understand what we would do differently in the light of Cloud computing, other than market … you know, change the wording on some of our ads.”

That is right. Larry Ellison will be bringing out ads that will be actively designed to deceive you into thinking that Oracle offerings that are not SaaS or Cloud actually are.

Vendors such as Oracle, Microsoft and IBM have been accused of “cloud-washing.”

A Replay of the Package Solution Fiasco?

If this sounds like a replay of the packaged software “revolution” in the 1980s and 1990s, it should. Custom solutions were replaced by ERP systems that promised to have all best practices. Companies let go of people supporting internally developed solutions, only to find that the external systems were not created for them. Deloitte and Accenture got rich billing for what was re-coding many requirements that were already covered by internal applications into ERP. Cloud knowledge in most companies is still low. We are seeing sort of a gold rush of very bad quality companies getting referred business from major software vendors. And the only reason they are getting the contracts is because they are “partners” and the vendor can take their margin on top of the cloud consulting firm/provider.

In fact, notice this quotation from an article by Mark Hurd, CEO of Oracle.

“The most important difference between consumer and business technology isn’t the amount of spending; it’s how the money is spent. Consumer tech spending is mostly on offense, as people buy the latest, most innovative devices, applications, and services to improve their lives. The vast majority of business tech spending is still on defense: maintaining, integrating, and protecting legacy systems.

In fact, most company CIOs still spend 80% or more of their IT budgets in this defensive mode, managing the applications and infrastructure they’ve had for a long time. That leaves precious little time and money for innovative new technologies, digital capabilities, and digitally inspired business strategies.

Those legacy applications, as well as the servers, storage, and other infrastructure that support them, amount to a form of technology debt. Think of the staff time and maintenance fees companies must keep plowing into their on-premises systems as mounting interest on the tech debt—time and money that do nothing but keep companies at status quo.”

The legacy argument was used by ERP vendors to denigrate the internally custom coded applications that the ERP vendors wanted to replace, we covered in the article How SAP Used and Abused the Term Legacy. Now the term is being repurposed to apply to on-premises environments.

But there is a problem. Migrating to the cloud is proving far more difficult than originally thought.

Notice the following graphic from IDC.

We have several questions about this study. The study declares cloud repatriation activity (great term by the way, kudos to whoever created it). As you see from my previous statement, a lot of scammers and shady operators are making deals with SAP and picking up cloud contracts. (which are actually hosting contracts because they lack the ability to convert/port SAP to cloud and the terms are on-premises terms — with contracts going out for around 5 years).

These cloud deals have a high failure rate. The vendor is pretending they are involved when they really are not. So an important question is how much are cloud failures related to customers going to the wrong place for information on cloud.

In our book How to Leverage AWS and Google Cloud from Oracle and SAP Environments, we explained that one should never look to vendors like Oracle or SAP for advice on cloud. But this is what companies are doing. They are listening to IBM or other incumbent vendors when they could just go directly to AWS or GCP or other real clouds and begin testing themselves.

How to Dilute the Terms Until they are Utterly Meaningless

The largest marketing budgets in enterprise software are maintained by the largest software vendors and the largest consulting companies. Therefore, this gives them great power to reframe SaaS or Cloud in a way that benefits them. SAP, for example, has zero interest in offering true SaaS or Cloud software. Deloitte has zero interest in implementing SaaS or Cloud software, and for very obvious reasons. Interestingly, this simply goes without comment.

  • SAP: One of the most controlling and extractive software vendors in enterprise software is suddenly interested in providing its customers with flexible lower cost applications?
  • Deloitte: Deloitte is a consulting company that routinely pulls out $50 to $100 million out of clients for low quality finished systems suddenly wants to be sidelined and see its revenues shrink dramatically because it “believes” in SaaS or Cloud? Because Deloitte is concerned with the value being delivered on projects?

And this ridiculous narrative essentially goes without mention. In fact, most analysts simply repeat what SAP says in their articles, and assumes that it is true. That is they grant SAP SaaS or Cloud status before SAP has actually proven the capability. They spend no time trying to understand if SAP is simply producing a misleading press release by adopting SaaS or Cloud terminology.

What they would like to do is to so undermine the terms SaaS or Cloud becomes utterly meaningless. So that basically the customer and Wall Street think they are getting SaaS or Cloud, but that everything from the terms is changed to the cost, and especially the cost are as high or even high than for on-premises software. The more that the big consulting companies and the big vendors can co-opt SaaS and Cloud and reduce its benefits, they more they can insure that they lose no business during what was supposed to be, and still has the potential to be a massive change in the enterprise software market.

Cloud Washing by SAP and Oracle

SAP has been relentlessly bringing out press releases as to how dedicated they are to SaaS. SAP has actually created products which are explicitly designed for cloud washing. This is covered in the article The HANA Cloud Platform Designed for Cloud Washing. SAP has also come out with completely impractical adjustments to the SaaS or Cloud concept called the hybrid cloud, which is completely disingenuous and is a way for SAP to essentially rebrand it’s on premises offering in a highly confusing manner to customers. SAP has to do this because most of SAP’s application sales is still on premises. This is covered in the article SAP’s Cloud Chaos Offering with Hybrid Cloud. Pure SaaS or Cloud vendors do not have to twist themselves into pretzels the way that SAP does because pure SaaS or Cloud offer real cloud naturally. Arena Solutions, Salesforce, etc.. do not bother with these types of shenanigans. In fact, SAP has been hiding who is actually hosting much of its software. This topic is covered in the article How SAP Has Secretly Been Outsourcing Hosting. 

Cloud Terms for SAP?

One of the most amazing developments is that SAP has become a major promoter of its products as SaaS or Cloud, but it uses SAP terms and conditions, which are anything but SaaS. SAP does not allow you to cancel quickly on a month to month contract. Quite the contrary, SAP has long term contracts and restricts and controls its customers.

SAP is moving into full harvesting mode. HANA puts in a series of rules and regulations which combined with indirect access create a maze that customers have to walk through. In this time where we thought SaaS was going to open up IT implementations to greater freedom, SAP has adopted or co-opted the term SaaS but is becoming even more controlling than it was previously. And in the short term, this will probably drive revenue (financial analysis is not my area, so that is a guess), but in the long term, it makes SAP obviously out of touch and vulnerable.

Paying Top Dollar for the Worst Possible Advice

If you follow SAP, Oracle or SAP or Oracle partner’s advice, you are headed for major cloud waste. They have to make their customers give them a great markup because that is their model. We are seeing the deceptive advice on the cloud given by these companies first hand as we are sent documents from clients. The problem is once again; there are virtually no independent consulting entities. Each of them is aligned with one of the major vendors, and that means supporting the markup doctrine that will allow the vendors to meet Wall Street objectives.

If a consulting firm does not follow the marketing talking points of the vendor, they will be appropriately punished by the relationship management arms within those companies. Overall this is a dangerous time to be taking advice from any consulting firm with a history of on-premises consulting. It continues to amaze us how companies are paying top dollar to consulting firms so they can get the absolute worst advice on the cloud.

Giving Out Fake Information on the Cloud

Oracle has the worst explanations of cloud we have ever read. Oracle keeps hiring people at the top of the market from AWS and Google, but the Oracle Cloud is not improving, and the Oracle explanations of cloud in the product documentation are entirely nonsensical. Larry Ellison’s statements where he tries to critique AWS or state that it costs less to run the Oracle database on Oracle Cloud are entirely false. 

Why Major Consulting Companies Ruin the Cloud

Something that should be eliminated, as a concept is that major consulting companies have any interest in improving the condition of their clients. The major consulting companies are first and foremost focused on their own bill-ability – and the problem is that their bill-ability is directly contradictory to the interests of their “clients.”

Trusting Major Consulting Firms on Technology Advice?

No major consulting company can be trusted to provide advice on technology because no major consulting companies place their client’s interests above their own. They have not fiduciary responsibility to their clients. SaaS is the most important development in enterprise computing, but major consulting companies are slowing its adoption? They do this because SaaS will mean that they shrink as entities and the software vendors take control of the implementation and the maintenance, at a far lower cost.

Major consulting companies have a serious conflict of interest when it comes to advising buyers of low support applications because they make more money from high rather than low maintenance applications. Correspondingly, they are significant proponents of the highest implementation as well as maintenance applications, and why they have come out so strongly against SaaS.

Accenture published a document entitled “Why Big Systems Are Here to Stay,” which perhaps should have been called “Why Big Systems Are Here to Stay: Because We Make Tons of Money That Way.” In this document, Accenture makes the following contentions:

“And a third advantage of an ERP environment has to do with how data is managed, integrated and secured. If not properly integrated, cloud and software-as-a-service solutions can create a more chaotic, less reliable and less secure data environment.”

Data Management and Advantage for ERP?

This is an interesting contention, because ERP environments have zero advantage over non-ERP environments with respect to data management or integration or security. ERP systems that I evaluated within companies often have the lowest data quality of any software category; particularly for the tier 1 ERP vendors as the applications have such dated data management tools. As for integration, ERP systems may be integrated to themselves, but the tier 1 ERP vendors are some of the most difficult systems to integrate other applications to. As for the security argument, ERP systems are not more secure than different software categories.

The above Accenture statement also confuses the topic of ERP systems versus SaaS systems. SaaS is a delivery method for software; ERP is a category of enterprise software. SaaS can deliver as an on-premises solution or any application, including ERP. If ERP systems are on premises, they are more secure than cloud or SaaS applications, but that is a different issue.

Overall, the evidence is severely lacking to support the statement made in the Accenture paper, and it should qualify as FUD (fear, uncertainty, and doubt). Accenture’s main financial incentive is to slow the movement towards SaaS solutions and away from tier 1 ERP because its how they make a lot of money, and they have far less control once the application is delivered via SaaS. Instead, the software vendor tends to take over consulting and support. Interestingly, nowhere in the paper does Accenture mention how it makes money (which is with on-premises consulting and support) and how this may influence its “recommendations.”

Accenture Says….

Accenture goes on to say that the best approach is a hybrid (that is some on-premises and some SaaS) and then proceeds to make another self-serving proposal, that this IT ecology must be managed by using a trusted “broker.”

So, who’s in charge of managing this complex hybrid system? The answer lies in the rising trend of using an integrator or trusted broker. This brokerage can act as either a consultant or as a managed services provider. This holistic or managed services approach enables companies to treat their IT resources as just that and also provides a new level of flexibility for companies and CIOs.

And who would this trusted broker be?

That is right Accenture!

After spending decades overcharging and misdirecting their clients to all the wrong software in the on-premises environment, Accenture would like to be handed to keys to managing their client’s IT solution architecture in the new on-premises/SaaS “hybrid” environment.

How to Understand Thomas Kurian’s Move to Google Cloud

Thomas Kurian recently left Oracle and joined Google Cloud. In this article, we will review the implication for Google Cloud.

Implications of the Move by Kurian

The Register described it as follows:

“Kurian was the database giant’s cloud supremo, and oversaw much of its product development. He seems to be a natural fit for Google Cloud: as an experienced enterprise IT vendor executive, he follows in the footsteps of industry veteran Greene in trying to smarten up Google Cloud so it can compete against Azure and AWS for business.”

This is a major happening, and it is for several reasons. One is that both AWS and Google Cloud are gunning for Oracle’s business. So far, AWS has been in the lead in going after Oracle, but this move is signal that now Google Cloud will have the ability to make going after Oracle even more of a priority.

The Experience of Migrating Workloads to Google Cloud

Mark Dalton of AutoDeploy explained this in the following quotation.

“One thing that is dramatically different from Google Cloud and everyone else is their 100 percent concern for open source software. They take this very seriously. Migrating our workloads to GCP requires the most robust OSS documentation I’ve ever seen. Google has dedicated resources who review the content and will reject your product if it is not documented with 100 percent accuracy. Thomas Kurian is going to have to adjust to that modality. But aside from that this make GCP a serious competitor to AWS. Thomas Kurian is brilliant, awesome to work with, and laser focused and dedicated to his engineers. This is going to work very well.”

Thomas’ Motivation is Sky High

Another question is around Thomas Kurian’s motivation. Kurian, it is rumored, left Oracle because he clashed with Ellison over the direction of Oracle Cloud, with Kurian preferring the strategy of leveraging the IaaS of both AWS and Google Cloud, while Ellison favored competing directly with AWS and Google Cloud.

“Think of all the Oracle customers Kurian knows. All of the customers that have told him Oracle Cloud is”customers who have struggled with Oracle Cloud Infrastructure, it’s stability, and offerings.”. He’s going to open that Roledex and start offering beta trials, incentive discount pricing, and bundled offerings.”

Kurian’s First and Second Steps at Google Cloud

Now Kurian is going to have a real cloud to offer rather than Oracle Cloud. Mark Dalton lays out the likely outcome in this quotation.

“So Kurian will go after the ERP workloads first, which is the obvious place to start. This is especially true of PeopleSoft. The PeopleSoft model is so spread out he can offer a very compelling case to move to GCP. Now, bundle that with BigQuery. Would you rather have a team of specialists on OBIEE, which is a difficult to install and maintain, or would rather have one or two dedicated resources that can get BQ up and running and making that data in your ERP accessible? The answer is obvious.”

Mark lays out the following strategy as stage two for going after Oracle’s business.

“He’ll use Kubernetes to orchestrate containerized solution sets for Oracle products. Want to run Hyperion in GCP, click a button, done. Lower cost for GCP, lower cost for the customer.

IBM’s acquisition of RedHat shows that there is a market demand for rapid deployment models for enterprise customers. Google does not need to invest 8 billion dollars. Google Cloud has the software to facilitate these new operating models, built, deployed, and operating at scale.”

Will Thomas Kurian’s Sales Approach be Successful at Google?

The following quote is from Ahmed Azmi, which describes how he thinks Thomas Kurian, the new head of Google Cloud as of November 2018, will approach making changes as Google Cloud.

“I think Kurian will focus exclusively on Oracle accounts, the ones with the most pain first. Those low-hanging fruits are first candidates to migrate systems and apps to GCP. He only needs a few big references in the next months to get the ball rolling. It’s a BIG open question if Oracle sales reps will be successful at Google. Selling services is fundamentally different than selling products, getting paid in advance, and moving on to the next customer. Outside of G-Suite, Google sells tech NOT business apps. Their approach has always been developer-centric just like AWS and Microsoft. Oracle’s sales approach is top-down selling to execs and budget owners NOT developers. There’s a significant skill mismatch involved.

You know, an Oracle sales rep I used to be friendly with told me she had no interest in selling services. The reason being, as you said, she wanted to

“get in, get out and get paid.”

She said that software sales were great because there was no question of the customer service aspects of consulting, and the common client issues. With software, the customer bought it, and it was cut and dried. On the “top-down” approach you describe, this reminds me of a quote from Dan Woods.

“Oracle understood very early that enterprise software is sold, not bought. To make a sale, you need an effective salesforce that is well equipped and highly motivated. You need a wide, deep, and highly motivated supporting ecosystem. Oracle has these elements and they have been the foundation of the company’s success. But the world of IaaS and PaaS is different. It is a developer-driven world. In an IaaS and PaaS cloud, software is bought, mostly by developers, not sold. All the salespeople in the world will not convince a developer to buy an inferior product. Oracle’s mighty sales machine cannot dominate this market; only better products matter. Right now, Oracle may fall further behind in market share in its IaaS and PaaS clouds.”

Thomas Kurian Lies to Geekwire

We took the most interesting and notable quotes from this interview and analyzed Thomas Kurian’s answers.

The Quotes

Kurian is Now a Fan of Open Source?

GeekWire: I was talking to Redis Labs CEO Ofer Bengal last week and he mentioned that in his view the new database services announced Tuesday was an initiative you pushed the company to do. How did this all come together?

Thomas Kurian: The background is fairly simple. We see a lot of customers wanting to develop applications using open source. Historically they wanted three things: They wanted a fully-managed infrastructure for the open source technology; second, they wanted enterprise support from the cloud provider; and third, they wanted the cloud provider to allow them to use their credits to consume the open-source offerings in addition to the cloud platform provider’s old products.

Well, Kurian’s position on open source will have to change, but at Oracle, they do whatever they can to undermine open source. This should be brought up by the interviewee.

Working in a Friendly Manner with Open Source?

We felt that many cloud providers were not working in a friendly manner to open source, and we felt that open source companies needed to have a cloud partner that would share the success of the platform with them. And so what we’ve done is a very simple thing. We’ve put together the leading open source companies, (and) they’re offering their services on Google Cloud as fully managed services. These products will be taken to market by Google’s cloud sales team and we will support it as a first class service in Google Cloud.

So we’re giving customers and developers choice by giving them ease of use, because they get a single console from which they can access all these technologies. We’re giving them the ability to get integrated billing, metering and consumption of procurement. And we are sharing our success with the partners.

How is that different from what Google Cloud had before. Our Google Console already had all of this. One has to be careful not to allow Kurian to take credit for things that existed at Google Cloud before he arrived there.

Open Source Companies Should Be Compensated for Their Hard Work?

“GeekWire: With respect to open source in general and some of the changes that have been contemplated by these companies, such as how cloud providers can use those open source projects, where have you come down on that?

Kurian: We generally feel that if an open source company has done the hard work of creating the open source technology and providing a solution that developers and customers like, they should be fairly rewarded for that hard work. And if their livelihood, if you will, is threatened by alternative forms of monetization, which is taking away their ability to monetize the technology that they invented, we don’t think that’s necessarily the right thing for the industry.”

Well, this was the exact opposite view that Thomas Kurian held when he worked at Oracle. Oracle’s view is that open source projects should get nothing. We quite from Larry Ellison.

“It is not enough for one to win, all others must lose.”

Google and Oracle Are Similar?

“GeekWire: This is the first time we’ve had a chance to talk since you’ve taken this new role and I wanted to check in on a couple of things. One thing that strikes me is that it would appear from the outside that Oracle and Google are two very different corporations. I was wondering if you could give me a sense, now that you’ve been around a few months, of how they are alike and how they are different.

Kurian: They’re alike and different in some ways. Every company that you work at is different from every other company that you work at, right?

I’ll give you an example. Engineers in all companies are roughly the same. They are very focused and disciplined on how they deliver software. They’re very keen on understanding customer needs. They’re very keen on delivering technical solutions to needs that customers have.

The way that Google brings its technology to market and the way that the relationship it has with customers are different than other companies. Partly because Google is such a technological powerhouse, but many companies in the industry look at it for solutions to their digital problems.”

Oracle is the worst and least ethical company in the enterprise software space, beating out SAP which holds the number two spot. Google has been one of the better corporate citizens. Secondly, Oracle engineers and developers are frequently disheartened as they can’t mesh with the overpromising sales teams. It is very difficult to see any similarities between these companies except that they both work in software.

Kurian Suddenly Found Ethics?

GeekWire: How do you feel about working with military customers when it comes to cloud and AI services?

“Kurian: We’ve made a public statement about it. We made a statement around our AI principles that’s publicly documented. We stand by them. We do work with a number of agencies around the world, but they’re always in compliance with our AI practices and principles that we publicly made a statement about.”

It is very difficult to believe any statement regarding ethics made by Kurian, given his history with Oracle.

Google Loyalty

“GeekWire: With respect to the core cloud business, what do you think Google has to do to gain share in cloud computing? And what do you think is a realistic target for where Google might be in two to three years?

Kurian: We have the lowest customer churn of any cloud provider in the industry. We have amazing customer loyalty. If you look at the top 10 companies in virtually every industry: nine of the top 10 media companies, seven of the top 10 retailers, six of the top 10 utility companies, five of the top 10 financial services companies, five of the top 10 manufacturing companies, five of the top 10 healthcare companies around the world — not just in the United States –use Google Cloud for their business transformation.”

And Oracle Cloud, which is what Kurian was responsible for had the highest churn. Kurian lead an approach where reps were simply told to get signups and where those customers would churn because that is what the Oracle Cloud leads customers to do. Oracle Cloud is a barely functional cloud, that is hosting, not cloud. That is what is Kurian is responsible for. Everything Kurian is saying were the accomplishments of Google Cloud before Kurian got there.

Training More Sleazy Oracle Type Sales Resources?

So for us to grow, the primary thing is to scale our go-to-market organization. And we’re very committed to doing that. We just need to hire and train and enable a world class sales team at scale.

Today we have a great sales team, but we are far fewer in number than the other players. We just need to expand that. And as I talked to customers, they asked us to, one: expand our sales organization and our go-to-market teams. Second: specialize (that sales team) with deep expertise in technology and in industry. And third: make it easy to contract and do business with us. We are extremely committed to doing all three of them.”

We cover this topic in detail in the article Will Thomas Kurian Bring Oracle’s Sales Sleaze to Google Cloud? 

Thomas Kurian told a lot of lies in this interview. He minimized the differences between Oracle Cloud and Google Cloud, he made pro-open source statements without a hint of the implied hypocrisy, he may have taken credit for something Google Cloud already had, he made statements that pretended he was ethical, he took credit for things that were the exact opposite of what he was able to accomplish at Oracle Cloud. And the interviewer sat there as a passive punching bag for whatever Thomas Kurian said.

Conclusion

The future of SaaS or Cloud looks increasingly murky. What was once an exciting application of a new software delivery method along with a series of open, transparent and flexible contractual terms has been co-opted and diluted by on-premises entities. Entities like SAP and Deloitte are intent not changing how they do business, which means ruining SaaS or Cloud all while promoting the idea that they are in favor of SaaS or Cloud. However, SaaS or Cloud has a specific definition, and it can not be attained by simply slapping a sticker on a private hosted solution that is not multi-tenant. Because of the sway that the on-premises vendors and on-premises consulting companies have with IT media, it is rare for these vendors and consulting to be questioned when they create marketing literature that proposes that they are SaaS or Cloud. While there is some talk of Cloud Washing, consulting companies are almost never questioned when they use the same on-premises consulting model while talking about being SaaS or Cloud-friendly.

SAP and Oracle customers must be wary of this time and the tidal wave to terrible cloud advice that is currently emanating from SAP and Oracle and their consulting partners and the SAP and Oracle user groups. The cloud is the best hope that companies have to reduce the account control of SAP and Oracle and to bring innovation as well as open source into the fold. However, SAP and Oracle and the “coalition of the billing” sit on the other side of this issue. The last thing SAP and Oracle want is for their customers to become educated as to the cloud.

The same applies to major consulting companies. The major consulting companies have a business model around fleecing their customers and increasing costs. This is why it is concerning when AWS has partnered with so many major consulting companies.

Overall the promise of the cloud is declining, as the cloud service providers are aligning themselves with on-premises consulting firms and bringing in executives from the least ethical on-premises vendors.

The Problem: A Lack of Fact-Checking of Cloud

Cloud began as one thing, but companies like Salesforce have developed what are “one-way clouds.” Cloud is still a way to increase one’s freedom from on-premises vendors like SAP and Oracle, but many vendors are deliberately not cloud-based, and the major vendors have co-opted cloud benefit messaging while offering none of the actual benefits of the cloud. When major consulting firms, that have built their businesses on on-premises lock-in tout the cloud, you know that inaccuracies are being provided.

 

The Necessity of Fact Checking

We ask a question that anyone working in enterprise software should ask.

Should decisions be made based on sales information from 100% financially biased parties like consulting firms, IT analysts, and vendors to companies that do not specialize in fact-checking?

If the answer is “No,” then perhaps there should be a change to the present approach to IT decision making.

In a market where inaccurate information is commonplace, our conclusion from our research is that software project problems and failures correlate to a lack of fact checking of the claims made by vendors and consulting firms. If you are worried that you don’t have the real story from your current sources, we offer the solution.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

Search Our Other SAP Cloud Content

References

https://lnkd.in/dqm7Td5

https://www.geekwire.com/2019/interview-google-cloud-ceo-thomas-kurian-open-source-aws-working-military/

The Public Cloud Revolution Book

The Public Cloud Revolution: How Open Source is Displacing IT Mega Vendors

Interested in how to open source is powering public cloud providers like AWS and Google Cloud and what this means for the different modalities of computer hardware (cloud, on-premises proprietary server, mainframe, and appliances?). This book covers many topics that are greatly underrepresented in the common IT media coverage of these topics.

How Large Consulting Firms Exaggerate The Costs of AWS Services

Executive Summary

  • AWS has added to its partnership stable with larger consulting companies for SAP.
  • These large consulting companies have had a habit of high-cost implementations.

Introduction

A primary benefit of using cloud services is that the costs are transparent and it gives more control over to the customer. However, companies like AWS and GCP do not offer the type of support that is common in the on-premises vendors. This has caused these providers to partner with firms to provide this consulting. However, what does this mean for costs?

Who Are AWS Partners?

We performed the following search for partners on AWS’s partner search website.

Here is a sample.

Notice many companies on this list. Accenture, Capgemini, Deloitte, Tata Consulting Services, Wipro, and others. These are companies that have been ripping off their clients for years. All of these companies are SAP partners and distribute false information to their customers as part of the SAP partnership agreement. 

Bringing Corruption to the Cloud?

The original idea of leveraging cloud services was in part of get away from these corrupt overcharging consulting firms. Some of these firms like Monacle or Linke we do not have experience with, so we will not comment on them for good or ill, but we would not trust many of the companies on this list and we routinely find them misleading clients on SAP.

The Markup of Consulting Services

Consulting services represent a high cost versus license costs, and this is true even when license costs are high, such as is the case with SAP and Oracle. However, the reason that the major consulting companies focus on SAP and Oracle is that it allows them to bill the maximum number of hours to their clients. However, in the case of AWS or GCP, the costs are very low compared to SAP or Oracle.

If these same consulting companies are used, much of the cost savings of the cloud will be diluted. Secondly, the poor quality of information provided by these consulting companies will lead to enormous cloud waste, as the produce extraordinary wast in the on-premises environments presently.

An IT department with extreme waste? This means that a major IT consulting firm is typically in the house, which is extracting as much as they possibly can from the client.

Bringing Horrible Advice to the Cloud

We analyze the advice given by large consulting companies on SAP for clients. And in general, we consider the advice offered by the large consulting firms to be of poor quality. The advice is essentially backward engineered from the conclusion, and the conclusion is determined from on high by people with major financial bias due to their compensation.

The major consulting firms are filled with content-free salespeople (called partners) who will repeat anything the large vendors say. They will also take the major vendors views on how to leverage the cloud, which will mean recommending paying the maximum markup to SAP or Oracle, and maximizing the waste on the account. 

Conclusion

The large SAP consulting firms have shown themselves to maximize the costs of SAP and Oracle projects. If they are brought in to do AWS or GCP or Azure work, they will do the same to those projects. AWS and GCP are inherently less corrupt in their model than SAP or Oracle. However, AWS at least is playing with fire by bringing these partners into the fold and it will no doubt be negative for customers.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

Search Our Other SAP Cloud Content

References

The Public Cloud Revolution Book

The Public Cloud Revolution: How Open Source is Displacing IT Mega Vendors

Interested in how to open source is powering public cloud providers like AWS and Google Cloud and what this means for the different modalities of computer hardware (cloud, on-premises proprietary server, mainframe, and appliances?). This book covers many topics that are greatly underrepresented in the common IT media coverage of these topics.

How SAP Plans to Markup Cloud Service Providers to High Profitability

Executive Summary

  • AWS created a presentation to show the relationship with SAP.
  • How much of the information provided around the co-interests of SAP and AWS are true?

Introduction

One of the most interesting developments in public cloud is how the public cloud service providers like AWS or GCP or Azure will work with the on-premises vendors. Oftentimes things are presented by companies for political reasons rather than what is true. We found the following slides from a presentation by AWS.

This slide from a presentation by AWS shows a very complimentary relationship between AWS, SAP and a number of partners. However, the reality is quite a bit different. Not only SAP, but many of the partners on this slide intent to significantly intermediate between AWS and the final customer.

This slide (by AWS) shows what is feasible, but not necessarily what is desirable for customers. Under the scenario where the SAP Cloud is the origination, the prices are dramatically higher. The table to the right shows that AWS claims a far more complete offering than GCP or Azure.

How SAP Plans on Maintaining its Margins

All of SAP’s recommendations for cloud come with a markup over the cloud provider, which SAP does not discuss and pretends does not exist. Cloud service providers that seek to gain SAP business must tread very carefully around the topic of SAP’s markup on their services, as we covered in the article How to Understand SAP’s Upcharge as a Service Cloud. Repeatedly circumvented SAP to sell directly to SAP customers rather than giving them a markup, SAP will immediately disappear from SAP’s recommended providers listing. SAP will try to direct customers to cloud service providers that allow for SAP to obtain their margin. In fact, this may be the main strategy that SAP will use to increase their margins.

See this comment from the SAP Q3 2018 analyst call.

As customers choose to switch to cloud, vendors have to deal with shifting from the upfront cash earned in on-premises deals to the ongoing subscription costs associated with cloud services.

On the earnings calls, execs argued that, as cloud has more lifetime value and more predictable future revenues, the firm was going in the right direction in the long term.

Insisting that the core business was stable anyway, CEO Bill McDermott said they should be “celebrating with champagne… that the cloud is soaring”, adding that if cloud was flat with a “rock solid core”, analysts would be “worried about the future”.

CFO Luca Mucic said the firm would always trade a software dollar for a cloud dollar, and “will not artificially slow cloud growth to optimise our P&L in the short-term”.(emphasis added)

Under what scenario where the vendor cannot markup the cloud services of other companies, this explanation is not true?

How can we say this?

Well, the most profitable vendors in software are the on-premises vendors. Vendors like Salesforce, the most prominent SaaS vendor has historically had low profitability. AWS is probably the most profitable cloud entity. And they are the exception.

Where Do SAP’s Margins Come From?

SAP has around an 85% margin on support. This is by far their largest margin item and the only real part of SAP’s revenues that are growing. SAP’s margin on applications and database licenses is far lower. The quotation above leaves out the fact that for SAP’s internally developed products, SAP’s cloud is just a passthrough. The actual infrastructure and real work is performed in either a public cloud or private cloud service provider. SAP spends extremely little on their own cloud infrastructure. The cloud can become a very profitable item for SAP — if, SAP can trick companies into using SAP Cloud as an intermediary rather than going direct to the cloud service provider.  The way to do this is to hide the margin from the customer. However, with public cloud, this is tricky as the pricing is public.

See this pricing estimate. SAP wants to mark this cost up by a factor of between 3 to 10 times. SAP wants to be paid for this simply for “originating the deal.” This is the only way that SAP can grow its revenues from the cloud. The SaaS applications that SAP purchases have a low margin, and several years after being acquired, the applications begin to decline in the marketplace. Cloud markup is where SAP’s financial future is. 

SAP has a long history of marking things up that they do not put work into developing. Databases are a good example of this. For decades SAP has been marking up the Oracle database and IBM DB2. Customers could have received a lower price by going through those vendors directly, but both vendors allowed SAP to serve as a reseller of their databases, which resulted in big profits for SAP, and higher costs for SAP customers.

Conclusion

SAP can worry less about the margin on its applications and databases if they can simply markup the cost of other cloud service providers. This will be easier with “private cloud” providers because the pricing is hidden. However, for this strategy to work, the private cloud providers must cooperate with SAP, and refer customers back to SAP rather than provide a direct bid. As soon as the customer finds ou the real cost, SAP will lose their position as intermediaries. To do this SAP will have to enforce very strict rules for how private cloud providers communicate costs.

At the time of publication, this is still a “story.” That is in the IT media and on calls with Wall Street analysts, the question is not asked for SAP where these margins are coming from. That is it is not very much discussed that SAP’s strategy outside of its SaaS acquisitions is to markup the offering of other cloud service providers. In the quotation from Luca Mucic above,

always trade a software dollar for a cloud dollar,”

..the fact that the software dollar that is being traded will in many cases not be for an SAP SaaS/cloud application, but a dollar of revenue that SAP plans to markup by 3 to 10 times over AWS/GCP/Azure/HPE/IBM/etc. Under that scenario, SAP could have the highest cloud margins in enterprise software, while doing the least actual cloud “work.”

The Problem: A Lack of Fact-Checking of SAP

There are two fundamental problems around SAP. The first is the exaggeration of SAP, which means that companies that purchased SAP end up getting far less than they were promised. The second is that the SAP consulting companies simply repeat whatever SAP says. This means that on virtually all accounts there is no independent entity that can contradict statements by SAP.

Being Part of the Solution: What to Do About SAP

We can provide feedback from multiple SAP accounts that provide realistic information around SAP products — and this reduces the dependence on biased entities like SAP and all of the large SAP consulting firms that parrot what SAP says. We offer fact-checking services that are entirely research-based and that can stop inaccurate information dead in its tracks. SAP and the consulting firms rely on providing information without any fact-checking entity to contradict the information they provide. When SAP or their consulting firm are asked to explain these discrepancies, we have found that they further lie to the customer/client and often turn the issue around on the account, as we covered in the article How SAP Will Gaslight You When Their Software Does Not Work as Promised.

If you need independent advice and fact-checking that is outside of the SAP and SAP consulting system, reach out to us with the form below or with the messenger to the bottom right of the page.

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

Search Our Other SAP Cloud Content

References

*https://www.slideshare.net/AmazonWebServices/track-1session-2sap-on-aws-running-your-critical-workloadspdf?

https://www.theregister.co.uk/2018/10/18/sap_q3_reults/

The Public Cloud Revolution Book

The Public Cloud Revolution: How Open Source is Displacing IT Mega Vendors

Interested in how to open source is powering public cloud providers like AWS and Google Cloud and what this means for the different modalities of computer hardware (cloud, on-premises proprietary server, mainframe, and appliances?). This book covers many topics that are greatly underrepresented in the common IT media coverage of these topics.

How Commercial Software Became About Charging Multiple Times for the Same IP

Executive Summary

  • Commercial software vendors trump up their IP, but they attempt to charge multiple times for the same IP.
  • In this article, we cover how they both take IP from the public domain and double and triple charge customers.

Introduction

The original proposal around commercial licenses is the same as patents. As presented by Bill Gates in his Open Letter to Hobbyists. Gates was dismayed by unpaid copying of Microsoft’s BASIC program. However, as the decades have passed and Gates and Microsoft have behaved as long-term pernicious monopolists, Gates letter looks less and less genuine. Microsoft’s original MS-DOS program was not even their own, but licenses for a pittance ($50,000) from another company and on the fact IBM did not know who actually made operating systems and thought Bill Gates would be an honest broker. Through this bit of deception, Microsoft was able to become a giant corporation, interfere in the open source movement to the detriment of their customers and in later years screw up many of the companies they are acquired.[1]

Microsoft was perfectly fine nearly stealing the IP for its original OS (that it limited licenses for use on IBM computers, but non-exclusively). Microsoft has displayed technical incompetence in failing in many of its technological endeavors, literally wasting many of the resources that it obtained through its monopolistic practices, as the following quotation explains.

“Microsoft currently wastes billions of dollars a year expanding its business in unproductive ways that don’t yield new profits. It spend millions writing a free web browser to compete with Netscape’s and then they just gave it away (of course to injure Netscape, removing profits from the browser) They probably gave up millions of dollars and untold bargaining chips when they twisted the arms of competitors into shunning Netscape. The company’s successful products pay for these excursions.”[2]

Therefore their views on IP should be taken with a grain of salt, particularly since Microsoft itself has produced shocking little IP considering their size.

This hypocrisy around IP is expressed in the following quotation quite nicely.

“The software industry likes to portray itself as a bunch of libertarians who worship the free market and all of its competition. In reality, the leading firms are riding a wave of power-grabbing that has lasted several decades. The firms and their lawyers have consistently interpreted their rules to allow them to shackle their customers with stronger and stronger bonds designed to keep them loyal and ever spending.”[3]

Monopolist Power Means Multiple Charges

However, what eventually happens is monopolistic software vendors want to be paid not once but multiple times for the same thing. The multiple payment ratio is simply determined by the monopoly power of the vendor, which is well approximated by the size of the vendor. Many people have had to pay Microsoft for the same thing on several occasions when their Windows valid license key did not work when they had to reinstall Windows. Microsoft had no way you could contact them (voicemail that went to nowhere), so they had no other option other than to repurchase the software. Microsoft continually charges for items like Windows and Office that are either little changed from previous versions, or worse than previous versions. How can anyone look at the Windows versions after Windows 7 and call this progress or “IP”?

Secondly, Microsoft’s long-term security problems with Windows has caused security headaches for decades, which is in part due to Microsoft’s need to control their source code.[4] These are security headaches that Linux does not have. The reason for this is explained specifically in the following quotation.

“You need source code to test software, and careful testing is the only way to eliminate security problems in cryptosystems,” he said. “We need everyone to review the design and code to look for weaknesses. Today security products that come with open source code are the most trusted in the industry. Private companies like RSA Data Security or Entrust can brag about the quality of their in house scientists or the number of outside contractors who’ve audited the code, but nothing compares to letting everyone look over the code.”[5]

Therefore, while Microsoft held and continues to hold a majority of the market share for operating systems on computers worldwide, its commercial license reduced both the security and the stability of the operating system that was the standard for millions. Microsoft’s compensation trumped the interests of all the billions that relied upon their OS. An OS, that due to lock-in with both hardware and software vendors had little practical alternatives (more so in the past than now). However, in a more hidden area, Microsoft lost to open source as explained in the following quotation.

“Microsoft lost the server market to Apache and Linux on the basis of price and performance. Web server managers are educated computer users who can make their own decisions without having to worry about the need to train others. Hidden computers like this are easy target, and the free software world will gobble many of them up.”[6]

 Imagine for a minute if Microsoft had won the server market, how insecure the Internet today would be.

Combining Disdain for Customers with the Desire for Duplicate Compensation

This disdain for customers and the desire to be paid many times for modest intellectual property contributions is easily found among the mega-vendors. Oracle wants to be paid multiple times with booby-trapped configurations and byzantine audit rules; SAP wants indirect access rights. Can anyone really reasonably argue that SAP and Oracle have not already full monetized their only real contributions to the IP space (SAP’s ERP system and Oracle’s database)? When SAP introduced the S/4HANA ERP system, which is simply the next version of their flagship ECC ERP system, they declared that it was the “logical successor, but not the legal successor” to ECC. The reason? So they could charge customers who had paid their 22% level of support every year while using ECC a new license for S/4HANA! This undermined the support agreement between SAP and its customers (which we covered in the article Why S/4HANA Should be Free). This rather obvious conclusion was not published by any media entity or any SAP consulting firm when we researched this topic. In the SAP space, SAP consulting companies would not dare call out SAP on double charging customers. The SAP consulting companies compete with each other for who can flatter SAP more, so that they may receive projects and references from SAP.

If I look at the vendors that Brightwork Research & Analysis has interacted with, they seem to agree that they should be able to charge for software, but when they contact us for information, they seem to think that our research should be free. When it comes to being paid for IP, we never recall any software vendor proposing we should be paid. We have to tell them. So how strong is the adherence to compensation for IP really among software vendors? If one is only serious about the topic when it is “your IP,” then as with Microsoft you are not holding to any principle other than the principle of self-interest. And of course, most software vendors also consider it appropriate to be paid for innovations they never created, or those that are exaggerated. Therefore, they want to be paid not for the software they created, but for the software they would like to have created, or that they would like others to think they created. Vendors that fake IA capabilities, want to be paid for those capabilities. SAP wants to be paid for creating a database that is “100,000x faster than any competing technology,” which of course they never created.

 If a vendor fakes innovation, should they be paid for that as well? Our analysis of quarterly calls with analysts indicates that vendors usually do think they should be paid for both real and fake innovation.

The Position of Teradata on IP

Recently Teradata sued SAP. We read the Teradata complaint against SAP with great interest. In the complaint, which we covered in the article How True is SAP’s Motion to Dismiss the Teradata Suit?, Teradata accused SAP of both IP theft and of engaging in monopoly practices.[7] Teradata frequently promoted its IP in the complaint, but they also seem to imply that they created all their database technologies from a clean sheet of paper.

  • Somehow it seems likely that much of what Teradata created was pulled from the public domain, and they added some things.
  • It is quite likely that a number of Teradata founders and IP contributors not only were educated at public expense but read books about databases which allowed them to consume information placed in the public domain by authors that came before them.

However, this is not at all apparent from Teradata’s complaint. According to Teradata all of their IP was internally generated. At this point, it is not necessary to conjecture if software vendors exaggerate their IP. They all do.

The largest software vendors today are overjoyed with their lock-in. SAP is the most challenging software to integrate other systems, and SAP uses a fictitious extension on a previously legitimate framework called indirect access to punish customers that show the independence to purchase too much non-SAP software which is explained in the following quotation.

“The reasoning is simple: If a program is accessing the data files of another program, meaning that they interact with one another, manufacturers claim that they are technically getting used by the foreign software. Consequently, licenses for this “Indirect Access“ have to be paid for. But Indirect Access is an illusion! SAP’s wish to make more money is responsible for creating Indirect Access. From a technological perspective, the interaction between user programs is called interoperability which is strictly regulated by the EU software directive. Therefore, it is the very nature of every software to communicate with other programs. With promises and threats, SAP created a fairy-tale castle which looks desirable as well as menacing from a distance. Upon closer inspection, the castle collapses in on itself, revealing the illusion it was all along. What is left is a disaster, because Indirect Access has no logical explanation.”[8]

SAP customers must increasingly be prepared to be charged multiple times. (Illustration from E-3 Magazine, which is a German publication) [9]

In addition to charging multiple times for their own software, SAP now has a scheme to markup cloud services of AWS/GCP/Azure by charging far more for the same services that SAP customers could buy from these cloud vendors directly. SAP has no interest in building much in the way of cloud infrastructure, but a great deal of interest in marking up the services of other providers. The major SAP consulting firms are so “dedicated” to their clients that they will likely not bring up the up charging cloud to their “clients.” We categorized this as an entirely new classification of cloud service, the “upcharge as a service” or UaaS.[10]

How to Best Understand ITAM on Cloud and SAM

In this article, we will cover some selected quotations from the article What Does the Cloud Mean for ITAM, from the site ITAM.

What Impact Does This Have on ITAM?

“‘Cloud’ based software, licenses and storage poses new challenges for ITAM professionals. There have been a number of publications that states that the cloud will mark the end of ITAM, but it is the complete opposite. Cloud based services just changes the way we will need to manage software, and further emphasises the importance of ITAM to an organization.”
Hypothetically, when a company moves from on-premises to the cloud, it is supposed to allow for the vendor to constantly be able to review the customer’s software usage. So it is interesting to see ITAM push back on this.
“With the new cloud based licenses there are a number of new elements added to an ITAM professionals role, including user management, deployment management and contract management. This means that whilst compliancy is not longer such an issue, there are other elements of the software and licenses that need to be correctly managed. As the majority of licenses now state that a user has the rights to install the software on up to five devices, including a home machine, the ITAM team need to ensure that there is a management process in place to ensure that should the user leave they are no longer able to use a license that belongs to the organisation.
Cloud poses even more challenges for ITAM professionals, and ITAM professionals need to ensure that they keep their knowledge level of cloud and cloud based licenses to expert level to ensure they fully understand their organisations rights with cloud services and software. When negotiating new cloud service contracts it may be important to ensure that someone from the organisations legal department are present to ensure that the organisation is fully aware of their legal rights.”

This brings up the question of how the customer can verify the usage. Vendors like SAP try to keep the information to themselves, and unless the cloud vendor offers what amounts to SAM software built into its application, the customer is then in the position of having to install SAM software onto the cloud application.

A New Dawn for ITAM

“With the new cloud based services and software licensing, organisations need to ensure that they modify existing ITAM processes and policies to fit in around the cloud. The cloud is a new element and challenge when it comes to software license management and software asset management, so organisations processes and policies need to be updated to reflect that. This will help ensure that organisations are still getting the most out of their cloud based software assets and services.

It is also important that organisations keep up-to-date with what ITAM tools are offering the way of cloud management. If there is already an existing ITAM solution implemented, then the organisation needs to understand what new features and capabilities they will be bringing to the product to ensure it can successfully manage cloud based licenses and cloud based software. Cloud based software and licenses still need to be managed by ITAM as there needs to be clear management of how many installs each ‘user’ has so the organisation can ensure that compliancy is maintained.”

These are all good points. There is a natural inclination to think that SAM becomes unnecessary with the cloud, but that falls into the pattern of trusting the vendor. Some vendors are quite reasonable. However there are specific vendors that are a license liability, and as those vendors migrate to the cloud, they are not likely to change their approach to license audits.

How Difficult to Move Away from the Oracle Database?

Oracle revels in how difficult it makes its database to migrate away from. Larry Ellison specifically brags about how difficult it is to migrate from Oracle (exaggerating quite a bit actually). Time and again, in the computer industry and in other industries when private companies have their way, they create maximally incompatible systems and lock in which are profit maximizing for them, and profit minimizing for their customers. In the perfect world of commercial software vendors, there is zero collaboration between developers that do not report up through the same hierarchy, and every problem is solved multiple times in different organizational hierarchies. This is apparently what conservative economists at fake think tanks like The Hoover Institute and The Heritage Foundation refer to as “efficient markets.” When problems are solved, each commercial software company declares that they came up with the single best way to solve that problem. SAP, for instance, states that every single best practice that exists within a domain is contained in their software. We evaluated the legitimacy of SAP’s best practice claims in the article How Accurate Was SAP on Containing Best Practices?[11] And in the article How SAP Uses Best Practices to Control the Implementation.[12] If we look at Oracle with Exadata, their desire is to combined proprietary hardware with proprietary software (the database), and then to sell both proprietary items, and to top it off with a proprietary operating system (Solaris). Oracle has a very simple way of presenting their ideas. They have the best products in the world and anyone who does not believe this is an idiot. It’s quite cut and dried. Currently Oracle is losing business badly to AWS, however, Oracle seems to think if Larry Ellison performs enough analyst calls and speaks at enough Oracle conferences, AWS will go away.

How Oracle and SAP Broke the Agreed Upon Rules of Commercial Software

It is common to propose that SAP and Oracle are merely following the normally accepted rules of commercial software. It is difficult to see how this is true. The original idea of compensated software was that work in creating and maintaining software required compensation. That is certainly fair. However, SAP and Oracle have moved the goal posts. Moreover, they use licensing rules to extract far above the value of their software. They spend far more on sales and marketing than they do on development and maintenance. The licensing agreements SAP and Oracle give customers are like credit card contracts. The complexity of the terms and conditions places Oracle and SAP in a dominant position versus the customer. Oracle and SAP have their customers so restricted by rules and restrictions that the goal of the software is often a secondary concern.

Furthermore, Oracle and SAP have been using this position to coerce their customers into things they don’t want to buy.

How SAP Took an Open Source Language and Make it Closed Source

The biggest problem of the SAP Cloud is proprietary Java Development Toolkit. Although it sounds ridiculous and impossible, SAP took a free language, modified it and forced customers to use it in the SAP Cloud. (that is Java was free, until Oracle (who bought Sun) just recently began charging for Java).

  • “SAP Java” also free, but it requires license validation. If could be impossible to go to any other cloud vendor if SAP changes the pricing policy.
  • SAP has a habit of frequently changing their policies. If they did make this change it would mean that SAP could effectively lock customers in with what was an open source item that they had nothing to do with developing. SAP and Oracle’s approach to open source is to infiltrate it (in some cases buy it) and then control it by closing it off. It was the EU regulatory body that required Oracle more or less not do this to MySQL in order to receive approval to purchase it. However, as soon as MySQL was purchased, it was forked to MariaDB. This was done for one very obvious reason. Oracle lacks credibility in the open source community because of its previous behavior with open source projects.

Clues from Decades of SAP Development

SAP’s development advice leads to high expense and low development productivity. This is another reason to steer clear from SAP’s Cloud as they are trying to take their development approaches to the cloud.

  • Neither Fiori, oData, and other SAP cloud items have very much uptake. Moreover, this is with the ability to push their components to a willing installed base.
  • SAP’s Netweaver is (in part) an uncompetitive web server/application server, yet is still used by SAP in instead of better alternatives like NGINX or Apache. SAP burns resources and time trying to make its components internally when there are far better components it could use that are made by other companies or are open source projects.
  • SAP does not have a successful cloud product that was not acquired and therefore already cloud before it became part of the SAP product catalog. Consequently, their proposed web thought leadership that they claim is unsupported.

Promises Made to Wall Street

Unfortunately for customers with substantial investments in Oracle and SAP, because of the promises made to Wall Street by these companies, we see these abuses only getting worse in the future. Oracle and SAP have been ratcheting up coercive tactics to obtain revenues to hide the fact that these companies are not growing in the new areas where they tell Wall Street they are growing, but instead they are merely extracting more income from their old areas. Is the fastest growing part of SAP or Oracle is cloud business? Is it SAP’s “hot new IoT” solution called Leonardo? Is it Oracle’s Automated Database? No. Every year, support grows as a higher percentage of both of these company’s revenues.

If you listen to Oracle sales reps they put themselves in the position of being there to help. They want to “help” their customers, but if one analyzes how they are helping, it is from Oracle’s own coercive policies! If you create a coercive scenario, but then appear to “fix” that scenario, that is called racketeering. The standard approach came from protection rackets. Where a mobster would approach a store owner and declare..

“If you pay me protection money, your store will be protected from the mob.”

However, then, the same mob is the only entity that would damage or destroy the store! Wouldn’t it be a terrible thing if something happened to that store? Yes. So in a way, those that negotiate terms on protection rackets are also “helping” their “customers.”

Conclusion

Open source software is known, although underemphasized in its contribution to the development of the modern Internet and in the rise of cloud services. However, less well publicized is the impact of open source hardware. This is usually explained with the term “commodity” however the truth is more nuanced than this. The design work is shifting from the vendor to the hardware buyers. Proprietary hardware manufacturers prefer to describe nonproprietary hardware as “commodity,” when in fact open source is a more accurate term to use. The fact is that the fastest growing infrastructure, which is the many billions of dollars currently being invested by AWS, Google Cloud and Azure is presently is primarily built on open source software and open source hardware. The commercial hardware and software vendors don’t much like this story, so they do what they can to suppress it from being known.

These entities do allow proprietary software to be used (like the Oracle database and SAP database), but the majority of the software used on these hyperscale cloud service providers is open source. Secondly, the vast majority of the hardware being deployed is also open source. AWS and Google Cloud are not hardware or software vendors. They sell access. Azure is of course owned by Microsoft, one of the largest commercial software vendors in the world. However, Azure also uses large amounts of open source software as well as hardware. Microsoft has tried to kill open source, but they just can’t and the faced a decision, either stay with Microsoft’s software and become irrelevant or open their system up. If Azure is to remain competitive with AWS and Google, it knows that using only their commercial software is not an option. This is not Microsoft seeing the light, it is Microsoft dealing with how it is. Microsoft’s server products have failed. With all their resources, and with all their dirty tricks, they were beaten by Linux.[13]

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

Search Our Other SAP Cloud Content

References

[1] “One Hotmail founder told the PBS Online columnist Robert Cringely, “All we got was money. There was no recognition, no fun. Microsoft got more from the deal than we did. They knew nothing about the Internet. MSN was a failure. We had 10 million users, yet we got no respect at all from Redmond. Bill Gates specifically said “don’t screw up Hotmail,” yet that is what they did.” – https://www.wayner.org/books/ffa/ffa-2002-12-13-mod.pdf

[2] https://www.wayner.org/books/ffa/ffa-2002-12-13-mod.pdf

[3] https://www.wayner.org/books/ffa/ffa-2002-12-13-mod.pdf

[4] “Open source versions of encryption technology are oozing through the cracks of a carefully developed mechanism for restricting the flow of the software. The US government has tried to keep a lid on the technology behind codes and ciphers since World War II. Some argue that the United States won World War II and many of the following wars by a judicious use of eavesdropping. Codebreakers in England and Poland cracked the German Enigma cipher, giving the Allies a valuable clue about German plans. The Allies also poked holes in the Japanese code system and used this to win countless battles. No one has written a comprehensive history of how code breaking shifted the course of the conflicts in Vietnam, Korea, or the Middle East, but the stories are bound to be compelling.” – https://www.wayner.org/books/ffa/ffa-2002-12-13-mod.pdf

[5] https://www.wayner.org/books/ffa/ffa-2002-12-13-mod.pdf

[6] https://www.wayner.org/books/ffa/ffa-2002-12-13-mod.pdf

*https://www.itassetmanagement.net/2015/08/25/cloud-itam/

[7] https://www.brightworkresearch.com/saphana/2018/09/04/how-true-is-saps-motion-to-dismiss-teradatas-complaint/

[8] https://e3zine.com/2018/12/02/indirect-access-illusion/

[9] https://e3zine.com/2018/12/24/sap-indirect-access-charge-twice/

[10] “What is more, HEC, HCP and SCP are much more expensive than clouds from AWS, Microsoft and Google, but do not have more or even any consulting services that would justify this difference. Some SAP partners have been noticing the first customers turning away from SAP clouds and to AWS, Azure and Google with their help.” – https://e3zine.com/2018/12/07/sap-erp-cloud-computing/

[11] https://www.brightworkresearch.com/sapresearch/2018/01/03/accurate-sap-containing-best-practices/

[12] https://www.brightworkresearch.com/erp/2018/11/08/how-sap-uses-best-practices-to-control-the-implementation/

[13] Linux was beating Windows in performance benchmarks back in the late 1990s. https://lwn.net/1999/0429/

The Public Cloud Revolution Book

The Public Cloud Revolution: How Open Source is Displacing IT Mega Vendors

Interested in how to open source is powering public cloud providers like AWS and Google Cloud and what this means for the different modalities of computer hardware (cloud, on-premises proprietary server, mainframe, and appliances?). This book covers many topics that are greatly underrepresented in the common IT media coverage of these topics.

What is the Real Story of How IBM will Use Red Hat?

Executive Summary

  • IBM purchased Red Hat, however, how real will the benefits be for IBM customers?
  • In this article, we separate the fluff from the reality if Open Shift and IBM.

Introduction

There is a great amount of coverage of the IBM purchase of Red Hat. However, there has been little critical analysis of the acquisition.

IBM and Red Hat and Open Shift

IBM made a major bet on containers and Kubernetes being the future of the hybrid cloud. They paid a 63% premium over Red Hat’s share price in order to acquire Red Hat, and this was in an already overheated stock market price.[1] The purchase was made primarily to access Red Hat’s Open Shift customers. Open Shift is a layer that sits on top of Kubernetes and Docker.[2] Red Hat describes Open Shift as follows:

“It’s hard to abstract the varied benefits of multicloud deployments, but deploying containers in clouds helps an enterprise use the right cloud for the right project. Red Hat OpenShift is a complete container application platform built on Kubernetes—an open source platform that automates Linux container operations and management so each container has policies telling it how and where to run. Every container is inherently designed to run on Linux, so deploying Red Hat OpenShift on Red Hat Enterprise Linux brings more security to every container and better consistency across environments. If you need everything at once (the cloud infrastructure + a container platform), Red Hat Cloud Suite combines a container-based app development platform, private cloud infrastructure, public cloud interoperability, and a common management framework into a single, easily deployed solution.”[3]

IBM’s plan with Open Shift, and Red Hat generally, we project, is twofold.

  1. Use Open Shift to push customers to IBM’s Cloud.
  2. Use Red Hat to sell other associated products and services.
  3. Sell Red Hat into existing customers and create a management service for hybrid cloud.

Use Open Shift to Push Customers to IBM’s Cloud

IBM can use Red Hat’s Open Shift container application platform to “intermediate” between the different cloud service providers. There are several problems with this strategy. One is that while IBM has promised that Red Hat will operate as “Switzerland” there is nothing in IBM’s history to indicate they will follow through on this. Therefore, IBMs desultory cloud services will want to pressure Red Hat to use Open Shift to funnel customers away from AWS and Google Cloud and Azure and towards IBM Cloud. In fact, that would have been a primary reason for IBM to make the acquisition. However, to pull this off, IBM must broadcast that Red Hat will remain neutral while doing the exact opposite behind the scenes. As IBM paid a very significant premium for Red Hat, they will need to monetize the purchase, which will mean leveraging Red Hat for self-centered, rather than customer priorities. IBM has almost said as much.

“This is a very good opportunity to cross sell,”[4]

Correct. Also, IBM Cloud services are a primary item to cross-sell, and these services are uncompetitive. They can’t make very much progress in the market on their own, in a level playing field, which is why IBM in part needs Red Hat, to push customers to a service that they would not ordinarily use. This means that a big part of the acquisition will be for Red Hat to have its customer base harvested by IBM, and to redirect cloud purchases away from the competitive providers to an uncompetitive provider. And to do this, Red Hat would have to become biased towards IBM Cloud. No doubt, efforts will be made in marketing to propose that Open Shift has been engineered by IBM to “work best” with IBM Cloud. This will mean IBM lying to Red Hat’s current customers by saying they will do one thing and then doing another.

How do we know this?

Well, the authors have plenty of experience with IBM. If we look at previous IBM acquisitions, this pattern is quite clear. In the case of the statistical application SPSS, the first thing IBM did was “overmonetize” the acquisition in 2009. IBM’s acquisitions are quite consistent. IBM announces an acquisition, and how it will be fantastic for customers, while at the same time making the acquired item less appealing either through price increases or control and interference.

The following quote is typical of the analyst reaction to acquisitions.

“UBS analyst Maynard Um called the acquisition “a step in the right direction” for IBM, as SPSS will add “an essential part” of an important growth area for IBM. He said the deal should add slightly to IBM’s earnings in 2010.”[5]

However, did SPSS grow after IBM purchased it? It should have right? Of course it would, with SPSS being pushed by IBM’s salesforce.

So what actually happened?

This is the usage of SPSS in academic articles.[1] Notice the aggressive decline before, but continuing after the acquisition. As a user of statistical packages, we no longer considered SPSS and option after IBM made the acquisition, and moved to use R. Our view is that customers should migrate off of any product that is acquired by IBM, when possible. IBM makes acquisitions to access customers and then to milk them.[2] [3]

Invariably, this is what private companies do when they purchase previously independent items (Red Hat was also a private company, but they were never before contained the bias of being owned by a cloud service provider. And for executive compensation reasons, IBM is desperate to show growth in its cloud services.) IBM has tried to recast is private cloud/data center operations as part of “cloud.”

Time to Crank Up the Smoke and Mirror Machine

IBM has already begun making false statements about Red Hat. Which means that the hype around Kubernetes and Open Shift is set to rise to the highest possible levels. Here are some example quotations from IBM about the acquisition.

“Deal accelerates IBM’s high-value business model, making IBM the #1 hybrid cloud provider in an emerging $1 trillion growth market.”

 Is IBM the #1 hybrid cloud provider? So was Red Hat the #1 hybrid cloud provider before the acquisition? No. This quotation highly overstates IBM’s centrality to the cloud. IBM has extremely little public cloud business, with most of its related business being public cloud or simply hosted. How a company can recast its previous inability to do much of anything in the cloud as now being central to the cloud is an amazing bit of propaganda.

“IBM to maintain Red Hat’s open source innovation legacy, scaling its vast technology portfolio and empowering its widespread developer community”

Open Shift is already open source. However, it’s difficult to see how IBM will empower its developer community. That developer community was doing fine without IBM. This acquisition is not about empowering Open Shift; it’s about accessing Red Hat’s customers.

“This brings IBM a collection of relatively sticky software clients, many of whom are undergoing a transition into shifting their IT — be it back office plumbing or client-facing platforms — onto the cloud.”[4]

There is no reason to accept IBM’s statements here at face value without looking at its history.

“The acquisition of Red Hat is a game-changer. It changes everything about the cloud market,”

Why is any of this quote true?

Any company that wanted to could have used Open Shift before IBM acquired Red Hat. IBM already had a partnership with Red Hat. Was that partnership ineffective? The fact is Red Hat was beating IBM in sales in key areas, which is a primary reason for the acquisition.

“Most companies today are only 20 percent along their cloud journey, renting compute power to cut costs,” she said. “The next 80 percent is about unlocking real business value and driving growth. This is the next chapter of the cloud. It requires shifting business applications to hybrid cloud, extracting more data and optimizing every part of the business, from supply chains to sales.” – Ginni Rometty, IBM CEO[5]

If Ginni Rometty thinks that the primary or only reason that companies use the cloud is to rent compute power to cut costs, she does not know much about the cloud. Companies use cloud services to access services that are not feasible to spin up on-premises, to access open source, to get exposed to the most advanced items in computing at both low cost and low lock-in. Brightwork Research & Analysis uses cloud services to test advanced services quickly and easily (and to shut them down after testing), to keep away from any on-premises investments outside of laptops and screens, and to access these cloud providers international network of server farms that provide low latency to any part of the globe. In fact, a big part of using the cloud is to get away from companies like IBM, SAP, Microsoft and Oracle that follow the lock-in model.

“IBM and Red Hat also will continue to build and enhance Red Hat partnerships, including those with major cloud providers, such as Amazon Web Services, Microsoft Azure, Google Cloud, Alibaba and more, in addition to the IBM Cloud.”[6]

IBM and Red Hat will continue to build and enhance Red Hat partnerships with AWS, Azure, Google Cloud, Alibaba, and IBM Cloud equally? Is IBM promising that it won’t leverage Red Hat into more business for IBM Cloud?

Use Red Hat to Sell Other Associated Products and Services

IBM is always interested in selling consulting services. Red Hat presents them with a way of doing this. IBM also owns a variety of Red Hat related products which it can also sell to Red Hat customers. This is where customers of Red Hat will have to be very careful, as the IBM sales teams will be coming for them, and told that they need to sell into Red Hat’s base to leverage the acquisition. And the information that Red Hat sales reps provide to their customers is going to take a steep dive. In our Honest Vendor Ratings, IBM scores very low in information quality.[7]  By contrast, Red Hat has been one of the good actors in the open source movement.

Sell Red Hat into Existing Customers and Create a Management Service for Hybrid Cloud

Under this strategy, IBM serves as an intermediary between all cloud service providers. Let us review some of the issues.

  • What is the value of IBM doing this over a customer just taking the Red Hat Open Shift software?
  • Is IBM qualified to explain all of the cloud options available in the different cloud service providers to clients? Secondly, with the first part of the strategy to push IBM Cloud, can IBM be trusted to do this? If IBM understood cloud environments so well, why has their own cloud been such a lagging offering?
  • Red Hat is certainly experts in cloud services and container management, but customers won’t just be dealing with an independent Red Hat now. The will be dealing with Red Hat’s new landlords, who by the way, have a bit of a reputation for micromanaging acquisitions.

A Company That Must Acquire or Die

IBM was always known as a company that used its monopoly position in data processing machines to extract extremely high service fees from their clients. However, for much if not most of its history it can be considered an innovative company.


IBM used to actually add value to the economy, instead of just extracting from it, with products like all transistor 1401.

Those days are past it. Now IBM is both unethical and essentially an empty blue suit when it comes to innovation. They retain a relatively small R&D group that exists primarily for PR or glamor projects like the IBM vs. Gary Kasparov chess competition. Almost all of their software is purchased and soon after purchase, the software and development teams are reorganized, bureaucratized and gradually becomes either a lagging package or completely irrelevant. This happened to Lotus and is in the process of happening to ILOG and SPSS. In fact, the act of IBM buying an application that you already own is a signal that it is time to begin considering its replacement.

What Happens to Vendors Acquired by IBM?

IBM acquires many software vendors, but the evidence is that these vendors gradually lose their relevance over time and that they move from being innovators to laggards in the marketplace. This is not actually that damaging to IBM because they only need their acquisition to be viable for a few years before they are able to make their money back with their lucrative consulting work, which is partially at least, based on their ability to acquire firms.

What Occurs

  1. For current customers of an application, they now are hit up by IBM salespeople, and their application costs increase.
  2. The investment in the software is diminished because IBM is not able to further develop the product very much, and in fact, that is not even IBM’s focus.
  3. IBM begins recommending whatever software they purchase through their consulting business. (how a major consulting firm can objectively recommend products which it sells and maintain its objectivity is difficult to understand)

The Public Interest

The problem with all of this is that it is very difficult to see how this benefits anyone but IBM. The determination of what companies can merge is a question for the government and must pass a standard of public interest benefit, or at least that is the official story. For instance, the recent attempt by ATT to acquire T-Mobile was not allowed because it could pass a public interest test. ATT wanted the enhanced market power of T-Mobile but is not interested in submitting to the type of regulation which prevents ATT from gouging customers that would have fewer placed to turn. In fact, generally, the government is, in my view, far too lenient on allowing mergers as few mergers actually benefit the consumers or buyers of a product or service.

However, these companies are major financial contributors. Interestingly with all the rhetoric about competition, few companies seem willing to compete, and want to grow through agglomerations and concentrating their market power with other companies.

Policy Perspective

Form an enterprise policy perspective, there is an obvious problem with allowing a company to acquire software vendors that it uses to enhanced its monopoly position particularly when there is a tie between a business that partially performs advisement (IBM Global Services) and selling software. It also has a negative effect on innovation in the software marketplace. The product CPLEX is a good example of this problem. CPLEX is a general optimizer that is used as a standalone product, but is also incorporated into many enterprise software applications. For instance SAP’s supply network and production planning modules are powered by CPLEX. However, now that it is owned by IBM, CPLEX has been captured, and I am hesitant to recommend CPLEX to a client because it comes with all the IBM overhead and manipulation of and IBM account manager that is trained to “penetrate and radiate the client.”

This is bad for clients and a waste because it means that my investment into CPLEX is diminished because it is no longer an independent company, and furthermore little future development can be expected from CPLEX. This problem is repeated with any software which IBM acquires, and they have a very large number of acquisitions in their stable. I have a number of good relationships with best of breed supply chain vendors, and if any of them were to be purchased, my relationship with them would probably end as they would then be mired in the bureaucracy of IBM. I cannot in good conscience recommend a product owned by IBM because this allows the “camel’s head into the tent.”

Buying Back Stock Over R&D

There is a problem in the US which is larger than IBM. That is the incentives in the system have become perverse. The provision of large blocks of stock options to executives have promoted them to focus on continually increasing their company stock price over the long-term viability of the company. Recently, the technique of repurchasing shares has become a way for executives to line their pockets. IBM has taken this to the extreme, by buying very large amounts of its own shares, which does nothing for the innovative prospects of the company, but which quickly brings up the share prices allowing the IBM executives to cash out and quickly become wealthy (or more wealthy than they were previously). This activity, undiscussed in the financial media, is covered by progressive economist and economic historian Michael Hudson.

“Like-wise, stock market prices rise not only because pension funding and other savings are being steered into the market, but because the volume of stocks actually is shrinking. Stocks are being retired by corporate raiders in exchange for high-interest (‘junk’) bonds, and by corporations using their earnings to buy their own stocks rather than to make new direct investments. (IBM is the most notorious example here, often spending $10 billion a year on its own stock rather than on R&D or other market-building investment.)”Michael Hudson

If we think of Red Hat, they have historically been a high trust offering. It took decades to build up that trust and community around Red Hat. So of course, IBM wants to extract this life force. This reminds me of the Microsoft acquisition of GitHub. Why should a company that has a history of stealing IP have the right to acquire GitHub? That code does not even belong to GitHub, but to those that trusted GitHub.  If unethical tech giants can kill (degrade, pick your choice of words) high trust entities like Red Hat and GitHub, this shows how entirely lacking regulation is of the IT market.

As soon as IBM makes an acquisition, our recommendation to clients is to switch out of that item as soon as possible. Red Hat’s name, their reputation should now be IBM’s reputation.

Note to Redhatters

Look, Red Hatters, if you stay you will be dancing with the devil in the pale moonlight. Just don’t. This is such a great time to leave. You can leave with your dignity intact. You did not join Red Hat so you would work for Big Evil….we mean Big Blue.

Angry Comments from IBMers

We can normally count on IBM to provide highly aggressive commentary around any criticism of their company and strategy, and we received this comment from this article.

The Initial Response to the Article

So this ‘article’ is complete garbage. They claim to know what IBM is going to do but apparently didn’t listen to anything that came out of THINK. IBM has established a clear hybrid cloud/multi-cloud strategy. IBM announced Watson Anywhere. You can run it on any cloud you want. Our product that competes with OpenShift, IBM Cloud Private just released support to run ICP on Azure, AWS, and GCS. We’ve released MultiCloud Manager, the first offering of its kind anywhere that allows operations teams to manage and control Kubernetes clusters regardless of the cloud they run on. If the author thinks Ginni has a simplistic view of the cloud, well I say, go ahead and underestimate her and a bunch of really dedicated IBMers who are determined to be the premier hybrid cloud/multi-cloud provider in the world. You may dismiss this post as nothing more than bravado, but those who know me know that I am nothing if not blunt and to the point. I don’t do bravado. You come across as former IBMers with an ax to grind and while that is your right, don’t expect others to call you on this BS.

Our Response to the IBM Resource

I don’t know how you concluded the article is filled with bravado. This is an analysis of the likely outcome of an acquisition. I looked up the definition of bravado and found: “a bold manner or a show of boldness intended to impress or intimidate.” Whom am I intimidating exactly? And do you have a problem with bravado in the first place? If so, IBM would seem to be a curious entity to support. I can’t speak to the “bravado scale” of the article; I want to be measured on accuracy. Moreover, the information I provide in articles is far more accurate than the information which IBM delivers to the market. You commented that I did not listen to anything coming out of THINK. This relies on the assumption that I am required to agree with things released by IBM. However, because IBM states something does not make it true. I have worked with IBM on projects and evaluated their media output, and its accuracy is quite low. This would be like saying I did not listen to the marketing literature around Watson. I read it, but never thought it would work, and ended up being right, while IBM was wrong.

So statements do not equal truth, this is even more true with statements made by IBM and I am not required to “listen” to statements that you think I should listen to. For the comment about Ginni, which was..

“If Ginni Rometty thinks that the primary or only reason that companies use the cloud is to rent compute power to cut costs, she does not know much about the cloud.”

This quote happens to be quite accurate, and difficult to debate. Cloud services are used for much more than this. They can be used to undermine low value add and corrupt vendors like IBM. They can be used to test cloud services and components in a way that was not possible before. So yes, Ginni seems to have a very narrow view of the cloud, but IBM has yet to offer much more than hosting. So yes, Ginni has little experience running a company with cloud expertise. This is why they had to buy Red Hat, and they have nothing developed internally. Also, if you are going to contest this point, don’t do what Oracle resources do, and come up with a bunch of examples that are hosting. I am aware of IBM’s giant data center business, but cloud has a specific definition, and IBM is not doing it, even if they market hosting as “private cloud.”

And Now We Get to the Topic of Bias

“I receive the accusation of bias nearly every time I write an article that a person working for that entity disagrees with. However, no one has yet demonstrated the reason for all of this bias. I have never once been accused of a positive bias when I have written an article that casts a positive light on an entity. So why is that? If accusations of bias are legitimate and not just a smoke screen, shouldn’t I be accused of positive bias from someone within that entity?

Accusations of bias are easy to make, but what is the origin of this bias? Is it financial? Because I/Brightwork take no money from any vendor or any entity to produce research. This differentiates us from nearly all the other research entities. Curiously, companies like Accenture or Gartner have not only demonstrated financial biases, but they do not get accused of bias. I have been trying to figure out why that is. It might be because if you are a large company, fewer people are willing to accuse you of bias. Therefore, the actual level of bias is immaterial to the accusation of bias. Any small entity that contradicts a large entity can be accused of bias.

The second problem, the person claiming bias always has a clear financial bias. I used to get most of the accusations from SAP, and Oracle resources really liked my articles and felt they had no negative bias. However, then when I began to analyze Oracle, all of a sudden Oracle resources stated I had a clear bias, which did not exist when they cheered on my SAP articles. Oracle resources are so bad at this that I wrote a specific article for them on the topic of hypocrisy titled Teaching Oracle About Hypocrisy on Lock In. SAP resources paid by SAP. IBM pays you. How could I possibly have a higher financial bias than you? I would have to draw all of my income from some competitor to IBM, when in fact I draw none.

So your financial bias is out in the open. Let us say that you hated the Red Hat strategy and you thought it would fail. Could you even write such a thing on LinkedIn without career repercussions? How much freedom of speech do you actually have? It seems IBM resources spend their time on LinkedIn promoting IBM. So not only is your bias clear, but your freedom to speak your mind is quite limited.

However, my bias is not demonstrated. I have been asking for years for someone to provide evidence of a financial bias, and no one has ever come up with anything.

Furthermore, most of my income has come from SAP. However, that does not work in terms of bias accusations, because I am probably the best-known critic of SAP. On several occasions, I have also been accused of biting the hand that fed me. But, isn’t that the opposite of bias? You are making two primary claims that lack evidence. The first is that IBM’s history should not be used to predict the future. However, history is usually the best guideline for predicting the future. The second is bias, but the person making the claim (you) seems to not recognize the problem in making such a claim without realizing their own position of bias.

Conclusion

Claims of bias against Brightwork always come from individuals who are themselves biased. The most important bias in society is financial bias. Yet, no individual who makes a claim of bias against Brightwork is able to substantiate the financial bias, and when we ask for this, we receive the observation that the article itself is an example of bias. Which is another way of saying they have no evidence? The term bias is sometimes simply a pejorative term that is used to mean preference, however, a preference and bias are not the same things. Secondly, the largest and most financially biased entities in the enterprise software space are rarely accused of bias. It is an important question to ask why.

The Necessity of Fact Checking

We ask a question that anyone working in enterprise software should ask.

Should decisions be made based on sales information from 100% financially biased parties like consulting firms, IT analysts, and vendors to companies that do not specialize in fact-checking?

If the answer is “No,” then perhaps there should be a change to the present approach to IT decision making. 

In a market where inaccurate information is commonplace, our conclusion from our research is that software project problems and failures correlate to a lack of fact checking of the claims made by vendors and consulting firms. If you are worried that you don’t have the real story from your current sources, we offer the solution.

References

[1] https://r4stats.com/2012/05/09/beginning-of-the-end/

[2] https://seekingalpha.com/article/152434-is-ibms-acquisition-of-spss-too-late

[3]After IBM bought SPSS, it steered away from the academic market, stopped the inexpensive student version bundling, went after the business market, even renaming the product PASW (Predictive Analytics SoftWare) for a while.” – https://r4stats.com/2014/08/20/r-passes-spss-in-scholarly-use-stata-growing-rapidly/

[4] https://www.bloomberg.com/news/articles/2018-10-29/why-red-hat-s-open-source-cloud-is-ibm-game-changer-quicktake

[5] https://www.prnewswire.com/news-releases/ibm-to-acquire-red-hat-completely-changing-the-cloud-landscape-and-becoming-worlds-1-hybrid-cloud-provider-300739142.html

[6] https://www.prnewswire.com/news-releases/ibm-to-acquire-red-hat-completely-changing-the-cloud-landscape-and-becoming-worlds-1-hybrid-cloud-provider-300739142.html

[7] https://www.brightworkresearch.com/softwaredecisions/honest-vendor-ratings-ibm/

https://www.sand.com/ibm-microsoft-oracle-sap-customers/

https://news.consumerreports.org/electronics/2011/12/more-signs-that-att-is-backing-out-of-t-mobile-acquisition-attempt.html

Financial Disclosure

Financial Bias Disclosure

Neither this article nor any other article on the Brightwork website is paid for by a software vendor, including Oracle, SAP or their competitors. As part of our commitment to publishing independent, unbiased research; no paid media placements, commissions or incentives of any nature are allowed.

Search Our Other Cloud and Multicloud Content

References

The Public Cloud Revolution Book

The Public Cloud Revolution: How Open Source is Displacing IT Mega Vendors

Interested in how to open source is powering public cloud providers like AWS and Google Cloud and what this means for the different modalities of computer hardware (cloud, on-premises proprietary server, mainframe, and appliances?). This book covers many topics that are greatly underrepresented in the common IT media coverage of these topics.