What To Do About the Extreme Monopoly Implications of Hyperscale Public Cloud Providers

Executive Summary

  • Hyperscale public cloud providers are tremendously efficient, but they are natural monopolies.
  • Why the issue of public cloud monopolies needs to be discussed and regulated.

Introduction

It is only possible to name a few public cloud hyperscale providers. This is because the hyperscale providers have enormous economies of scale in their facilities as well as in how they enable their services to be easily consumed — and other factors. Even large vendors such as Oracle and SAP have been unable to provide a competitive offering to the hyperscale providers. (One might argue they could have put up more of a fight, but lack the appetite for such long term investment, Oracle for example prefers to spend money on stock buy backs).

How Monopolistic Are the Cloud Service Providers?

There is little doubt that these providers are monopolistic.

  • GCP’s parent company, Google has taken control over the majority of online advertising.
  • AWS, has a specific business model to eliminate competition from the markets in which they compete. AWS seemingly unlimited funding is described my monopoly expert Matt Stoller as a type of counterfeit capitalism, and it has many copycats in software and outside of software (see the links and quotes at the bottom of this article).
  • Azure’s parent company Microsoft, is well Microsoft.

Curiously, one of Azure’s arguments to customers is that AWS is such a monopolist, that they use the data they gather from providing cloud services, to compete against their customers, at least in some circumstances as the following quote explains.

Microsoft has been telling potential clients that if they use its Azure service, they won’t need to worry that they are placing valuable customer data or product information with a rival who can use the data to compete with them. According to the Journal, Julia White, corporate vice president of Microsoft Azure, said in an October interview that unlike with AWS, Azure is “not about using customer data and competing with them.” – Forbes

This is an amazing development, with one of the largest monopoly vendors in the enterprise software space making the monopoly argument against a competitor.

While this is all known, the far less frequently discussed topic is what to do about it.

Non Hyperscale Providers Losing Market Share

Data centers and colocation operators are steadily losing market share to the hyperscale providers. So much so, that as we cover in the article How Gartner and IDC Help Vendors Co-Opt Things, They Are Unrelated To, even huge companies like Equinix have found it necessary to change the narrative. They have turned to IT analysts like Gartner and IDC and paid them most likely a substantial fee to try to discourage companies from viewing Equinix’s “non public cloud” offering as relevant and as valuable as the public cloud. As we cover in the article, Equinix’s arguments, repeated through Gartner and IDC make little sense.

The Role of Regulation and Natural Monopolies

The answer to this is the same answer to any natural monopoly, namely regulation.

The definition of a natural monopoly is as follows.

natural monopoly is a monopoly in an industry in which high infrastructural costs and other barriers to entry relative to the size of the market give the largest supplier in an industry, often the first supplier in a market, an overwhelming advantage over potential competitors. This frequently occurs in industries where capital costs predominate, creating economies of scale that are large in relation to the size of the market; examples include public utilities such as water services and electricity.[1] Natural monopolies were recognized as potential sources of market failure early as the 19th century; John Stuart Mill advocated government regulation to make them serve the public good. – Wikipedia

The understanding of monopolies, much less natural monopolies in even the business general public, is quite weak. We accept highly regulated natural monopolies in areas ranging from railroads, water works to power generation, without giving it a second thought.

The prices paid for our monthly power bill are not set by the “market” and from among multiple options. In each city in the US, for example, there is one power provider — a regulated utility. Most of the world works in the same way.

A dam, which produces power, and is a natural monopoly does not work under a competitive model. First dams are extremely expensive to build and have large ecological implications. How does a “free market” work for dams? Should a second dam be allowed a few miles from this dam? That won’t work, as a dam creates lake behind it. 

Large infrastructure items like dams, railroads, power generation, water works, and hyperscale providers do not fit within the construct of open competition.

The outside of a Google data center. 

The inside of a Google data center.

The Failure of the Low Regulated Mobile Phone Services Market

In cases where natural monopolies have been fragmented, such as in the US with mobile phone services, the costs have become much higher than necessary. And there has been a duplication of infrastructure, and a corresponding increase in expenditures on sales and marketing. A discussion with any Canadian quickly illuminates how Canada kept their cellular service a regulated monopoly, to the satisfaction of many Canadians, whereas the US followed a “free market” model of trying to have multiple cellular service providers for what is a natural monopoly.

Why There is No Other Historical Solution than Regulation

There is no other answer to natural monopolies but regulation. Without regulation, natural monopolies coerce excess returns from their customers. This has been found to occur in virtually every case where a monopoly is present.

Currently, the hyperscale providers like AWS, GCP, and Azure provide low prices (with only AWS and GCP being public prices). Still, history shows that as these providers continue to drive out competition, these prices will not stay low. Low prices are the early stage of monopolies (and often used to justify the monopoly), mid and later stage monopolies use their market power to raise prices. Consumers lack alternatives to the monopoly, and once most of the competitors are run from the market, it is difficult for new entrants to bring back competition. Monopolies are also intertwined with government lobbying and protected by governments. With the rise of not only hypercloud public cloud providers but several giant technology companies (including Facebook and Apple), the size and influence of these companies are making them close to unregulatable.

Such political power is also suffused into policy unrelated to regulation but which nevertheless makes it even more difficult to compete with the monopoly. As an example, Apple barely pays taxes due to its tax haven in Ireland, and General Electric (an older monopoly) has many years where it receives a billion-dollar or more reverse tax from the US government. That is, it not only pays no tax but is paid to exist by the US government.

International Concern Over the Concentration of Hypescale Public Service Providers

While AWS, GCP, and Microsoft/Azure are multinationals with offices all over the world, they are all based in the US. As concentration continues to occur, each non-US country will have to come to terms with higher and higher percentages of government and private industry data being kept on US servers. And beyond the privacy concerns within each vendor, the US government has come up with a variety of excuses to obtain access to this data as is explained in the following quotation.

However, those using third-party cloud solutions are relinquishing some of their control over their business data. For example, the U.S. Cloud Act (Clarifying Lawful Overseas Use of Data) gives U.S. authorities access to data stored in the cloud – even if local laws in the data storage location prohibit it. Enterprises will increasingly use their data to create value – increasingly in real time, for example, in the production environment, ”said Dr. Karl-Ulrich Köhler, CEO of Rittal International. “Data sovereignty will be an important success factor for international competitiveness,” adds André Hiddink, product manager IT Infrastructure. – Data Center Works

The primary regulatory body internationally that has been able to fine and otherwise punish US companies has been the EU.

The US and Europe have had good relations for many decades. Still, it is difficult to see the US government accepting the current and predicted future situation if the roles were reversed.

This leads to the following quotation.

In the EU there is a move towards regulation to counter the dominance of the USA Tech giants which will hurt AWS, Google etc and leaves the door open for Tier 2 cloud providers (some using OCP hardware) that want to use colocation centers. This may or may not hurt Equinix if the EU include Equinix in with the other USA based companies.

I have been advised by a small colocation provider in the UK that provides an On Ramp services.

One of the main CSPs (mobile network provider) in the UK used them recently to connect to Google Cloud, and it was the only way they could do it apparently. And only networking gear was installed in their colocation center, that is no servers were installed. – Mark Dansie

And the following quotation also.

The European major digital project Gaia-X, an initiative of the German Ministry of Economic Cooperation and Energy (BMWi), is to start in 2020. The project aims to build a European cloud for the secure digitization and linking of industry and forms the basis for the use of new AI applications (artificial intelligence). In this context, the Fraunhofer-institute the initiative ‘International Data Spaces’. This virtual data room allows companies to exchange data securely. Compatibility of a proprietary solution with existing (cloud) platforms – interoperability – also exists. This means: geographically dispersed smaller data centers with open cloud stacks can create a new class of industrial applications that perform the first data analysis directly at the source of the data and use the cloud for later analyzes. – Data Center Works

Advice on Enjoying the SAP and Oracle Cloud Quiz

To see the full screen just select the lower right-hand corner and expand. Trust us, expanding makes the experience a whole lot more fun.

 

Conclusion

The US has done very little in the past few decades to enforce its antitrust regulation, and without a national security concern (as all of the hyperscale providers are based in the US), the EU is the likely regulatory entity that would do something to regulate the market. The EU has a significant weapon in the fight, which is the EU market.

If forced to do so, the hyperscale providers would have to accommodate the EU regulations. The hyperscale providers are quite new, especially at their current scale. This is an issue that is creeping up on regulators, and that becomes more important as they continue to grow and pull market share from public cloud providers.

Quotes on Counterfeit Capitalism

These quotes are from a landmark article on capitalism titled WeWork and Counterfeit Capitalism, where the competition is primarily based upon access to capital.

Today I’m going to continue on this theme, and discuss the increasingly common tendency of capital markets to finance loss-making companies, which is an important trend I call “Counterfeit Capitalism.” The most hilarious example is WeWork, because it’s just such an obvious example of self-dealing couched in New Age management consulting speak. Its CEO, Adam Neumann, was just forced to step down. Both Neumann’s rise, and his fall, have important lessons if we want to correct serious errors in our political economy philosophy as a society.

This is of course Amazon’s model, which underpriced competitors in retail and eventually came to control the whole market. And Amazon has spawned a host of imitators, including WeWork. It has also reshaped venture investing. The goal of Son, and increasingly most large financiers in private equity and venture capital, is to find big markets and then dump capital into one player in such a market who can underprice until he becomes the dominant remaining actor.(emphasis added)

In this manner, financiers can help kill all competition, with the idea of profiting later on via the surviving monopoly. – Matt Stoller

AWS is profitable. However, it hasn’t been for long. And in fact, most of Amazon’s profits come from AWS, not from its larger retail revenues.

There are few companies that the capital markets would have allowed to make the investments that AWS did into its infrastructure. This is an extra barrier to entry, that is the capital markets allow some companies to go years without profits or only rarely profitable quarters, while requiring profits from other companies. Tesla is another company that the capital markets to make enormous promises, and to come to raise enormous sums of money, even when they repeatedly say they won’t.

Matt Stoller continues…

What predatory pricing does is to enable competition purely based on access to capital. Someone like Neumann, and Son’s entire model with his Vision Fund, is to take inputs, combine them into products worth less than their cost, and plug up the deficit through the capital markets in hopes of acquiring market power later or of just self-dealing so the losses are placed onto someone else. This model has spread. Bird, the scooter company, is not making money. Uber and Lyft are similarly and systemically unprofitable. This model is catastrophic not just for individual companies, but for their competitors who have to *make* money. I’ve written about this problem before. Amazon has created a much less competitive and brittle retail sector. Netflix’s money-losing business is ruining Hollywood.

Then Stoller goes on to explain the impact of this on society generally.

This kind of counterfeit capitalism is terrible for society as a whole. At first, with companies like Walmart and Amazon, predatory pricing can seem smart. The entire retail sector might be decimated and communities across America might be harmed, but two day shipping is convenient and Walmart and Amazon do have positive cash flow. But increasingly with cheap capital and a narrow slice of financiers who want to copy the winners, there is a second or third generation of companies asking Wall Street to just ‘trust me.’

As euphoria in capital markets takes hold, predatory pricing scheme come to entirely wastes capital on money losing enterprises, and eventually these companies become Soviet-style generators of white elephants and self-dealing. The men and women who run them have to be charlatans, because they are storytellers justifying losses.

One of the results was the establishment of the Securities and Exchange Commission, which was designed to stop monopolization and fraud enabled by stock manipulation. As it turned out, it worked quite well. And as corrupt as the SEC has become, these principles even work now, in 2019, under the Donald Trump administration. Pure disclosure and public markets managed to stop Jamie Dimon, Masayoshi Son, and Adam Neumann.

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.

What We Do and Research Access

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References

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

https://www.geekwire.com/2019/amazon-web-services-powers-tech-giants-profits-slower-growth-raises-new-questions/

https://datacenterworks.nl/artikelen/wat-hoort-er-op-de-trendlijst-voor

https://www.forbes.com/sites/petercohan/2020/01/06/how-much-of-amazons-73-billion-aws-profit-will-rivals-win/#4145bec5bcd7

https://www.geekwire.com/2019/true-amazon-profitable-nearly-two-years-even-without-aws-cloud-windfall/

https://mattstoller.substack.com/p/wework-and-counterfeit-capitalism

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.

Why Government Entities Should Use Open Source Over Commercial Software

Executive Summary

  • Commercial software vendors are being subsidized by taxpayer dollars while keeping their code private.
  • Public money should go to public, not private code.

Introduction

Little thought is given when governments buy commercial software that is sold under a restrictive license.

However, upon reflection, this is a strange and inconsistent arrangement. This is because when the government funds something, it is typically placed into the public domain. This is true of public research and public publications as just two examples. For instance, in the US, when taxpayers fund the research of the Office and Management and Budget, their reports are available for everyone to see.

The Public Money: Public Code Video

The following is an excellent video that explains the concept of requiring government entities to direct resources into open source or public code projects.

The things pointed out in the Public Money: Public Code video is unseen. This is because the ASSUMPTION is that applications should be in the hands of private entities and closed.

It is normally assumed that governments should buy their software as the private sector does. However, governments have a public function, and this differentiates them from private companies that have no other charter except to look out for their concerns.

A Long History of Faking Innovation

Commercial vendors have a long history of taking from open source projects, making some small changes, and then marketing the work on the part of the open-source project as their own.

We cover in the article Why Both Superconvergence and Hyperconvergence are Hollow Marketing Constructs. Nutanix helped created the marketing construct of “hyperconvergence,” however, a major thing they did was take the open-source Linux KVM virtualization technology, add some tiny thing, make it private, and then claim innovation. One the basis of a slightly adjusted Linux component and their propriety dashboard, Nutanix claims to be a “one-stop-shop” for all data center needs. Their actual contribution to the “party” is a dashboard, and yet if you read the Nutanix website, it makes claims of revolutionizing data centers.

And this is the problem with commercial vendors. The profit incentive often drives them to make false claims. However, media entities and IT analysts can be hired to say that whatever the marketing department at commercial vendors has cooked up is correct.

The History of Commercial Vendors Ripping Of Governments

As for the government examples given in the video, in the US, government entities are known as easy pickings for the vendors. I am currently tracking several US government entities who are being robbed by SAP and by several SAP consulting partners. The Air Force once spent 1/2 billion on an ERP implementation from Oracle that they canceled after they figured out that Oracle had lied to them when they said Oracle ERP could replace all of the specialized Air Force systems.

Rather than buying ill-fitting solutions and exorbitantly priced solutions from SAP or Oracle, as it is taxpayer dollars, the US government could support open source, which is released back to the movements.

The video makes an excellent point and challenges existing assumptions by asking the question which can be paraphrased as follows.

Why are public taxpayer dollars going into the pockets of closed source commercial vendors?

Taxpayers should insist that open-source alternatives be evaluated first. However, right now, the opposite is occurring.

Under the Trump Administration, a highly functional award-winning and internally developed application called VistA at the Veteran’s Administration (VA) is being replaced by a commercial system from Cerner, which has also given large donations to the right places. This application is a horrible fit for the VA because it was developed for the private health care industry and has a significant functionality focus on billing management, which is irrelevant for the VA because the VA does not bill its patients.

Choosing to be Lied to By Commercial Vendors Like SAP

Various US departments are purchasing a database called SAP HANA right now.

SAP HANA is even a more limited option from a licensing perspective than Oracle. SAP HANA comes with what is called indirect access liabilities, which we cover in the article The HANA Police and Indirect Access Charges. And it means that the US government has restrictions as to how it can move data to and from the HANA database, which SAP uses to force companies into purchasing more SAP software and databases.

Even more appalling is that the US government is buying a database that has enormously false claims about its superiority to other databases How to Deflect That You Were Wrong About HANA. And the database has, in part, been reverse-engineered from open source databases!

And this is admitted to by SAP (although not willingly).

The Teradata v SAP Lawsuit

In a lawsuit against Teradata, as we cover in the article How SAP Admitted in Court Documents to Copying from MySQL, their defense is that they did not take the idea from Teradata (as accused by Teradata), but from MySQL!

Really?

Because this was denied for quite some time after published in the article that Did SAP Reinvent the Wheel with HANA? that HANA had been reversed engineered. And then, when pressed in court, it turns out this was true all along. It is interesting what lawsuits can get companies to admit.

If you are backward engineering your database from open source, then why are taxpayers paying a license fee and dealing with the license restrictions (and the INCREDIBLE license restrictions on HANA) for it?

HANA is of such poor quality that I proposed merely replacing it with an open-source database, but keeping the HANA name so that the executives could feel good about their purchase.

These are the types of topics that I consistently point out the IT media sphere will not touch. Why? Because commercial vendors and consulting firms exclusively fund them. I have been privy to how the ad sales departments at IT media entities work — and they continually send out emails to vendors and consulting firms and ask them to increase their advertising levels.

Conclusion

There needs to be serious discussion around this proposal because there is little reason for governments to be using public taxpayer dollars to fund commercial vendors. This is particularly when commercial vendors and their consulting partners have such a terrible history of taking advantage of government entities.

If governments began to fund open source projects, open-source would explode — because open source projects have proven to be extraordinarily efficient at converting funding to quality output. They are so good at it, that commercial vendor’s trip over themselves to try to take efforts from the public sphere and make it private, and claim that it was their invention.

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.

What We Do and Research Access

Using the Diagram

Hover over each bullet or plus sign to see more explanation. To move to a different bullet point, just “hover off” and then hover over the new bullet.

 

Research Access

  • Do You Need to Access Research in this Area?

    Put our independent analysis to work for you to improve your spend.

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.

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 providers. AWS is the largest cloud provider in the world by far and was the early pioneer in the 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 it 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 an excellent 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 exceptionally 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 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. 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 has 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 currently residing in a 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 the 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 provide 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, scroll past this section.

International Latency Testing

However, of the three hyper-scale 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 five comparisons. But the differences are small.

From Singapore, there is no discernible 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 the 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 the 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 not to play in each other’s spaces. However, nearly all the growth in the cloud is the public cloud, not a 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 the 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 before the public cloud is 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 for 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 service provider in the world, it does not have very many images for S/4HANA. And the ones they do have are previous versions rather than the latest.

This lack 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 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, scroll through this section.

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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 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 test AWS directly, 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.

Advice on Enjoying the SAP Cloud Quiz

To see the full screen just select the lower right-hand corner and expand. Trust us, expanding makes the experience a whole lot more fun.

 

Conclusion

Whichever way the client decides to go, Brightwork thinks the client must have 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.

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 mislead 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 purchase).

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

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

“SAP said ABC so XYZ.”

And that ladies and gentlemen are how you make an excellent 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, usually 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 highly dubious. 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 would 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. 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 can 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, which 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 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 the 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 the 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 entirely 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? 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 not that many customers for Employee Central. S/4HANA sees 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, I 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 complete 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 not. And many vendors are also SaaS and innovators in SaaS, so, curiously, 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 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’ cannot develop cloud offerings internally. I believe the second is true, as SAP 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.

Is SAP 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 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 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. 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. HANA dramatically 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.

Advice on Enjoying the SAP Cloud Quiz

To see the full screen just select the lower right-hand corner and expand. Trust us, expanding makes the experience a whole lot more fun.

 

Conclusions

SAP’s cloud revenues will increasingly come from their cloud markup business. SAP’s most significant 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.

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://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 up charging 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, I will describe the battle of the pure cloud against those that would undermine the cloud. I will cover the fact that the hyperscale providers are partnering with highly corrupt consulting companies as well as the problems with executives leaving evil entities like Oracle to assume leadership positions in the hyperscale providers.

What SaaS or Cloud 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 more straightforward 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 multitenant architecture.

Multitenant Architecture

This was an essential 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. Lower sales and marketing costs also defined saaS and Cloud vendors. These vendors would allow customers to test their software by offering trials and to purchase the software incrementally. They often allowed customers to buy 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 to 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 essential 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 hosting, and this allows them to upgrade their applications 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. , a new feature is added, or some backend change occurs, and you 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 codebase. 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 initially designed for the cloud. The reality is SAP sells a 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 tiny customers. Or when Bill McDermott continually brings up its Cloud offerings such as SuccessFactors 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 like 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. Pure 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 massive 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 its 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 happens to be funded in part by SAP? So big surprise Diginomics 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 huge 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 significant 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 substantial 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 prominent vendors and to consulting companies, SaaS and Cloud are entirely negative.

  • The prominent 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 in 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 prominent on-premises vendors and the consulting companies were aligned against SaaS. Thus, both the leading 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 significant 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 not to 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 that they are “partners,” and the vendor can take their margin on top of the cloud consulting firm/provider.

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 complicated than initially 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 hosting contracts because they cannot convert/port SAP to cloud and the terms are on-premises terms — with contracts going out for around five years).

These cloud deals have a high failure rate. The vendor is pretending they are involved when they are not. So an important question is how much cloud failures are related to customers going to the wrong place for information on the 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 the cloud. But this is what companies are doing. They are listening to IBM or other incumbent vendors when they could 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 most significant marketing budgets in enterprise software are maintained by the largest software vendors and the largest consulting companies. Therefore, this gives them enormous power to reframe SaaS or Cloud in a way that benefits them. SAP, for example, has zero interest in offering pure SaaS or Cloud software. Deloitte has zero interest in implementing SaaS or Cloud software, and for self-evident reasons. Interestingly, this 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 mainly goes without mention. Most analysts 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 proven the capability. They spend no time trying to understand if SAP is producing a misleading press release by adopting SaaS or Cloud terminology.

What they would like to do is to undermine the terms so 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 is as high or even high than for on-premises software. The more that the big consulting companies and the prominent vendors can co-opt SaaS and Cloud and reduce its benefits, the more they can ensure 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 created products that 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 entirely impractical adjustments to the SaaS or Cloud concept called the hybrid cloud, which is entirely disingenuous and is a way for SAP to necessarily 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 are 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 offers real cloud naturally. Arena Solutions, Salesforce, etc.. do not bother with these types of shenanigans. SAP has been hiding who is 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 surprising developments is that SAP has become a significant 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 significant cloud waste. They have to make their customers give them a considerable markup because that is their model. We are seeing the deceptive advice on the cloud provided 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 bad 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 the cloud we have ever read. Oracle keeps hiring people at the top of the market from AWS and Google. Still, 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 altogether 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 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 crucial development in enterprise computing, but significant 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 severe conflict of interest when it comes to advising buyers of low support applications because they make more money from high rather than more moderate 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 concerning 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. 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 significant 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. At the same time, 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 standard 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 quote 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 challenging 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 challenging 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 leads an approach where reps were 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 the cloud. That is what Kurian is responsible. Everything Kurian is saying was 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 the Oracle Cloud and Google Cloud. Thomas 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.

Advice on Enjoying the SAP and Oracle Cloud Quiz

To see the full screen just select the lower right-hand corner and expand. Trust us, expanding makes the experience a whole lot more fun.

 

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 to change 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 merely slapping a sticker on a private hosted solution that is not multitenant. 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 seldom asked 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 concerns 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.

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.

What We Do and Research Access

Using the Diagram

Hover over each bullet or plus sign to see more explanation. To move to a different bullet point, just “hover off” and then hover over the new bullet.

 

Research Access

  • Do You Need to Access Research in this Area?

    Put our independent analysis to work for you to improve your spend.

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 getaway 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 meager 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 the information provided by these consulting companies will lead to enormous cloud waste, as they 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 information offered by the large consulting firms to be of poor quality. The advice is inherently backward engineered from the conclusion, and the outcome is determined from on high by people with significant 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. 

Advice on Enjoying the SAP and Oracle Cloud Quiz

To see the full screen just select the lower right-hand corner and expand. Trust us, expanding makes the experience a whole lot more fun.

 

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.

What We Do and Research Access

Using the Diagram

Hover over each bullet or plus sign to see more explanation. To move to a different bullet point, just “hover off” and then hover over the new bullet.

 

Research Access

  • Do You Need to Access Research in this Area?

    Put our independent analysis to work for you to improve your spend.

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 to Understand Thought Leadership Transition from SAP and Oracle to AWS and Google Cloud

Executive Summary

  • AWS and GCP have totally taken over thought leadership from SAP and Oracle.
  • What this transition means for the cloud.

Introduction

For a time, Oracle provided a distinctly differentiated product to the market in its Oracle database. For a time, SAP provided a distinctly differentiated ERP system. These two developments gave those companies great power. However, at this point, those products are not anywhere as distinct as when they were first introduced. Also, SAP and Oracle have grown into difficult vendors to manage with enormous senses of entitlement over the IT budget and with both vendors pushing the envelope as to what is legal to achieve their all-consuming revenue objectives.

Furthermore, if you implement SAP and Oracle’s products as they and their consulting partners stipulate, the result is the highest TCO in the industry. SAP and Oracle want this TCO hidden, and IT analysts and SAP and Oracle consulting partners are only too happy to help SAP and Oracle keep this information quiet. SAP and Oracle want pricing secret, so that pricing can never be determined without a lengthy interaction with their sales representatives. AWS and Google Cloud are offer price transparency because they aren’t software vendors, but service providers.

A Menu of Options

AWS and Google Cloud offer a menu of options; the prices are communicated to customers in real time for various services configuration. The customer chooses, and AWS and Google Cloud are happy to make money from any of them. We spin up AWS and Google Cloud services without ever talking to an AWS and Google Cloud sales rep, and you know what?

We don’t miss them. If we never interact with an Oracle or SAP sales rep again, that would be a good thing.

The following quote from Denis Myagkov further illuminates this.

“I think that SAP’s and Oracle’s myth department is propelling they database solutions without any context. It’s pretty weird to compare one database with another and not mention of its application. Any database is only a way to store some data somewhere and somehow and here we have the huge gap – what system will be consumer of they databases?

AWS and Google act like good merchants, they simply propose an assortment of different databases for developers. Maybe I’m wrong, but I prefer to choose tools for the task, but not vice versa.”

And this is the issue. When we debate SAP, but more Oracle DB resources, what we get back is how deep the Oracle database is in this or that. Also, how the World Data Center uses it for Weather or some other upper tier case studies (with all of the upper tier case studies open source databases ignored). However, the database is part of the IaaS, and the IaaS enables the database to do things, or it sets the boundaries for what is possible (for example, horizontal scalability, which is multi-location and based upon the IaaS).

Should anyone be surprised?

Because the database is what SAP and Oracle have to sell, as they have not figured out IaaS beyond having offerings that function more as propaganda (that makes Wall Street think there is something there, make it seem like they are hip and cool, etc..) That leads the industry in licenses purchased for shelfware.

Loving Bare Metal

Oracle loves promoting bare metal. Unsurprisingly, bare metal is what Oracle is offering. They cannot do the sophisticated things with multitenancy, etc. that AWS or Google Cloud can do. This is equally true of SAP, which for their internally developed products are designed to work on dedicated rather than virtualized servers. Bare metal is hosting; it is not a cloud. If hosting were the answer, IBM and CSC would be rising, instead of being companies that barely anyone talks about concerning the cloud.

Let us say that a salesperson wants to sell you an engine out of context with the value it provided to you. They could discuss its technical specifications. For example, it could be a very powerful engine (a selling point the salesperson chooses to emphasize) It may product 1000 horsepower. It may have a fantastic compression ratio, and so on. However, what about how it fits within the car and the daily use of that car? The salesperson can go into a lengthy monologue discussing very narrow characteristics of the engine. Pretty soon, if you listen to that salesperson, you will put that engine in your economy car. After all, it’s a great engine! Sports car advertisements are similar in that they sell a dream of a car, out on an open country road, that provides a very different experience in traffic, where you might prefer more legroom and an automatic. The vehicle may go 200 mph, but by the way, the speed limit is 65 mph (45 to 55 mph with traffic). That is the danger in listening to a salesperson who has something to sell and only one particular thing to sell.

Hasso Plattner’s Context Free Selling

Hasso Plattner engaged in this type of context free selling when SAP introduced its HANA database. First, nearly everything he said about HANA was not true, as we covered in the article When Articles Exaggerate SAP S/4HANA Benefits. However, let’s say for a moment; it was all true. Even if true, it would not improve the condition of the user, as Hasso and SAP have proposed. Also, it certainly would not be worth the price, maintenance overhead, and indirect access implications.

SAP and Oracle both like to pretend the car/road or the IaaS is immaterial to the discussion, and that the primary focus should be what they have to offer, which are applications and databases. And only commercial databases and applications, of course, no open source databases or applications are to be considered.

The Move Away from Proprietary Hardware

A critical component of AWS and Google Cloud is the ability to move away from proprietary hardware. AWS and Google Cloud have amazing economies of scale in hardware and data center technology and management. How could a company put together a hardware setup that is competitive on price or flexibility with AWS/Google Cloud? Those data centers have untold economies of scale. It’s like mass production, versus a job shop for an IT department. If we look at a big company, say Chevron, they are still not going to have the scale or competence of AWS/GCP. Does anyone look to Chevron for technology? Of course not.

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.

References

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 AWS and Google Cloud Speed the Implementation of SAP and Oracle

Executive Summary

  • AWS and Google Cloud offer the capabilities to speed implementations for both SAP and Oracle.
  • Using external cloud services is far better for implementation speed versus methodologies.

Introduction

Both SAP and Oracle rely upon an ecosystem of consulting partners to implement their software. These partners can sell both licenses and consulting services, but most only have consulting services to sell, and their consulting services are based upon billing hours. The agreement between these vendors and the consulting entities is to gain recommendations from consulting companies in return for receiving implementation work.

The following are important things to consider regarding these consulting partners.

  • As the consulting company does not use the software after it is implemented, their primary concern is the billing hours, not the software that works the best for their clients.
  • Each of the SAP and Oracle consulting companies maintain aggressive targets regarding the number of billing hours and the margin that must be sold each year for a member of these consulting companies to attain and retain their senior level status and their compensation. This is why consulting companies aren’t able to help their clients with software selection in a way that puts the client’s interests ahead of the interests of the consulting companies. The selection has already been performed before the consulting companies evaluate the requirements. This is because the consulting company has already dedicated its consultants to specific modules within a specific vendor. SAP or Oracle consulting companies will typically use the RFP process to backward engineer the RFP (regarding the questions in the RFP) to match the software for which they already consult. Any senior member who did not do this and allowed the client to choose an application the consulting company could not implement (and thus bill hours for) would lose their position in that company as well as the respect of their peers. This is covered in the article How to Understand the Logic of the Software RFP. For consulting companies the RFP functions to place an aura of legitimacy over the software selection process.

The True Function of SAP and Oracle Consulting Companies

Therefore the SAP and Oracle consulting companies primarily function to funnel IT expenditures to SAP and Oracle applications and databases. This of course results in SAP and Oracle implementations.

Of all the vendors, SAP has the most significant partner consulting network with the top 18 consultancies employing over 250,000 consultants globally. There are many other smaller consultancies and independent consultants that increase that number significantly above 350,000 consultants. In the book SAP Nation 2.0, the global SAP ecosystem was estimated at roughly the size of the GDP of Ireland or Norway. In the book, Vinnie Mirchandani observed that he could receive no assistance from any of the well-known IT analyst firms in estimating the global yearly spend on SAP and SAP services as the IT analyst firms said that the total number was “sensitive.” Such estimation is only sensitive because the major IT analyst firms are paid by SAP to push SAP products. Also, therefore SAP is a client, and hence the sensitivity, or should we say the reluctance to offend such a well-paying customer.

The SAP Consulting Ecosystem

SAP’s consulting ecosystem has grown to be the largest in the world because SAP projects are the most remunerative in the world. That is the consulting companies followed profit-maximizing principles when selection which vendors to push. In consulting companies that have both an SAP practice and an Oracle practice, in most cases, the SAP practice is larger. The remuneration obtained from SAP projects is a function of the number of consultants that can be staffed on an SAP project multiplied by the length of each SAP project, and SAP has the most extended projects in the industry.

SAP has introduced one accelerated methodology after another for decades, beginning with ASAP in the 1990s that were proposed to increase implementation speed. We covered one such methodology in the article How to Best Understand the Faux SAP RDS. Our conclusion is that much like the implementation methodologies of the SAP and Oracle consulting companies they are primarily written by the sales and marketing arms of these entities, and they don’t speed implementations. Neither SAP nor Oracle implementations has changed much in their implementation durations.

SAP and Oracle Implementation Timelines in Reality

How long do these implementations for SAP and Oracle take? Well, SAP’s flagship ERP application, called ECC, is typically thought not to be implemented in less than a year, with multi-year implementations being the norm. At the outer edge of the typical timeline, a recent SAP failure at the grocery chain Lidl went on for seven years until it was finally canceled. While a significant loss for Lidl, it was extremely remunerative for KPS as the consulting partner. KPS which would have consumed an ample percentage of the estimated 500 million Euros that were spent on that project over that extended timeline. This is because the consulting company always makes a significant multiple of the funds received by SAP for the license (although recall that support is paid to SAP on a yearly basis, even after the implementation ends). Even after the failure, the project has still declared a success on the KPS website as we cover in the article KPS Continues to Keep Promote HANA for Retail for Lidl After Failure.

Curiously, KPS complained that the timelines for performing customization were too short, which seems like an odd complaint for a project that went on for seven years. Still, a large number of SAP consultants leaped to KPS’s defense, declaring that in their “considered opinion” it would have to have been the client’s fault. This is standard practice. When projects fail, the SAP consultants that comment nearly always blame either the customer or the systems integrator. And this is done ordinarily without actually reading the case study. By the time developers start work, the contract is already signed and its already too late. Whenever an SAP project fails, the post-mortem is typically performed by SAP consultants (or by Oracle consultants for Oracle), which is a problem as they have a strong financial bias to blame the client, which they ordinarily do. In each case, the apologists are careful never to highlight their financial bias when they provide their explanations for SAP project failures. These sources also have a habit of denying that poor quality information flows to the customer/client in the beginning.

Both SAP and KPS told Lidl many inaccurate things. We know this because this is a feature of how SAP projects are sold and because credible sources have told us who were involved in the project. Because the duration was so long (no doubt the project became delayed from an originally shorter duration), this meant that it took Lidl a long time until they finally learned that many of the areas of information presented to them were incorrect. The eventual outcome was that Lidl ended up preferring to stay with their previous systems rather than move on to SAP. SAP consultants see this as a “failure of leadership” at the customer.

It is well known, and we have documented this in the article How SAP Used and Abused the Term Legacy, that SAP nearly always overrepresents how easily SAP’s applications can take over for the prospect’s existing applications. Oracle did the same thing to the Air Force in a well-publicized case of sales overreach, proposing that Oracle’s ERP functionality could replace highly specialized military systems that had been custom developed over decades (Which we covered in the article How to Understand Overmapping Functionality to ERP). In both cases, the length of the project, along with its eventual (mandatory?) delays pushed out the date when the customer figured out that the information given in the sales process was radically inaccurate.

How Can AWS and Google Cloud Improve This Situation?

Because AWS and Google Cloud offer ready to deploy infrastructure, it means that sales contentions can be tested far more quickly than they can in an on-premises environment. Under the on-premises model, merely the sizing exercise, which is unnecessary when one has access to a reliable IaaS environment, pushes out the date from trying out the software. Both SAP and Oracle continuously pledge their newfound allegiance to the cloud. However, they don’t run their companies as cloud vendors. They have for their entire existence operated on the on-premises sales model, where contentions are not checked until a significant amount of time has passed, and the longer the lag between the purchase the decision and learning the reality, the more likely the customer is to “stay the course” the less likely they are to admit they made a mistake.

Something else which is essential to consider is that both SAP and Oracle consulting companies operate with almost no independent verification of the information they provide to customers. We/Brightwork Research & Analysis receives details of communications from all over the world, and the accuracy of the consulting company provided information turns out to be quite low, something we cover for SAP in the article A Study into The Accuracy of SAP. We have not performed such an exhaustive study for Oracle, but our individual analysis of Oracle such as with the autonomous database (as covered in How Real is Oracle’s Autonomous Database?) indicates that Oracle would also not fare very well in this analysis.

As with SAP and Oracle, AWS and Google Cloud also have consulting partners. However, the orientation is entirely different from the relationship between SAP and Oracle and their consulting partners. First, AWS and Google Cloud have created such a magnet with their capabilities, that AWS and Google Cloud do not rely upon partners anywhere near the way that SAP and Oracle do for lead generation. If these partners want to participate with AWS, then they can, but AWS does not “need” them. Furthermore, the multiple that consulting companies have come to expect from SAP and Oracle is not going to fly with AWS. Therefore, the consulting companies will most likely find AWS and Google Cloud related consulting to be a poor substitute for SAP and Oracle consulting because there is no financial substitute for SAP and Oracle consulting.

One way or another AWS and Google Cloud will grow because their offering is that good. This also extends to sales. AWS and Google Cloud’s business is mainly inbound, or the SaaS/cloud model of acquisition. AWS has hired some salespeople from Oracle and other vendors, but AWS (nor Google Cloud) will never have the number of salespeople compared to their revenues or customers as SAP or Oracle. SAP and Oracle are so heavy with salespeople that there are constant turf battles between the sales reps for the territory within both vendors.

AWS and Google Cloud Tools for Speeding Implementation

All three of those involved in this book are experienced implementations. As such we are highly suspicious of accelerators promoted by vendors and consulting companies and view them more often than not as sales tools. However, when reviewing AWS and Google Cloud documentation called Quickstart, we were pleasantly surprised. Unlike with SAP or Oracle, these are not just methodologies (i.e., PowerPoint decks) they are actual components that can be leveraged within AWS. Let’s take a look at some of them.

AWS’s QuickStart covers the following categories.

  • Databases & Storage
  • Big Data & Analytics
  • Data Lake
  • Data Warehouse
  • DevOps
  • Security
  • Compliance
  • Messaging and Integration
  • Microsoft Technologies
  • SAP Technologies
  • Networking and Remote Access
  • Additional

Each one of these categories has coverage for multiple items. If we take just one, which is the first on the list, Databases & Storage we see the following items.

  • CloudStax Cache for Redis
  • CloudStax NoSQL DB for Cassandra
  • Couchbase
  • DataStax Enterprise
  • MongoDB
  • ONTAP Cloud for NetApp
  • Oracle Database
  • SAP HANA
  • SIOS DataKeeper
  • Spectrum Scale
  • SQL Server
  • StorReduce

AWS is serious about each of these Quickstarts. Each one of them have a comprehensive guide. If we take just the first Quickstart on the list, the CloudStax Cache for Redis, it is 23 pages long.

Here is a graphic from the CloudStax Cache for Redis Quickstart document explaining the architecture of Redis.

Each Quickstart guide lists the prerequisites to using the Quickstart. For the CloudStax Cache for Redis, the following are listed as prerequisites:

  • Amazon EBS
  • Amazon EC2
  • Amazon ECS
  • Amazon Route 53
  • Amazon VPC
  • Redis
  • CloudStax FireCamp

The guide then explains the technical requirements, the deployment options, the deployment steps, how to launch the quick start, how to test the deployment, information around data persistence, data backup, Redis configuration, security, troubleshooting, links to GitHub to download more templates and scripts and how to share customizations with others. Finally, there is an extensive listing of additional resources.

Google Cloud also has Quickstarts. They can be found as separate documents like AWS’s Quickstarts, but also pop out to the right while performing tasks in the console.

Considering Quickstarts

Evaluating this documentation leaves one with the distinct impression that the Quickstarts were not merely conceived as marketing tools, senior members didn’t write them at AWS or Google Cloud or by their sales groups (as is the case with Oracle and SAP methodology and accelerator documentation). Instead, they were written by technical resources at AWS. Once again, this makes sense. AWS and Google Cloud are not trying to sell software or to create a giant consulting ecosystem. They are trying to get customers up and working as quickly as possible. The sooner customers can begin using AWS and Google Cloud services, and the faster they can start using more services, and more advanced services, the more that AWS and Google Cloud can charge them. That is, while SAP and Oracle’s revenues models are loosely based upon the usage of their products (and for SAP and Oracle’s consulting partners their consulting services), AWS, and Google Cloud’s revenues are tightly connected to the utilization of their services.

Another part of AWS’s rapid approach is the free and paid training that AWS offers. AWS offers quite a bit of good quality free training. AWS breaks its training tracks into the following:

  • Cloud Practitioner Path
  • Architect Path
  • Developer Path
  • Operations Path

While AWS offers offline courses, AWS, as is usually the case, differentiates itself by providing training online. While SAP and Oracle treat training as profit centers, AWS treats training as a way to get customers and consultants scaled up on AWS as quickly as possible.

We signed up for and tested AWS’s training ourselves while researching this book to validate its quality.

This will of course change, but when we filtered for Digital courses in English, we found 230 courses that we could take from AWS. They ranged from 7 hours to 5 minutes.

AWS training is quite good. Here is a slide from a video explaining the benefits of Amazon Aurora. We learned quite a bit about Aurora from the AWS training on the topic.

For example, the Aurora training did an excellent job of explaining what parts of the stack are managed by AWS, with the EC2 service managing one level, and the RDS managing essentially the entire database. This is not a slide or training that SAP or Oracle want anyone to see. This is because neither of these vendors can offer what AWS can for the fully managed database.

Google Cloud also offers quite a bit of inexpensive training options.

Google Cloud also has a wide number of training options available online. Google Cloud uses a company called Coursera.

All of this leads into the topic of how reliable SAP and Oracle consulting companies are on the subject of AWS and Google Cloud. First, these consulting companies will have a problem with AWS and Google Cloud as AWS, and Google Cloud provide the ability to both shorten implementations, and to bring down the time between when the sales process occurs, and therefore when the information about software finally is available to the customer. As so many SAP and Oracle projects have such a wide variance between what is promised and what is true, this is not a welcome development for SAP, Oracle or their consulting partners. It does nothing but increases the likelihood their customers will confront them on inconsistencies.

The Issue with Shortening Time Fames of Implementations for Consulting Companies

Secondly, the shortened time frame reduces the potential revenues for these consulting companies. For example, consultancies like Accenture and CapGemini have begun AWS practices.

Accenture is an AWS partner. But this is not what these consulting firms actually want. Accenture and others with SAP practices will make far less money client with AWS than they will with SAP consulting. SAP consulting, according to the book SAP Nation 2.0 supports a $300+ billion ecosystem, as we covered in the article SAP Nation 2.0 on The Overall SAP Ecosystem Spend. (29% of which is consulting).

The historical behavior of these firms makes us wonder whether these are good companies to listen or use to when it comes to AWS.

  • These companies are accustomed to a high multiple between the vendor or service expenditure and consulting.
  • How will they adjust to the cloud, which is supposedly about efficiency?
  • Will these firms find it as straightforward to access cloud skills as on-premises skills? Many cloud skills are based upon open source, something big SAP and Oracle consulting firms don’t have much history in working with.
  • These firms for decades have been very focused around specific vendor practices. How will they adjust to an environment that requires true systems integration? That is their ability to select the best tool for the job?

For this book, we reached out to Accenture and several other large consulting partners that also have SAP consulting practices. When we asked questions, we were met with the same overpromising that it is so typical from these companies on SAP projects. Everything was explained as “very easy,” and there was a desire to move us quickly to the next stage of the sales process where we would meet with a solution architect. We are quite confident that these consulting firms will “lift and shift” their business practices from SAP and Oracle consulting to AWS and Google Cloud consulting.

The On Premises Model

Thus it is not only SAP and Oracle that are “addicted” to the on-premises sales and delivery model, but also their consulting partners. They are all hugely successful following their current processes and have not adjusted their organization structure and staffing to be successful in the cloud. SAP and Oracle along with their consulting partners have fought and will continue to fight movement to the cloud as it fundamentally undermines their business model. The implications of the cloud are not only the consulting firms it is not being considered by governments and policy setters, as we covered in the article How Cloud Changes the Labor Needs in IT.

Advice on Enjoying the SAP and Oracle Cloud Quiz

To see the full screen just select the lower right-hand corner and expand. Trust us, expanding makes the experience a whole lot more fun.

 

Conclusion

Up until this chapter, we focused primarily on the functionality offered by AWS and Google Cloud. That is why it was so essential to have a chapter that just focused on development speed because this is one of the lesser discussed topics around cloud services. Services are so easy to bring up on AWS and Google Cloud that development can experiment faster than they ever could before. The introduction of “serverless” provides enhanced development speed because not only is sizing unnecessary but server component selection is also unnecessary. The on-premises vendors were offering none of these things. Quite the contrary, the SAP and Oracle were quite happy with the status quo.

However, it is not merely a matter of leveraging AWS and Google Cloud services. SAP and Oracle consulting firms are embedded at SAP and Oracle accounts, and one of their primary roles is to put the brakes on leveraging the innovation in AWS and Google Cloud. They need to push their clients to SAP and Oracle cloud to maintain their relationship with SAP and Oracle. This is why self-reliance and finding entities that are not part of the current status quo on SAP and Oracle projects are so important to be able to leverage AWS and Google Cloud for SAP and Oracle environments.

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

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 Slim and Re-platforming the Data Warehouse with AWS Glue and Anthem

Executive Summary

  • Data warehousing and data lakes are being re-platformed for the cloud.
  • When re-platformed to the cloud, data warehousing and data lakes have additional capabilities.

Introduction

Cloud is causing major changes in the data warehouse and data lake spaces. Cloud is going to result in a significant reconfiguration of the data warehouse market. It is already leading to an increase in choice and a move away from monolithic data warehouses. And on AWS, one of the components that support this change is Amazon Athena and Amazon Glue.

Amazon Athena and Glue

Amazon Athena is one of the most quizzical or unexpected serverless services. Athena works on files to be uploaded to an S3 bucket. The load is supported by AWS Glue, which is an ETL service that simplifies preparing and uploading data. Glue discovers data and the associated metadata, and once cataloged, the data is “immediately searchable, query-able, and available for ETL.” We will discuss Glue in relation to Athena, but it also works with RDS, DynamoDB, Redshift, as well as S3 (which is how it integrates with Athena).

AWS describes glue as follows:

“AWS Glue is a fully managed ETL (extract, transform, and load) service that can categorize your data, clean it, enrich it, and move it reliably between various data stores. AWS Glue crawlers automatically infer database and table schema from your source data, storing the associated metadata in the AWS Glue Data Catalog. When you create a table in Athena, you can choose to create it using an AWS Glue crawler.”

The ability of AWS Glue to do this means it creates an AWS Glue “data catalog.” This reduces the time between data ingestion and use because AWS Glue can begin working with the new data with little processing, as we will illustrate with Athena.
Amazingly, Glue is not only compatible with multiple data sources, but it also works across different data sources.

The AWS Glue Crawler will create a metadata repository called the AWS Glue Data Catalog that allows a virtual database to be created.

Notice the relationship between the AWS Glue Data Catalog and other components.

This topic is explained in the following quotation.

“The AWS Glue Data Catalog provides a unified metadata repository across a variety of data sources and data formats, integrating not only with Athena, but with Amazon S3, Amazon RDS, Amazon Redshift, Amazon Redshift Spectrum, Amazon EMR, and any application compatible with the Apache Hive metastore.”

Observe how AWS Glue can tie together many different data sources. But also note that AWS Glue can also interact with Lambda.

Notice the AWS Glue Data Catalog. It connects the various data sources through discovery. In this case, the queries are being run from Amazon Redshift, AWS’s data warehousing solution to S3 to data outside of Redshift.

This is another view of how Glue fits into the data warehouse design.

AWS Glue also allows data to be moved between data stores. However, there is something quite appealing about when Athena is used with only S3, which is that it means one does not need to spend time structuring and organizing data before performing queries on data. Athena is a service that allows SQL queries, and normally ad-hock or in-frequent queries to be run against a logical schema is flexibility and quickly applied to a text file or text files. The logical schema is superimposed on the files loaded into S3. AWS describes Athena this way.

“In Athena, tables and databases are containers for the metadata definitions that define a schema for underlying source data. For each dataset, a table needs to exist in Athena. The metadata in the table tells Athena where the data is located in Amazon S3, and specifies the structure of the data, for example, column names, data types, and the name of the table. Databases are a logical grouping of tables, and also hold only metadata and schema information for a dataset”

AWS Glue, Athena, and S3 begin to call into question the different distinctions or dividing lines between constructs like data warehouses and data lakes. Let us review the definition of these two terms.

This table is from AWS only.

Notice the data warehouse is a structured data lake. Data warehouses have been with us for decades. However, the term data lake is relatively new. When comparing the two descriptions, the data warehouse described an end state to a process that never occurs. This is because new data is continuously being brought into the environment. Therefore it seems logical that one must have both a data warehouse and a data lake. It is not an “either/or” situation. Proposing that a data warehouse exists without a data lake would be like suggesting that all of the files on your computer are organized. Some of them are organized (the ones you use), but many of them are not organized, and others never will be. Not all of the data that comes in needs to be placed into a rigid schema, or placed into an RDBMS. It is not worth the effort. Every IT department we have seen has far more data than they can ever reasonably manage, so perfectly manicured data sets is not on the table as an option. (or as we like to say, optimal has left the building).

Furthermore, many of the initiatives that are begun around data warehousing are not completed, or not completed as advertised. This is covered in the following quotation from Snowflake.

“Many organizations do not have an enterprise data warehouse or data lake. In some cases, they’ve been disappointed by their attempt to create one. Their data sits in multiple, on-premise systems: some used for OLTP, some used for OLAP and some data sits in file systems just waiting to be analyzed. Changing platforms is viewed as an ideal time to re-architect, or architect for the first time a fully functional data platform capable of scaling with the business.”

Secondly, with a service like AWS Glue, queries can be run not only on one data source but instead on multiple data sources (so-called federated queries). Some of those data sources could be Athena, and other sources could be RDBMSs. Alternatively, they might be a key value database like DynamoDB, or a column-oriented database like Redis, but with Elasticache in front of it.

It all depends.

That is, some of the queries will be local, and some will be cross data source queries. Moreover, when this capability is enabled, it means a federated database or virtual database is created. Wikipedia calls this a virtual database is there is no integration between the database. Instead, queries are run across the federation.

This is an example of a federated query. This runs a select statement for a table called accounts in one system versus a dataset outside of the system called crm-account-stats.

It is incredible to learn that the concept of federated databases goes back to the 1980s, but they are now only recently appearing in reality, and they are doing so because of the cloud.

When reviewing the lifecycle of data, it just does not make sense to assume that all data eventually moves to the RDBMS. Some will, some won’t, and there is a triage process where the company should determine, “is it worth the effort to place this data into a rigid schema?” If it isn’t, then don’t. However, one way or another, a data warehouse is going to have a data lake attached.

Furthermore, there may be opportunities to bring new data or data set into the data lake, for example, to perform a correlation with already existing data that is only used intermittently. That is a perfect data set to keep in S3.

Let us review the last row of the table, which explains the difference between data warehouses and data lakes concerning analytics.

A natural question might be, why not perform both types of analysis on data in the data lake. That is batch reporting, BI and visualizations on data warehouse type data sources, and machine learning, predictive analytics, data discovery, and profiling on data lake type data sources? After all, as the data sources are held together in AWS with AWS Glue that allows cross-source queries, why conceive of a dividing line between the data warehouse and the data lake?

The SAP Business Warehouse (BW)

When we think of the new approach possible in data warehousing, it is instructive to compare it to the old way in SAP and Oracle. The most popular data warehouse in SAP is BW. SAP also purchased Business Objects, but BOBJ has been in a decline since SAP’s acquired them, with new development as well as support in a long-term continual decline.

SAP BW is an extremely difficult data warehouse to work with, and it has appalling productivity. We reviewed SAP BW in this article MUFI Rating and Risk SAP BW/BI. SAP BW followed a somewhat typical pattern of overweight and encapsulated data warehouses in that the reports sit in a lengthy queue. When the report is received, it often does not meet the initial requirement or has taken so long to be developed that it is no longer relevant to the business. SAP does provide an ad hock front end for BW called the BEx Web Analyzer, but it is a weak offering.

SAP has had the most success with its HANA database both commercially and in real terms by porting BW to HANA. This speeds BW, but it also undermines many of the reasons for BW as much of BW is a Data Workbench that allows structures to be created that speed queries when BW sits on a row-oriented data store. However, SAP follows the data warehouse concept where data is staged and is not analyzed before being pushed through the process where it is placed into a rigid schema. However, SAP does have an answer to how to connect to the data lake. For this, they propose connecting HANA to Hadoop.

SAP likes publishing these types of diagrams. However, there is a significant problem with this. BW is SAP’s primary data warehouse, and it has been demonstrated to be inefficient. HANA speeds BW, but at great expense. Now SAP wants companies to connect Hadoop to their problematic combination of BW with HANA. Overall, SAP is trying to get companies to take an RDBMS centric approach to data warehousing, but the difference being that the RDBMS is now connected to Hadoop.

SAP has had many years to demonstrate capabilities and the cost-effectiveness with BW and has failed to do so. For this reason, SAP is intent on convincing customers that their offering is still relevant, given all the changes that are afoot, and one of the ways of doing this is in co-opting new items. For whatever reason, SAP has spent most of its marketing effort in co-opting Hadoop. SAP interpreted Hadoop as the most significant threat to their data warehouse revenues. SAP has spent time influencing customers that Hadoop will not replace the data warehouse. SAP does not say this because it is true, but because SAP sells a data warehouse.

Notice the quote from Timo Elliott from SAP on this exact topic.

“Does this mean that you’ll be able to do more with Hadoop in the future? Yes. Is it going to be easier to make applications? Yes. Is forty years of business process and data warehousing technology and expertise going be obsolete any time soon? No!”

Loosely translated, Timo Elliott would like to ensure that SAP customers keep playing licenses on SAP BW. SAP wants as little adjustment as possible to the current scenario with BW. This scenario does not serve customers, but it keeps money flowing to SAP.

However, the new options available to customers for data warehousing and the data lake is far more extensive than merely Hadoop. Moreover, to query Hadoop, it turned out that NoSQL turned into SQL, and running SQL on Hadoop structures meant putting energy into some degree of organization and increase the relations. As we just described, AWS Glue combined with S3 and Athena – along with other components, means that the RDBMS centric approach to data warehousing/” data laking” makes less sense.

As with SAP, Oracle is also trying to promote the idea of an RDBMS centered data warehouse. Recall that Oracle is only dominant in one database type, the RDBMS. Is this the best technical solution? No, but it is what Oracle has to offer. Therefore, for Oracle, every problem looks like a nail, that an RDBMS will be “just perfect for.” Their marketing and sales are directed toward getting companies to see data warehousing as a perfect problem for the Oracle RDBMS. However, using data for analytical purposes means de-normalizing that data that is then aggregated. RDBMSs are optimized for highly normalized data (for transaction processing) that is not aggregated.

Thus why are RDBMSs the center of SAP and Oracle’s data warehousing strategy?

This is how Oracle likes customers to see it in the data warehousing/data lake. Oracle’s RDBMS is right in the center of it. However, the RDBMS was never designed for analytics, or that is for read performance. An RDBMS is not optimized for anything other than transactions that require commit/rollback. An RDBMS does as much writes and locks as reads, while a data warehouse does read operations only. So why is Oracle saying that it is?

The problem with what Oracle is proposing is covered in this quotation from Dan Woods (#2).

“The model of having just one data warehouse is a throwback to a simpler time. In any organization of significant size, there will be a need for multiple repositories. The CDW should participate in federated queries both as a query aggregation point and as a source for queries aggregated by other systems.”

Another concerning thing about Oracle is that they state analytics can be performed using the column oriented store that is within their RDBMS. This is explained in Oracle’s documentation.

“Database In-Memory uses an In-Memory column store (IM column store), which is a new component of the Oracle Database System Global Area (SGA), called the In-Memory Area. Data in the IM column store does not reside in the traditional row format used by the Oracle Database; instead it uses a new columnar format. The IM column store does not replace the buffer cache, but acts as a supplement, so that data can now be stored in memory in both a row and a columnar format.

Oracle Database In-Memory accelerates both Data Warehouses and mixed workload OLTP databases and is easily deployed under any existing application that is compatible with Oracle Database. No application changes are required. Database In-Memory uses Oracle’s mature scale-up, scale-out, and storage-tiering technologies to cost effectively run any size workload. Oracle’s industry leading availability and security features all work transparently with Oracle Database In-Memory, making it the most robust offering on the market.”

That sounds good, but Oracle, does not compare their offering to other offerings that are less complex and perform better because they are purpose built for analytics, rather than an adjustment to an application database (RDBMS) design. Oracle does not address the maintenance overhead of adding extra workload capability to an already very complex Oracle database. For example, purpose-built and inexpensive in-memory databases like Redis or an in-memory data store Elasticache can be integrated connected to any RDBMS. These services can be easily tested as independent items without having to go through the overhead of maintaining those items in Oracle. As Elasticache can be flexibly assigned, it can be used in front of virtually anything that requires extra performance. Also, as those services are specialized, they will be better than Oracle’s in-memory addition to RDBMS.

 

 

Furthermore, as Oracle continues to add more items to their monolith, the more overhead their RBBMS develops. This evaluation with respect to Oracle applies equally to SAP’s HANA and IBM’s DB2. In the past, it would have been far more difficult for customers to test services like Redis or Elasticache, but now they can be brought up in minutes and thoroughly tested. This is reducing the power of the commercial database vendors, hence the need for misleading propaganda. This is to get customers to do things that are against their interests, but good for the monopoly vendors.

Oracle is asking customers to invest more into their monolithic database and not to follow a microservices approach to database selection, which is based upon database specialization. No doubt, Oracle would be fine with microservices, as long as the Oracle database is used, and everything is kept Oracle-centric.

“The ability to easily perform real-time data analysis together with real-time transaction processing on all existing database workloads makes Oracle Database In-Memory ideally suited for the Cloud and on-premises because it requires no additional changes to the application.”

The issue here is that that is not true. Oracle is not as suited for the cloud as Aurora or DynamoDB or Spanner. These databases have been specifically designed for the cloud. Furthermore, the Oracle RDBMS was not even designed for data warehousing!

A mixed type database such as an RDBMS with a column store (like Oracle RDBMS and SAP HANA) will never perform as well. It will come with extra complexity over a pure column-oriented database like Redis for analytics. If even more speed is required, than ElasticCache can be placed in front of Redis, and it can be added quite inexpensively. The weakness of Oracle’s inability to leverage the multibase approach shows itself in the designs that they present to customers. This is also a problem when analyzing Oracle’s pronouncements about their RDBMS’s performance or its complexity. The question should always be “to what end.” The RDBMS has a limited window where it beats other database types, and it is particularly suitable as an application database. However, Oracle pushes its RDBMS into places where it is not competitive.

Moreover, Oracle has done this for decades. When there were fewer alternatives and because they were more difficult to access (pre-IaaS), Oracle was very successful with this strategy. But now, with a cornucopia of databases so quickly brought up on IaaS providers, Oracle’s presentation of the universality of their RDBMS is increasingly being challenged.

With Athena, Amazon Quickview can be used as the analytics frontend. QuickSight is an analytics service on AWS.

QuickSight runs on AWS and can easily connect to any AWS data sources.

The data comes in extremely easily. It uses either direct query mode or SPICE, which stands for Super-fast, Parallel, In-memory, Calculation Engine is how the data is stored into the SPICE memory store.

QuickSight is quite impressive. It allows analytics to be performed right on the data sources at AWS. Coming from SAP projects, it seems like a different world regarding productivity beginning at the data and following the string to the analytics layer.

Right now, on SAP and Oracle projects, there are massive queues of reports that are waiting to be processed. Moreover, there is one self-evident reason for this. SAP and Oracle’s data warehousing solutions are significantly behind the cloud. For example, SAP Cloud Analytics (supposedly supplanting the visualization application and “Tableau killer” Lumira) is still barely operational, and that does not count the data supply chain.

One potential data supply chain for Amazon QuickSight.

Oracle and SAP data warehousing projects have the feel of extreme hierarchy. The users are asked to “wait outside.” While the “priests” or the data mungers and data structure builders do their work on the inside, moreover, dropping a visualization tool onto the environment does not help the overall scenario very much. At many customers that we have seen with both SAP and Tableau, the most popular analytics tool is Excel.

The eternal question for users on SAP projects after they pass away.

The Importance of Access to Compute

Companies focused on data warehousing that is not focused on the cloud will face increasing difficulty in maintaining the illusion that their approaches are desirable. This is explained in the following quotation from Dan Woods (#2).

“The cloud is the land of cheap storage and on-demand compute. The CDW should radically separate storing data from the engine that does the computation. This will allow as much data as possible to be stored and as many different type of engines as needed to process it to be created. This separation significantly changes the economics of the data warehouse because you don’t have to build a large system to handle your peak storage needs inside an on-premise system.

The of the complexity of a data warehouse is decreased by the cloud’s ability to start up as many different computing engines as needed to handle your workloads. Some of these engines will wake up and stay running, handling on-demand requests or waiting for batch jobs. Others will wake up and process just one workload and then disappear. The point is that each of these engines is created on a separate infrastructure that doesn’t compete with the others. This simplifies the implementation.”

How All of This Applies to Google Cloud

This chapter has discussed AWS; however, this applies similarly to Google Cloud. We showed this table earlier, but Google Cloud has similar services that are data warehouse/data lake ready.

As with AWS, Google Cloud allows a conglomerated approach which flexibly combines a data lake with a data warehouse and can allow for federated queries across a virtual database.

Google Cloud does not have an analytics application that we consider as good as QuickSight, but here there are many options.

One of the most interesting data warehousing use cases is not something we would ordinarily consider a data warehousing application as it is such a short time lag use case. This is published on Google Cloud’s website and is a real-time inventory management system. In most cases, inventory management is handled by the ERP system. However, there is nothing to say that an ERP system has to be used for this purpose. ERP systems usually are costly implementations and impose considerable inflexibility upon a company. As we cover in the case studies, ERP systems typically have poor supply chain planning capabilities. An ERP system could be used or not be used with this use case, which is shown in the graphic below.

Here the point of sale information comes from retail stores. The current inventory position is held in the back-office applications (which may contain an ERP system). The various Google Cloud components are used to combine retail store point of sale data with the back-office applications.

Conclusion

Data warehousing projects are known to be engines of scope creep in companies and deliver far less output than expected at the beginning of the project. This is yet another monolithic approach where an enormous number of data sources are brought together in a single place. SAP and Oracle’s entire concept of a data warehouse is dated. It locks customers into a high overhead and inflexible design that already has ample evidence not to be able to come close to meeting the expectations set for data warehousing. The future of data warehousing is leading away from the approaches and heavy lock-in promoted by SAP and Oracle.

Data warehousing vendors and consulting companies have become accustomed to long-running projects, where again, the final result is not verifiable until a lengthy period has passed, and a lot of money has been spent. Once purchased, they prove incredibly sticky, and the vendor sets the agenda in what has been a monolithic design where they stipulate the tools. Everything ends up being around what the vendor decides will be used. However, cloud data warehousing/data laking can be brought up much more quickly, and the more savvy customers will leverage this rather than continuing to take what the data warehousing industry has been serving up.

AWS and Google Cloud offer the opposite of what the traditional data warehousing industry with its high lock-in and long-running projects.

Snowflake obtained a peculiarly high score on Gartner’s ODMS Magic Quadrant. For a vendor that is rated at 119th in overall popularity, it seemed odd. That is until we found how much capital Snowflake had raised (and therefore its budget for promotion). Yet if you look at the items, it lists on its webpage (Instant Elasticity, Secure Data Sharing, Per Second Pricing, and Multiple Clouds), those are all capabilities already inherent to both AWS and Google Cloud. The market will determine if there is enough value add with Snowflake over the inherent data warehousing capabilities in AWS, Google Cloud, and Azure.

Snowflake was able to raise $450 million in capital in 2018 alone. And the investors in Snowflake are making a bet that the data warehouse market is ready for an all cloud provider.

This is Snowflake’s vision of the multicloud data warehouse.

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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

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.

Being Conscious of the Many AWS and GCP Database Options for SAP and Oracle

Executive Summary

  • AWS and Google Cloud provide an amazing number of database options to customers.
  • What this means for on-premises environments with more restricted options.

Options Galore with AWS and Google Cloud

AWS does offer some internally developed products (the Aurora database being one), and Google Cloud offers both the Spanner database and the Go coding language. Still, the vast majority of AWS’s and Google Cloud’s revenue comes from providing services for items they did not have a hand in developing. Kubernetes is an open source project initiated by Google, which has helped increase the popularity of Google Cloud; however, Kubernetes is not controlled by Google.

Some of these items that AWS and Google Cloud offer services are open source, and some are commercial license products. This “universal” revenue stream places AWS and Google Cloud in a far less biased position than a software vendor that is trying to sell its licenses first (which leads directly to the most profitable thing SAP and Oracle sells which is support), and it is the cloud as a distant second. Both Oracle and SAP have very small cloud businesses compared to AWS or Google Cloud.

This choice was explained by AWS in the following quotation.

“The days of the one-size-fits-all monolithic database are behind us,” he said. “Our customers are changing how they develop applications and they need particular databases to do that.”

This is particularly prevalent in the space for databases that are analytical in nature rather than designed to support an application (because of the lower degree of lock-in due to application certification). Moreover, what have we observed in this market? Increasingly, the data from applications are being moved into data lakes or data staging areas at a lower degree of normalization (increasing the size of the data, but reducing its maintenance). These are being pushed out of more structured higher maintenance databases like Oracle (version 18 presently) and into databases like Hadoop or MongoDB. However, SAP and Oracle are trying to “get into” this open source environment by declaring that their commercial software is necessary. Let us review a graphic in this area.

Notice the data coming from SCM (SAP) goes to HANA, then to MAPR. However, the sensor and social media data (which is not from SAP, goes directly to MAPR). What is the benefit of HANA in this design? SAP makes several proposals, but non-SAP projects are pleased with 100% open source Hadoop. If the ERP, ECM, CRM (SAP) data is in Oracle, it can go directly to MAPR. However, if any application sits on HANA, it must then go through a second HANA database due to indirect access rules enforced by SAP. There is no reason for SAP to have HANA in this design, except to infiltrate the open source MAPR solution.

What Oracle Offers

Oracle offers a variety of database types, but its primary strength is in the structured (highly normalized) relational database design. However, growth in the database market is more in the unstructured database design (which in practice often means it holds less normalized data than a database that supports an application that requires highly normalized data). There are many people with excellent database knowledge like Werner Vogels that propose the highly normalized relational database design has been over applied. Less normalized databases are dominated by open source offerings rather than commercial offerings.

Moreover, of course, Oracle has no interest in using its Oracle Cloud to allow companies to host non-Oracle databases or applications. Secondly, the Oracle Cloud is such an uncompetitive offering to AWS or Google’s Cloud Services that it would make little sense to use Oracle Cloud even if Oracle were interested in opening up to other vendors and to open source. The Oracle Cloud, much like the SAP Cloud, is for hosting Oracle databases and applications. That is the extent of Oracle’s vision for the Oracle Cloud. AWS, by contrast, offers the ability to test all of the different databases (including SAP and Oracle databases), and this dramatically increases the ability of a company to test different databases and to compare and contrast the offerings.

One such area to test is covered in the following quotation.

“And, if you’ve mixed online transaction processing (OLTP) and analytics-style data access, moving from a one-tool-for-everything Oracle setup to using a separate warehouse for reporting and analytics can improve both your application responsiveness and your analytics capabilities. There are options to create a dedicated Postgres-XL–based warehouse or use Amazon Redshift as a powerful managed warehouse.” – David Rader

Increasing the Type of Databases Put Into Use

This increase in the types of databases put into use. For years SAP and Oracle and even IBM have been telling customers they offer the database processing types that they needed and that various processing types could be met their RDBMS databases. When SAP promoted their HANA in-memory RDBMS database as superior to all other databases, Oracle and IBM copied SAP by adding column-oriented “in memory” capabilities to the Oracle and IBM RDBMS database. Bloor Research questioned whether this was really worth the extra overhead, as we covered in the article How Accurate Was Bloor on Oracle In-Memory? The sizing each of their databases is by itself a lengthy process, and the commitments for specific hardware have greatly restricted testing the proposals by SAP and Oracle. When the performance does not match what SAP or Oracle says, some excuse is often given. After the customer has purchased the software and the hardware and paid for the implementation, the vendor has the power in the relationship.

In terms of options, AWS offers EC2, which is a AWS’s computer cloud. With EC2, AWS offers over 60 different instance types that are categorized by the following types.

  1. General Purpose
  2. Computer Optimized
  3. Memory Optimized
  4. Accelerated Computing
  5. Storage Optimized

AWS’s RDS has 35 different instance types. These changes depending upon the number of CPUs, the amount of memory, whether the instance is EBS optimized, and the speed of the network.

AWS S3

AWS S3, which is a storage offering, has four different storage classes (Standard, Standard-IA, One Zone-IA, and Glacier). It also has options concerning access control. In each AWS offering, SAP and Oracle customers will observe options that they are not accustomed to in SAP or Oracle. Also, all of these options are public; they do not need to be communicated through an account rep.
All of this allows AWS to support new approaches to data management, as is covered in the following quotation by Werner Vogels, the AWS CTO.

“If there’s a unifying theme to AWS’s disparate set of databases, he said, it’s that they’re all aimed at supporting cloud-native methods of creating applications that aren’t driven by the way the data needs to be stored in a single kind of database. Instead, the cloud application, often composed of smaller bits of code widely distributed in multiple data centers and the cloud, drives the way the data needs to be accessed and used. That, Vogels contends, requires different kinds of databases for different kinds of applications.”

SAP and Oracle’s Oppositions to Open Source

Also, there is just no way for SAP or Oracle to provide such a variety of databases on their cloud offerings. One reason is both SAP and Oracle are very opposed to open source options. SAP is an expert at taking open source offerings and then making them closed source. SAP has a product that is a copy of the open source Spark component, called Vora, that connects HANA to Hadoop (as we covered in the article How Accurate is SAP on Vora? ). Also, almost no one uses it. Nor should anyone. Hadoop does not need HANA, and a company that is intelligent enough to figure out Hadoop will also figure out that there are far better column oriented in-memory databases to connect to Hadoop rather than HANA. SAP is always coming up with some intrusion into open source with a commercialized offering. Oracle’s history with open sources has been one of hostility and neglect. Several very prominent examples include the following:

  • Oracle purchased Java, OpenSolaris, OpenOffice.org and MySQL and others, and is widely considered to have worsened each of these open source offerings.
  • Oracle’s acquisition of MySQL is a significant factor that drove the growth of other open source database projects like MariaDB and PostgreSQL.
  • AWS is opening up the horizons of its customers in a way the customers have not had in the past, as explained by Werner Vogels.

“More generally, Vogels contended, AWS’ own enterprise customers were looking for alternatives. “With many of our enterprise customers migrating from on-premises into the cloud, there’s a desire to move away from commercial databases, mostly because of the licensing restrictions and the lack of control over the cost.”

And AWS is the best in the market at offering these options.

“Now, he noted, a lot of companies are using multiple Amazon databases for various parts of their business. “What we’re seeing in AWS customers is they’re using a multiplicity of databases,” he said. “They’re looking for the best tool for each application, or maybe multiple tools.”

“For instance, Airbnb Inc. uses DynamoDB for storing users’ search history, ElastiCache for storing site sessions for faster site rendering, and MySQL on another AWS relational database, RDS, as its main transactional database. Besides Elasticsearch, Expedia also uses Aurora, ElastiCache and Amazon’s Redshift data warehouse.”
This is a fundamental change in how databases are evaluated and then used. This means that the structure and row-oriented database that was overapplied is giving way to a multitude of specialized database types. AWS emphasizes the educational challenge in leveraging these different database types in the following quotation.
“The biggest challenge is education; there is another way, but it means learning something new,” Jim Webber, chief scientist at the graph database maker Neo4j Inc., also told SiliconANGLE.

“If all I’ve got is a hammer, then every problem is a nail. Relational is a beautiful hammer.”

Conclusion

Changes are afoot in software development that are intertwined with the cloud. The cloud is reinforcing these changes. This is because the cloud is making so many options available to developers. These changes are reinforced by specific cloud providers, not all of them. SAP Cloud and Oracle Cloud make it very difficult to bring up services and have all manner of quality problems. SAP and Oracle are overpromising in the cloud to the degree that it is difficult to believe what they say about their cloud offerings. AWS and Google Cloud offer so many services that SAP Cloud and Oracle Cloud that there is no way to draw a comparison between these two sets of the cloud. Two clouds have more significant numbers of users logging in and trying new things, and using their clouds in production. Two other clouds are more brochureware designed to help those companies that are opposed to the cloud and opposed to open source projects cloudwash for Wall Street. One of the authors of the book, Ahmed Azmi, recently tested SAP Cloud for a prospect, and it was a resounding “pass.” In AWS, Azure, and GCP, we can spin up/dispose of a container within a few seconds. On SAP Cloud, containers take as long as 8 minutes to start. That’s not an ideal environment for building lightweight microservices.

These changes are allowing a movement from monolithic designs with little choice, to containers where the number of options seems endless, and where much more time must be spent in evaluating individual components rather than simplistically choosing to use the Oracle database because one is an Oracle shop, or to use ABAP because SAP says that it is “standard SAP.” This means multiple programming languages being used, and multiple databases being used to develop applications that are “composites” of multi-container applications. It also means being able to leverage custom and, in many cases, self-configured hardware in a way that was not possible before, and that removes the necessity to perform sizing.

Never before in IT has there been such a necessity to perform testing, or such a fast and straightforward way to perform that testing. The previous on-premises approach where vendor sales reps were able to make assertions that could not be first be tested before a purchase is diminishing. These are all positive developments, but they mean a new day for IT departments, and that the structure of previous IT departments is not the appropriate structure required to leverage the new cloud lead alternatives.
Now that we have covered how the four different clouds compare, let jump into what the cloud means for the data warehouse and data lake.

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

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.