Large enterprises are poised to increase their SAP cloud investments, but are committed to a future of hybrid clouds for security, privacy and compliance issues.
By Jack Rosenberger
Large enterprises will nearly double their investments in SAP clouds during the next year, according to a new report by HCL Technologies. The organizations are moving more business operations and on-premise applications to the cloud not to reduce costs, but because they recognize the business advantages of cloud computing—such as providing better customer service—and are striving to stay abreast of their competitors or simply beat them.
"Most importantly, the report shows that businesses are no longer debating whether to leverage the cloud," says Greg Palesano, Executive Vice President, Applications, HCL Technologies. "Rather, they are debating what and how to leverage the cloud. This is a significant turning point."
Independent research firm Vanson Bourne interviewed executives at 100 large enterprises, primarily in the U.S. and U.K., all of which have annual revenues of at least $1 billion. The industry sectors included government, manufacturing, consumer and financial services, and life sciences. The survey focused on cloud investments in SAP—which is the world's dominant ERP leader, controlling 24.6 percent of the market in 2012, nearly twice that of Oracle, its closest competitor—and cloud implementation strategy and inhibitors. (For a copy of the report, click here.)
Some of the key trends mentioned in the report, "The Future of the SAP Cloud: Examining SAP Cloud Strategies Across 100 Large Global Enterprises," include:
The report makes it clear that "competitive advantage, and not cost reduction alone, is driving adoption," says Palesano. "Companies are looking at the cloud differently now, and are seeing more strategic value rather than the cloud simply being a cost lever."
According to the respondents, the top three business drivers for their organization's cloud strategies are:
- business agility and speed (59 percent)
- access to new technologies, such as smartphones and tablets (46 percent)
- improving customer satisfaction (43 percent)
The overwhelming majority of respondents are increasing investments in their SAP clouds, with eight in 10 saying they will boost their SAP cloud investments during the next year.
One of the chief obstacles to enterprises being able to invest in SAP is their commitment to on-premise software, with 30 percent of organizations reporting that it is an inhibitor to more cloud adoption. Yet, the respondents indicate that "46 percent of the SAP landscape could move to the cloud over the next two years," says Palesano. "This is undoubtedly a reflection of the growing interest in SAP’s cloud offerings and the need for organizations to be more agile."
While enterprises are boosting their cloud investments, wide-scale cloud implementation faces some daunting inhibitors. According to the survey, the three biggest inhibitors to moving SAP applications or infrastructure to the cloud are:
- a lack of budget (38 percent)
- security and privacy concerns (36 percent)
- integration challenges with legacy systems (30 percent)
"Security concerns will remain an obstacle as organizations continue to evaluate what data and functions are placed into a cloud environment," says Palesano. "However, these concerns are beginning to subside somewhat with the increased cloud adoption and maturity."
Looking Ahead: A Future of Hybrid Clouds
For the large enterprises in the HCL report, their preference is hybrid clouds, with 88 percent saying they will store data in private and public clouds, due in part to security, privacy and compliance concerns, plus the difficulty of meshing legacy infrastructure with SAP clouds.
Enterprises are encountering some challenges when it comes to implementing a cloud-based landscape because of their legacy applications and infrastructure, Palesano notes. "From a business perspective, newly created companies will have a distinct advantage over existing companies," he says. "There is simply no legacy baggage to account for, and this will create further disruption in the marketplace as we move through time."
Palesano's advice for how CIOs can improve their cloud implementation? "Create flexibility," he says. "There is a significant amount of change yet to come, and CIOs must have the ability to adapt quickly to this rapidly changing ecosystem. Make careful decisions when locking down technology decisions, especially in the applications arena. Create alternatives and options."
About the Author
Jack Rosenberger is the managing editor of CIO Insight. You can follow him on Twitter via @CIOInsight. To read his previous CIO Insight article, "How Intel Taps Into Its Internal Expertise," click here.