SAP wants to be cloud leader in APAC by 2020

Business software supplier SAP is casting its sights on the fast-growing Asia-Pacific (APAC) cloud computing market, with the hope of becoming a cloud leader in the region by 2020.

Speaking to Computer Weekly on the sidelines of SAP Sapphire in Orlando, Paul Marriott, chief operating officer of SAP Asia-Pacific and Japan, said APAC presents huge opportunities for the German company whose cloud subscriptions and support revenue in the region grew by 65% during the first quarter of 2017.

Without revealing specific plans, Marriott said by 2020, SAP expects at least a third of its revenues in the region to come from a cloud portfolio that includes S/4 Hana cloud applications, SAP Cloud Platform and Hana Enterprise Cloud.

“Our balance sheet today is historically geared towards a revenue stream based on maintenance of software, and this allows us to invest in new cloud solutions,” he said. “What we are going to see is a massive shift towards cloud revenues.”

Across the region, Marriott noted that the hotspots for SAP’s cloud services are Australia, Japan, India, Southeast Asia and South Korea.

He singled out Australia as a market that had been most receptive to cloud applications, due to the local preference for off-the-shelf packaged software with minimal customisation, as well as the presence of an SAP datacentre in the country to meet data sovereignty requirements.

“In Australia, we’ve seen by far the fastest shift from on-premise software to the cloud over the past 12 to 18 months,” said Marriott. “It happened very quickly, even in the public sector where the government has mandated the shift to the cloud.”

Marriott said the next market to tip the scales towards the cloud is Japan, where the SAP Cloud Platform and S/4 Hana cloud applications have been well-received by enterprises. “This will be followed by markets such as India and Southeast Asia,” he said.

As for South Korea, Marriott said the country’s strong engineering culture has led to a dominance of on-premise software that is well-tested with hardware. “It will take a little bit longer for that tipping point to happen, but the changing leadership in Korea could accelerate the move to cloud.”

One of SAP’s key strategies to grow its cloud footprint in APAC is to support leading infrastructure-as-a-service (IaaS) offerings, including Amazon Web Services (AWS), Microsoft Azure and Google Cloud Platform.

By letting enterprises run SAP applications on those services, Marriott said SAP will be able to reach new customers, especially small and medium-sized enterprises (SMEs) with existing IaaS investments that may be underutilised. “Those customers are looking for workloads to put on AWS and Azure, so that’s perfect for us,” he said.

Marriot said another strategy to grow SAP’s cloud business is to enter new markets by selling only cloud services. That said, he noted that SAP will still make its on-premise software available to companies that are unable to use cloud services reliably due to connectivity issues.

According to Gartner, the public cloud market in mature APAC economies, including Singapore, Australia, New Zealand and South Korea, is expected to grow 17.7% in 2017 to total $10bn, up from $8.5bn in 2016.

Much of this growth will come from software as a service (SaaS) and platform as a service (PaaS), which are expected to grow by 28.5% and 26.7% respectively in 2017.