I’ve written about the path to innovation as an evolutionary journey for high technology companies and their customers and partners. When new technologies like cloud disrupt existing business models, the survivors are those that adapt and evolve as part of an intelligent plan. In other words, customers need a fast yet flexible route to adopt cloud-based software at the pace that makes the most sense for their business. SAP aims to make that journey for customers as easy as possible with a new, simple model for extending their current on-premise solutions to cloud applications, including Ariba and Success Factors.
Described as the next step in SAP’s recently announced unified cloud portfolio vision, this policy is designed to put customers in charge of their cloud journey. Here’s an example of how it works. A customer that’s licensed 100 users for SAP Human Capital Management (HCM) on-premise software is interested in reducing 50 of those users in order to get an expanded business scenario with Success Factors cloud-based software. Under the new extension model, the customer can reallocate investments to the respective cloud solutions from SAP, replacing the affected on-premise license and maintenance with a cloud subscription.
Remarking that he hasn’t seen any other vendor offering anything like this, Josh Greenbaum, industry analyst and principal of Enterprise Applications Consulting, says the new model provides a distinct competitive advantage to SAP. “Telling customers that we’re going to support your migration to cloud, we can give you an interesting break on maintenance if you commit to a certain degree of SAP cloud, and we’ll work with you as your infrastructure shifts to optimize that for you is of tremendous value to customers.”
Greenbaum explains that although cloud adoption is on the rise, it’s one of several deployment options and will remain so for a while. “What cloud’s ascension really brings to the table is the recognition that it’s a hybrid world and customers need some help navigating it from a contract, maintenance, and support standpoint, and this is one way that SAP is going to help customers do that.”
What’s more, now that the first rush to cloud is over, Greenbaum says that companies are realizing they can’t afford to run standalone cloud instances. Integration lets the customer leverage the value of both on-premise and cloud effectively, making business processes more valuable. “You can extend the capabilities to a greater number of users, and provide a much richer degree of automation that’s appropriate to the process. Maybe parts of field service need to be cloud-based while call center agents are on-premise. But both of those groups access parts of the ordering system that’s classically on-premise and connected to a warehouse that’s likely on-premise.”
Few would argue that cloud computing isn’t fundamentally changing the software industry and how its customers do business. Adopting innovation always requires a careful balancing act to make sure customers and vendors don’t lose out on current investments while transitioning to the next big thing. Even so, making the actual transformation requires some pretty bold moves. With extension models like SAP’s, it just got a whole lot easier to get there.
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