Status and outlook

SAP is working with three hyperscalers - Microsoft, AWS and Google - as well as global system integrators on this project. Microsoft was named a "preferred partner" in this context for the Embrace project in October 2019. SAP rarely favors a partner so clearly and publicly. This approach has caused irritation among some customers, and there have also been open questions about how to deal with this within the DSAG association.

For Microsoft, this status is very valuable: The hyperscaler providers live on the trust of customers, and in addition, the IaaS product is interchangeable in its basic features. A public preference for SAP is therefore still like an accolade in the industry. Once infrastructure decisions are made, they are long-term in nature and not easily changed. This means that a customer who chooses Microsoft Azure because of its Preferred Partner status will generally stay there for a long time.

SAP benefits from Embrace because SAP is rarely involved in infrastructure discussions. Being involved here at an early stage is eminently important for customer access. On the other hand, the core product S/4 is still dependent on classic infrastructure (IaaS). S/4 is not a native serverless cloud application that can be mapped in Lambda from AWS and which then "breathes" depending on the load - thus independently mapping or "shutting down" peak loads.

SAP therefore needs the active support of partners to optimize the operational management of the core product. This optimizes efforts for customers and also SAP's in-house IT for customer systems in the HEC. Due to the widespread use of Office 365 Enterprise, enterprise customers are already familiar with Microsoft's services, so the hurdle for cloudification of SAP applications with Microsoft is lower.

What have Embrace and the status of "preferred partner" achieved as a result? Microsoft's market access to enterprise customers has improved and SAP has a partner with a clear commitment. SAP's roadmap shows a large number of innovations already delivered and planned with Microsoft, more than the other two market players combined. Sales cooperation between SAP, MS and the partners has taken a significant step forward - at least in some areas - and joint coordination on customer access is taking place, unfortunately hampered by an unprecedented pandemic.

Now, however, there is an update of the agreement under the name Embrace 2.0. It is heard that there will no longer be a status as "preferred partner" for Microsoft. SAP wants to return to a neutral view of the partners. At first, this may look like a step backwards for Microsoft - but this status fulfilled an important marketing task at a crucial time. At the same time, SAP and Microsoft will intensify their cooperation. There are still a few points here where both partners need further improvements in services.

One indication of this further cooperation is the announcement by SAP and Microsoft of collaboration in the area of supply chain and Industry 4.0 on Microsoft Azure. SAP solutions from the Digital Supply Chain area will be offered as SaaS on Microsoft Azure. SAP functionality is to be implemented on Azure Stack Edge, enabling SAP solutions to be operated in production facilities. Azure Stack Edge is purpose-built Hardware as a Service (HaaS) with Azure Stack Edge, intended for robust production-related operation.

However, this initiative goes beyond the production-related "edge operation". The entire supply chain should be given framework conditions for resilient operation in order to cope with the increasing uncertainties in the world caused by natural disasters, trade wars or political decisions. Here, production-related intelligence - i.e., really close to production - can ensure robust procurement, production, and optimized logistics of the product to the customer.

This is becoming more complex as batch sizes continue to decrease and requires integration without media discontinuity. With this initiative, SAP and Microsoft are leveraging each other's strengths - and are well aware of the partial coopetition in services such as Microsoft Azure IoT and SAP Internet of Things, respectively.