The end of the SAP Cloud Platform

Success still proves SAP and many SAP partners right. However, it is the classic disaster with an announcement that could take place in 2023. Current success is the cause of future failure, explain the analysts at Gartner:

"Although the market for Integration-Platform-as-a-Service, iPaas, is showing strong growth, the first signs of market consolidation can already be observed."

The research and consulting firm Gartner expects up to two thirds of iPaas providers to merge, be acquired or leave the market by 2023.

"The challenge for most iPaas providers is that their business is not profitable"

explained Bindi Bhullar, Senior Research Director at Gartner.

"Sales growth and increasing customer acceptance cannot keep pace with the costs of operating the platform and the high expenditure on sales and marketing."

There is no better way to describe SAP's business figures for the past year. CEO Bill McDermott praised himself for this high sales growth and the comprehensive acceptance among users.

At the same time, however, he and his CFO Luka Mucic had to admit that profitability was "still" low - obviously the result of the high PaaS costs. SAP and partners are winning customers and growing sales, but the high operating costs are preventing a sustainable profit margin.

Gartner:

"Top dogs such as Oracle, Microsoft and IBM are better equipped to meet these challenges. They can offer more competitive products and more aggressive pricing models than smaller providers."

Gartner assumes that this trend will continue and that the market share of specialized iPaaS providers will decrease. In the SAP community, this also includes companies such as All for One.

Ultimately, it's a question of scale! While hyperscalers such as AWS, Google, IBM, Oracle and Microsoft can get away with sheer size - "Too big to fail?" -smaller PaaS providers will be shipwrecked, according to Gartner.

SAP is already observing this development today: Bill McDermott is of course sticking to his "Cloud First" strategy and defending it, but internally the experts have long since realized that SAP will not survive like this.

SAP's PaaS business has too small a volume compared to the hyperscalers - probably still in 2023. At the Fkom 2019 event (SAP Field Kick-off Meeting), the watchword was therefore "Embrace".

SAP wants to embrace its successful PaaS partners such as Microsoft, AWS and Google, and perhaps also IBM, in order to benefit from their success and survive in their shadow.

A year ago, former President of SAP Cloud Platform Björn Goerke presented the "Multicloud" concept at the DSAG Technology Days 2018: SAP customers should be able to move their applications between the SAP, AWS, Google and Microsoft clouds almost at will.

Björn Goerke has no longer worked for SAP since the end of February this year. The "Cloud First" and PaaS vision of Bill McDermott appears to have failed in several respects.