SAP founder Hasso Plattner: 'If this doesn’t work, we’re dead. Flat-out dead.'

Business Insider article by Julie Bort – Feb 4, 2015

On Monday, German software company SAP released a new crop of products, redesigned from the ground up to take advantage of its four-year-old database called HANA.

"If this doesn’t work, we’re dead. Flat-out dead. It’s that simple," SAPs charismatic 71-year-old founder and chairman Hasso Plattner told Re/Code's Arik Hesseldahl after the launch.

He's not exaggerating.

SAP is the biggest player in the financial software market, also known as "enterprise resource planning or ERP," which helps companies track everything from sales to raw materials.

Financial software is a conservative business and SAP is the epitome of a conservative company. The company, and its customers, don't like change.

But a new trend is coming that threatens even a stalwart like SAP: a form of cloud computing called software-as-a-service, where companies rent their apps, delivered as a service over a network, paid for on a subscription basis.

SaaS is an alternative to buying SAP software the old fashioned way: licensing the apps, then buying computer servers, building data centers, and installing it all. Such old-school SAP roll-outs could take years, cost millions, and are often fraught with cost overruns and other problems.

Cloud companies are threatening to each SAP's lunch and are deliberately gunning for SAP's customers. Cloud competitors include Workday, Zuora, Netsuite, and, most especially, Oracle, who has also been relatively late to the cloud game, but is now coming on strong.

There's also a crop of startups selling new cloud financial analysis apps that work great on smartphones and tablets, like Anaplan and Tidemark. They are gunning for SAP too, and growing really fast.

SAP has been buying its way into the cloud with big multi-billion acquisitions like SuccessFactors, Ariba, and Concur. But its attempts to write its own cloud apps haven't done well.

Plattner admits as much, telling Hesseldahl, "You can say that our in-house development was not contributing enough."

SAP has spent the last few years concentrating on HANA, which it did develop in-house. HANA is a new breed of "in-memory" database designed to crunch huge amounts of data lickety-split.

Most of SAP's customers have traditionally used Oracle's database, but Oracle viciously competes with SAP and they are arch rivals. Given the amount of smack talk they toss at each other, the word "hate" might not be too strong.

So HANA is SAP's way of extracting its software, and its customers, away from Oracle and creating a much-needed new revenue stream. Plattner has staked SAP's future on HANA.

The new products announced on Monday, known as SAP S/4HANA, can still be used with Oracle's database, or other competitive databases. (It would have been suicide for SAP to do otherwise – enterprises do not lightly yank out their databases.) But there are special features customers can only get when using SAP's software with HANA.

These new products not only use HANA, but SAP changed them to be more touchscreen-friendly. And all of this software, including the database, can be run in the cloud, in a customer's data center, or some combination of the two. (The combo thing is known in geek speak as "hybrid computing.")

How well is SAP keeping the grim reaper at bay? SAP says it now has more than 5,800 HANA customers, and about 2,000 of them are using it with its its other apps.

That's good, but not good enough, Plattner says.

He tells Hesseldahl, "We have 2,000 systems sold, and I learned today that we have 270 more in production. If we only double that in 2015 I will be disappointed. That is a significant number, but I will be disappointed by it."

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