Understanding the ‘new’ IBM/SAP HANA Enterprise Cloud agreement

This week’s announcement of a new HANA Enterprise Cloud agreement between IBM and SAP has been making some waves – especially regarding the competition of both firms with Oracle and AWS.

The official press release provides this description of the partnership.

The SAP HANA Enterprise Cloud service is now available through IBM’s highly scalable, open and secure cloud. SAP HANA Enterprise Cloud will expand to major markets with the addition of the IBM cloud data centers. This is expected to enable customers to deploy their SAP software around the globe in a faster and more secure environment that is backed by IBM’s proven cloud capabilities.

There are a few key pieces of relevant background material which are largely overlooked in this announcement and the analysis thereof:

• SAP’s Managed Cloud offering for HANA – called the HANA Enterprise Cloud (HEC) – is not new but was announced last year in May.
• The degree of market awareness / interest for the offering has been limited in the past.
• IBM has been a certified HEC provider since last year.  The initial managed service offering was based on the use of the IBM SmartCloud.
• There are a variety of other certified HEC partners
• The announcement that Virtustream’s cloud management platform (CMP) software, xStream, is an option to deliver SAP and SAP HANA environments on the SoftLayer cloud globally for both managed and customer managed SAP environments appeared in June of this year.

Thus, the emphasis that IBM is now a HEC provider is incorrect – it has been a provider for a while.  An InformationWeek article provides a more intriguing / important spin on the partnership:

In this new partnership, IBM is strictly the infrastructure-as-a-service (IaaS) provider, and SAP is running its Hana Enterprise Cloud platform and applications as managed, private-cloud services on top of IBM's IaaS.

"This is sold by SAP and branded by SAP, but the IaaS layer comes from IBM," said Kevin Ichhpurani, a senior VP at SAP, in a phone interview with InformationWeek. "The software and the services come from SAP, and it's a turnkey solution for the customer with a single throat to choke."

This snippet reveals the interesting aspect of partnership that is not clear in the press release. IBM is supplying the IaaS layer for the HEC that is still sold / branded by SAP.

As analyst Holger Mueller suggests, SLA-related advantage are one benefit for customers in such a relationship:

Enterprise customers look for a single 'throat to choke' when it comes to strategic projects. Moving to the cloud is certainly one of these projects and with SAP offering a single SLA across SAP and IBM data center locations, customers and prospects will certainly take note.

There are, however, other factors which influence SAP’s move.

Last year, I wrote The second heresy: Does SAP have to own the IaaS layer in the HANA Enterprise Cloud? predicting that the IaaS layer on the SAP HEC could be outsourced.  In a very long comment,  Bjorn Goerke - then SAP CIO and head of the HEC - explained the motivation behind a possible evolution of the platform in this direction.

First, I agree that with the choice of vendors and providers on the infrastructure level, there is opportunity to reduce cost for customers. And reducing cost for customers is always a good idea.

Second, I agree that on the pure infrastructure level we already see massive commoditization happening. So why would anyone try to reinvent the wheel here?

Also, if it comes to an SAP business solution, we talk about more than HANA systems. We talk about system landscapes that do require a set of additional servers, network capabilities and storage requirements. All of this infrastructure needs to be consistently managed.

When we look at the Cloud Management infrastructure required for an SAP solution, we basically have two big layers: One is the lower level technical infrastructure stack. The other is the management layer above that addresses the specifics of the application and business solution level.

My intent is to focus my team's energy on the upper layer and provide the best possible Cloud Management infrastructure for the SAP "content". Based on standard products that we evolve into or build from ground up as Cloud-optimized, i.e. scalable, fully software controlled, components and that we combine with SAP specific content for massive automation. Thus driving cost of operations down and easing the task of managing powerful business solutions across a hybrid solution landscape. This Cloud management infrastructure will also be made available to partners and customers. So the benefit of that infrastructure will not only be to SAP's HEC advantage, but help partners and customers operating SAP solutions in a highly effective and efficient manner as well.

On the lower layers, we seek to go for as much openness as possible. OpenStack is actually my favorite target as it sees broad acceptance and adoption already. At the same time, we have to acknowledge that OpenStack in itself is not a ready-made, standardized solution one can assume to find everywhere. So there's a bit more intelligence that needs to be brought to the table here before we can say we can exchange IaaS providers underneath... Nevertheless, going for something like OpenStack as a unifying IaaS toolkit will allow us to bring in "choice" on the lower IaaS layer while focusing our energy on enriching the upper layers of the Cloud Management stack. Ideally, but this is not a promise yet ;-), we will also contribute parts of our efforts into the OpenStack community. But this is still too early to say. But my history somehow keeps getting back at me :-)

At the same time, let's not forget that HANA infrastructure, especially if you want to flexible scale out HANA systems in a Cloud environment, does require more sophisticated compute, network and storage architecture and Hardware than your everyday web server. HANA Cloud Cell (the hardware architecture) / Frame (the software layer managing the Cell) is our approach to standardize that particular aspect of HANA power managed in a cloud-optimized way. We're working with several vendors here. We will continue to invest into driving the hardware architecture of HANA cloud infrastructure -- together with our hardware partners -- to maximize performance and minimize cost (both in hardware and operations). I believe it is crucial that SAP keeps being in the driver seat here.

Thus, the recent partnership with IBM is not a sign of SAP’s weakness but rather an indication of SAP’s HEC operational experience / maturity.

Instead of attempting to control the whole stack as Oracle intends, this agreement gives SAP the ability to concentrate on the upper levels of the HEC stack where it can add more value.

Bjorn’s comment also shows that SAP is following through on a strategy that has been present since May of 2013.

Note: SAP has its own DCs (14 active and 6 planned) and I doubt that these will be taken off-line based on the new agreement. These DCs are also used for other SAP Cloud offering such as SuccessFactors . The IBM DCs provide additional global coverage. What will be interesting is to watch and see the ratio of SAP’s HEC-IaaS business that remains in the SAP IaaS layer and how much moves to the IBM IaaS layer.

Disclosure: SAP is a premier partner at time of writing