SAP and Microsoft Cool It

What's Up?

SAP and Microsoft are making their very special relationship a little less special, and I have to believe that a major factor in this status change is that both companies are headed for a full-speed head-on collision in the white-hot market for industry clouds.

SAP has decided that Microsoft Azure will no longer get to be the “preferred” cloud-infrastructure partner for SAP. So while it’s not on par with “I hate you and never want to see you again!”, it’s also a pretty clear indication that the former BFF’s might no longer be quite as much “best” nor quite as much “forever.”

While Microsoft and SAP have had a solid strategic relationship for decades, things got particularly cozy a couple of years ago when SAP, as part of its accelerated commitment to the cloud, embraced Microsoft and Azure as its preferred cloud partner. About 20 months ago, I wrote a piece called SAP and Microsoft Revolutionize the Cloud Market describing how Microsoft EVP Judson Althoff told me that the relationship between the two companies had become so close and so strategic that he was creating a special team of Microsoft salespeople who would be able to sell SAP applications along with Azure infrastructure.

And then came 2020 and its extraordinary upheavals, which triggered among many other things the emergence of industry clouds as the next big thing in the tech world.

As that massive industry-cloud sector begins to open, SAP and Microsoft, as two of the world’s most important and widely used enterprise-software companies, are both charging full-tilt into the market with aggressive plans backed by multibillion-dollar investments and a lusty appetite to become #1 in this space.

So, just imagine: an SAP industry-cloud salesperson in the retail sector is making great headway with a client, and at some point the client says, “We really love your Retail Cloud apps—what cloud-infrastructure partner would you recommend?” Is that SAP salesperson going to suggest Microsoft, knowing full well that Microsoft has its own suite of industry-specific retail applications?

Same with a few other market sectors where SAP has massive presence: Financial Services, Healthcare, and Manufacturing. It turns out that Microsoft is now fully into the hunt in those industries as well, with CEO Satya Nadella telling the world in late February that his company—the one with the $2-trillion market cap and the #1 spot on the Cloud Wars Top 10—is now fully embracing an “industry-first focus.” As I wrote on March 9, SAP & Oracle Beware: Microsoft CEO Nadella Declares “Industry-First Focus”.

So: can the SAP-Microsoft partnership be saved? My thoughts in the “What’s Next?” section below.

What's Happening in Industry Cloud?

Microsoft Faces Off with Google, SAP, Oracle in Industry Cloud Blitz

Has Salesforce Beaten Microsoft, Oracle & SAP to #1 in Industry Clouds?

SAP Raises Stakes on Salesforce, Google, Oracle with Huge Bet on Industry Networks

Microsoft Investing Billions to ‘Verticalize the Cloud’ for Industries

SAP Goes FinTech with Bold New Approach to Industry Cloud

The Industry Cloud Top 10: #1 Salesforce, #2 Google, #3 Oracle, #4 SAP

10 Reasons Google Cloud Is #2 on Industry Cloud Top 10 List

IBM Cloud Renaissance: General-Purpose Clouds Out, Industry Clouds In

Microsoft Acquisition Reveals Huge Ambitions for Red-Hot Industry Clouds

SAP & Oracle Beware: Microsoft CEO Nadella Declares “Industry-First Focus”

10 Reasons Salesforce Expects to Rule Booming Industry-Cloud Market

Google Cloud CEO Thomas Kurian: “Where the Cloud Needs to Go”

Infor Leapfrogs Microsoft, Oracle, SAP: $1 Billion in Vertical Apps

Has Oracle Climbed to #3 in Booming New Cloud Category?

What's next?

On my new Industry Cloud Top 10 rankings, SAP is #4 and Microsoft is #6. Both companies have, within the past several months, greatly accelerated their investments in and focuses on their respective industry clouds, and I think it would be silly to bet on Microsoft remaining #6 through the end of this year. Microsoft doesn’t take small steps, and it doesn’t pursue small opportunities, and I think it’s planning an all-out blitz on the industry-cloud market much as it’s done over the past 15 months with Teams, Dynamics 365 and Power Platform. Corporate VP Alysa Taylor recently told me that Microsoft will “continue to invest deeply” in this huge and high-impact opportunity and sees it as a “multi-year initiative.”

For SAP, the outlook is equally aggressive and might perhaps be even more so. Because for Microsoft, industry clouds are extremely important but they also form one piece in a vast set of businesses—but for SAP, industry clouds are rapidly becoming the business. 

And if Microsoft chooses to compete head-on, it certainly has the right to do so, and I think SAP would expect nothing less. And at the same time, SAP fully has the right to revoke Microsoft Azure’s “preferred” status, which will in time become just one example of what will surely become an intensely competitive battle between two companies that just a short time ago were Best Friends Forever.

However: in the Cloud Wars, “forever” is proving to be a very short time.

Thanks very much for spending some of your valuable time with Industry Cloud Newsletter, part of the Cloud Wars Media family!  Cheers,
Bob