SAP and NEC sign deal to compete for cloud ERP market

November 11, 2010
By djohnson

The Cloud changes a lot of things, including the way that “partnerships” can compete. In some cases partnerships may begin competing for customers.

In CRN magazine, a recent press release “NEC Launches ERP Cloud Service Systems With SAP” describes a new partnership. In this partnership, NEC will utilize its Cloud Oriented Data Centers to launch a Cloud ERP solution based on SAP software.

The problem is that hosted ERP software solutions compete against native/true cloud applications. In this partnership, SAP is helping NEC create a hosted ERP solution which could compete against Business ByDesign.

Rationalizing the move: ERP Software Market Segments

The announcement doesn’t provide a lot of detail, but in this case the customers NEC will approach with their version of SAP Cloud ERP is likely going to be different from the customers that SAP will approach with SAP ByDesign. The customers for NEC will likely be large multi-nationals with heavy integration and customization requirements, while customers for SAP ByDesign will be mid-market folks with fewer customizations and integration tasks.

Can True Cloud ERP address enterprise markets?

Cloud ERP vs Legacy ERPYes. SAP has decided that hosted “cloud” ERP will serve larger customers while ByDesign will serve the mid-market, but there is no reason that Cloud ERP solutions cannot serve enterprise customers. The Cloud is scalable and can be installed inside an organization (private cloud) to meet demanding integration and customization requirements. Several Cloud providers already deliver this model.

SAP’s segmentation makes sense because their older ERP software contains extensive features, robust APIs, a network of system experts, and many deployments. By partnering with NEC to host a “cloud” version of the legacy code they can address the enterprise market without waiting for all features to become available on ByDesign. This highlights that the technology is different and shows the difficulties that older ERP providers face introducing cloud solutions to the market.

Vendors that start with a true cloud solution can opt to run the solution as a service (SaaS) or offer a software license – allowing customers to select their deployment method. This makes it possible to deliver the same code base to both large customers needing customizations as well as smaller customers needing turnkey operations.

Partner and Compete

Public clouds will force ERP software companies and partners to compete globally and differentiate based on service delivery, uptime, and features. Private clouds will force competition based on customization, flexibility, adaptibility, and industry knowledge. In a private cloud the role of the value added reseller and the partner channel will be critical for delivering services and customizations.

A solution that is developed for the cloud can be used to compete effectively in both markets. By providing public and private clouds, a single software solution can meet the needs of both mass markets (public cloud) and best in breed markets (private cloud). The SAP and NEC partnership highlights the importance of the cloud as well as stop-gap measures for delivering cloud solutions using legacy software.

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