Inside IBM & SAP's cloud tie-up

Inside the enterprise: Traditional enterprise software vendors have been slow to move to the cloud.

Perhaps because their products are complex, and their customers have invested heavily in local hardware, moving applications to the cloud has happened slowly, if at all.

The move to the cloud has been led, for the most part, by the infrastructure and hardware companies, such as Cisco, IBM, and HP, specialist datacentre or datacentre services companies Rackspace, Equinix, or perhaps Digital Realty Trust and the pure-play cloud companies, which has to include Google and Amazon's AWS.

CIOs, for their part, have tended to opt for ready-made cloud services, from the likes of Netsuite and Salesforce.com, rather than moving existing applications to the cloud. And there are few hard statistics on how many businesses run mission-critical applications in the cloud, despite vendor hype, although SAP and Oracle, the two largest enterprise software vendors, each claim over 20 million cloud users.

In that context, the IBM-SAP cloud deal is a logical one. Both companies clearly believe that cloud computing will account for a growing proportion of CIOs' spending. But both IBM and SAP have struggled to create a truly compelling end-to-end cloud offering. SAP has the applications, and IBM the infrastructure, so joining forces makes sense.

The two companies do, of course, already have partnerships. And the new arrangements for the cloud are limited in scope. SAP will run two products SAP HANA and SAP HANA Business Suite on IBM cloud infrastructure.

This will allow SAP to expand its SAP HANA Enterprise Cloud service to more geographies, bringing it within the reach of more potential customers, and overcome one barrier to SAP's cloud growth plans: the speed at which the software vendor was able to build enterprise-class datacentres.

As part of the deal, IBM brings 40 of its datacentres into play. This is an important benefit for SAP, according to Holger Mueller, vice president at analysts Constellation Research.

Culturally, and because of its customer base, SAP is more sensitive than many vendors to issues of privacy, and where data is located. There are also performance benefits to using a cloud service closer to home, and, despite the global nature of cloud services, CIOs and their internal enterprise customers do rather prefer a "local" service provider.

"Location matters both for regulatory compliance and performance of cloud deployments. IBM Cloud does very well here," says Constellation's Mueller. The deal will benefit IBM too, as it positions the company as the "premier strategic provider", in the companies' words, of SAP cloud deployments.

There are, of course, still issues to be overcome. Initially, at least, IBM will only run SAP HANA services on its x86 infrastructure, though a port to the IBM Power platform is in the works.

But the arrangement overcomes several of potential customers' objections to cloud hosting for enterprise applications, including data residency, latency, and the ability of cloud providers to scale.

It is an arrangement, too, that other vendors are likely to watch with interest.

Stephen Pritchard is a contributing editor at IT Pro.