Harvard Case - SAP and Cloud Computing in 2012 and Beyond
"SAP and Cloud Computing in 2012 and Beyond" Harvard business case study is written by Robert A. Burgelman, Jean-Bernard Rolland. It deals with the challenges in the field of General Management. The case study is 33 page(s) long and it was first published on : Jul 19, 2013
At Fern Fort University, we recommend that SAP, in light of the rapidly evolving landscape of cloud computing in 2012 and beyond, adopt a multifaceted strategy encompassing digital transformation, strategic partnerships, and a focus on innovation to secure its position as a leading player in the enterprise software market. This strategy should prioritize customer-centricity, agility, and scalability while leveraging the power of technology and analytics to drive growth and enhance value proposition.
2. Background
The case study focuses on SAP, a German multinational software corporation, and its strategic response to the emergence of cloud computing in 2012. The company, a dominant player in enterprise resource planning (ERP) software, faced a critical juncture as cloud computing gained momentum, presenting both opportunities and threats. SAP's CEO, Jim Hagemann Snabe, recognized the need for a strategic shift to embrace cloud computing and ensure the company's continued relevance in the evolving technological landscape.
The main protagonists are Jim Hagemann Snabe, the CEO of SAP, and Bernd Leukert, the company's Chief Technology Officer, who are tasked with navigating the strategic challenges posed by cloud computing. The case study highlights the internal debates and decisions made by SAP's leadership team as they grapple with the implications of cloud computing on their business model and future growth.
3. Analysis of the Case Study
To analyze SAP's situation, we can apply a combination of frameworks:
a) Porter's Five Forces:
- Threat of New Entrants: Cloud computing lowered barriers to entry, attracting new competitors offering specialized cloud-based solutions.
- Bargaining Power of Buyers: Customers gained greater leverage as they could choose from a wider range of cloud solutions, potentially driving down prices.
- Threat of Substitutes: Cloud-based solutions offered alternatives to traditional on-premise software, posing a threat to SAP's core business.
- Bargaining Power of Suppliers: The rise of cloud platforms like Amazon Web Services (AWS) and Microsoft Azure gave suppliers greater bargaining power.
- Rivalry Among Existing Competitors: Competition intensified as established players like Oracle and Salesforce entered the cloud market, alongside new entrants.
b) SWOT Analysis:
- Strengths: SAP's strong brand reputation, established customer base, extensive expertise in enterprise software, and global reach.
- Weaknesses: Initial reluctance to fully embrace cloud computing, potential for losing market share to cloud-native competitors, and the need to adapt its business model.
- Opportunities: Rapidly growing cloud computing market, potential for new revenue streams from cloud services, and the ability to leverage its expertise in enterprise software to offer comprehensive cloud solutions.
- Threats: Competition from cloud-native players, potential for disruption from emerging technologies, and the need to invest heavily in research and development to stay ahead of the curve.
c) Strategic Planning Framework:
- Vision: To be the leading provider of cloud-based enterprise software solutions, enabling businesses to achieve their digital transformation goals.
- Mission: To leverage SAP's expertise in enterprise software and its global reach to deliver innovative cloud solutions that empower businesses to optimize their operations, enhance customer experiences, and drive sustainable growth.
- Objectives: To expand SAP's cloud offerings, increase market share in the cloud computing market, develop strategic partnerships, and foster a culture of innovation.
- Strategies: Invest in research and development, acquire cloud-based companies, develop a robust cloud infrastructure, and build a strong ecosystem of partners.
- Tactics: Develop new cloud solutions, enhance existing on-premise offerings with cloud capabilities, provide comprehensive training and support for customers, and actively engage with industry thought leaders.
4. Recommendations
Embrace Digital Transformation: SAP should prioritize digital transformation across its operations, leveraging technology and analytics to improve efficiency, enhance customer experiences, and drive innovation. This includes:
- Investing in cloud infrastructure: Building a robust and scalable cloud infrastructure to support its growing cloud offerings.
- Developing cloud-native solutions: Creating new cloud-based solutions specifically designed for the cloud environment.
- Modernizing existing solutions: Integrating cloud capabilities into its existing on-premise software to offer hybrid solutions.
- Adopting agile methodologies: Embracing agile development practices to accelerate the delivery of new features and respond quickly to market changes.
Strategic Partnerships: SAP should actively pursue strategic partnerships with key players in the cloud computing ecosystem, including:
- Cloud platform providers: Collaborating with companies like AWS, Microsoft Azure, and Google Cloud to ensure seamless integration and compatibility.
- Technology providers: Partnering with leading technology companies to integrate emerging technologies like AI and machine learning into its cloud solutions.
- Industry-specific solution providers: Collaborating with specialized companies to develop tailored cloud solutions for specific industries.
Focus on Innovation: SAP should prioritize innovation by:
- Investing in research and development: Allocating significant resources to develop new cloud solutions and technologies.
- Acquiring innovative companies: Identifying and acquiring promising startups and companies with cutting-edge cloud technologies.
- Cultivating a culture of innovation: Encouraging employees to experiment, explore new ideas, and contribute to the company's innovation pipeline.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: Building upon SAP's expertise in enterprise software and its commitment to providing innovative solutions, these recommendations align with its core competencies and mission.
- External customers and internal clients: By embracing cloud computing, SAP can cater to the growing demand for cloud-based solutions from its existing customers and attract new customers seeking cloud-native solutions.
- Competitors: These recommendations aim to position SAP competitively against established players like Oracle and Salesforce, as well as emerging cloud-native competitors.
- Attractiveness: The recommendations are expected to drive growth, increase market share, and enhance SAP's overall profitability.
6. Conclusion
In the dynamic landscape of cloud computing, SAP needs to embrace digital transformation, forge strategic partnerships, and prioritize innovation to maintain its leadership position. By adopting these recommendations, SAP can effectively leverage its strengths, address its weaknesses, capitalize on opportunities, and mitigate threats to ensure its continued success in the evolving enterprise software market.
7. Discussion
Other alternatives not selected include:
- Focusing solely on on-premise software: This would limit SAP's ability to tap into the growing cloud market and could lead to lost market share.
- Developing a cloud-only strategy: This could alienate existing customers who prefer on-premise solutions and may not be feasible given SAP's established on-premise business.
- Merging with a cloud-native competitor: While this could provide quick access to cloud expertise, it could also lead to cultural clashes and integration challenges.
Key risks and assumptions:
- Technological advancements: The rapid pace of technological innovation could render SAP's investments obsolete, necessitating continuous adaptation and investment.
- Competition: The competitive landscape in cloud computing is dynamic and constantly evolving, requiring SAP to remain agile and responsive to new entrants and competitive threats.
- Customer adoption: The success of SAP's cloud strategy depends on customer adoption, which can be influenced by factors such as security concerns, data privacy regulations, and the availability of skilled personnel.
8. Next Steps
- Develop a comprehensive cloud strategy: SAP should create a detailed roadmap outlining its cloud strategy, including timelines, milestones, and key performance indicators (KPIs).
- Invest in cloud infrastructure: SAP should make significant investments in building a robust and scalable cloud infrastructure to support its growing cloud offerings.
- Develop a cloud-native product portfolio: SAP should prioritize the development of new cloud-based solutions specifically designed for the cloud environment.
- Form strategic partnerships: SAP should actively seek out and cultivate strategic partnerships with key players in the cloud computing ecosystem.
- Foster a culture of innovation: SAP should create an environment that encourages experimentation, innovation, and continuous learning.
By implementing these recommendations and taking proactive steps to address the risks and assumptions, SAP can successfully navigate the challenges and opportunities presented by cloud computing and secure its position as a leading player in the enterprise software market.
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Case Description
In 2012, after several failed attempts at establishing a cloud computing solution for its entire Enterprise Resource Planning (ERP) suite, SAP announced two major acquisitions: SuccessFactors, a major SaaS provider for Human Resources software and Ariba, a major SaaS provider of supply chain software. The first acquisition was for $3.4 billion, with a 52 percent premium over SuccessFactors' market value. The second was for $4.3 billion, with a 20 percent premium. The industry press and bloggers saluted this as a strategic shift in SAP's approach to cloud computing. In May 2012, Lars Dalgaard, CEO of SuccessFactors, was appointed head of SAP's Cloud Business, in charge of the entire SAP SaaS strategy. This case explores the decisions, tactics and strategies pursued to turn SAP into a major cloud computing company.
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