While both Google and SAP shared a 1980's music sensibility at their respective conferences this week - Billy Idol performed at Google I/O and U2's Bono walked the floor at SAPPHIRE - the two companies see the future of computing very differently. Even when the two companies agree on the importance of cloud computing, their strategies couldn't be more different.

For one thing, SAP's new cloud isn't even a cloud. But then, SAP's Bono wasn't really Bono, either, but merely an impersonator.

Forrester analyst Stefan Ried takes SAP to task for getting cloud wrong in its new HANA Enterprise Cloud:

"The Hana Cloud is a very careful move to a new business model. It is not disruptive and will NOT accelerate Hana usage to the many more customers who have been struggling with Hana on-premises because of its licensing. 

"The announced Hana Enterprise Cloud follows the 'Bring Your Own License' paradigm. While this is great for customers that already have a Hana license and would like to relocate it into the cloud, it is useless for customers that might have largely fluctuating data volumes or user numbers and might specifically use a cloud because of its elastic business model."

In other words, it's not really a cloud. 

Amazon, more than any other cloud vendor, has insisted that such "clouds" don't deserve the name, as they fail to live up to the very premise of cloud computing: truly elastic, on-demand software. But while Amazon normally reserves its ire for private cloud vendors, SAP's HANA Cloud is even less of a cloud because it requires you to bring your own HANA license to the party.

Meanwhile, over at Google I/O, Google introduced improves to Google Cloud Platform and made Google Compute Engine available to all. Like Amazon, Google is making a powerful array of infrastructure technologies available on-demand, and totally elastic.

Google, like Amazon, realizes that the future of computing is not going to be won by the vendor with the prettiest device or even the best user interface: it will be won by the company with the best cloud services. As Redmonk analyst Stephen O'Grady pointed out, summarizing Google's first day announcements:

"[Google is clearly telegraphing that] the war for mobile will not be won with devices or operating systems. It will be won instead with services."

SAP must see this, too, but appears hamstrung by its past, in true "Innovator's Dilemma" fashion. It has so much revenue tied up in legacy deployments of legacy software that even releasing a kind-of, sort-of, not-really cloud offering is the best it can do.

This is not to suggest that HANA is bad technology. By most accounts, it's quite good. But as Ried argues, "The SAP Hana Enterprise Cloud is version 2 of the initial Hana in-memory database, but the cloud offering based on 'Bring Your Own License' is more version 0.1 of a cloud business model."

Which is to say, it's no cloud at all. While this may not seem like a big deal, enterprises are barreling into true clouds for a wide variety of needs, and no longer merely for development and test workloads. If SAP wants to participate in the future of enterprise computing, it should learn from the companies that are inventing that future: Google and Amazon.

Image courtesy of Shutterstock.

A new survey of IT decision makers by SAP and Harris Interactive reithat the rise of machine to machine (M2M) communications - more commonly referred to as the "Internet of Things" - is on the cusp of transforming our homes, our cities and how business is conducted.

How, you ask?

• By leveraging Big Data and real-time analytics to improve parking and traffic flow, which could reduce pollution and traffic accidents as well.
• By managing all the gadgets in our homes, from lights, computers and smartphones down to our coffeemaker and garage door. Wake up, the coffee is brewing, the house is heated, the car already knows the best route to work and the news we need is showing on the screen of our choice - prioritized, obviously.
• Connected cars, roads and smartphones will guide us to the nearest open parking spot - and bill us automatically.

This Internet of Things will also let businesses increase "efficiency, productivity and collaboration," as it delivers real-time data and insight when and where it's most needed, including to a widely dispersed, highly mobile workforce.

Buried within the survey results are such nuggets as:

• Mobile devices will outnumber humans this year. 
• 90% of consumer-connected devices will have access to some personal cloud in 2013.
• 24 billion devices will be connected to the Internet by 2020.
• 66% of IT professionals surveyed believe business and consumer technology will converge within 3-5 years - great news for consumer tech leaders like Apple, Samsung and Google.
• At least 4 billion terabytes of data will be generated this year alone.
• The trend toward BYOD (Bring Your Own Device) has clear and present business repercussions: 75% of the surveyed IT professionals believe that employees' personal use of mobile devices impacts how the business itself uses the cloud. 
• 65% think the Internet of Things' biggest challent in managing and analyzing the resulting real-time data.

(Note: SAP and Harris have also prepared an infographic of the survey results, visible here.)

Global Phenomenon

The business-funded survey of 751 IT "decision makers" was generally upbeat about the Internet of Things. A statement released with the survey suggested connecting data from CRM systems, social media and billions of devices, all in real time, will result in "the ultimate social media collaboration of man and machine." 

That said, it is somewhat surprising that IT decision makers in developing countries - China, India and Brazil - appear more eager eager for the M2M revolution. Consider the response percentages to specific statements regarding the Internet of Things:

• Gives companies greater insight into their business: China (96%), India (88%), Brazil (86%), Germany (79%), U.S. (74%) and UK (61%)
• Enables businesses to respond to real world events: China (92%), India (86%), Brazil (82 %), Germany (82%), U.S. (78%) and UK (73%)
• Increases business efficiency:  Brazil (54%), UK (53%) and U..S (49%)
• Increases productivity for employees:  China (69 percent) - significantly higher than any other countries surveyed

Nearly all decision makers (89%) across all surveyed countries agreed, however, that widespread availability of LTE/4G infrastructure was vital for the success of the Internet of Things. This will likely not come cheap, however. A recent statement by Cambridge Wireless noted that today's mobile networks are "lacking ubiquitous coverage" and suggested that "service tariffs are too high to support" the full potential of the Internet of Things.

(See also Futurist's Cheat Sheet: Internet of Things)

The hope of the Internet of Things is that greater connectivity, vastly more data, improved data analysis - and response - will make our lives better in ways we can scarcely predict, at home, on the road, at work; everywhere.

Note: Per SAP, "the survey was conducted online by Harris Interactive on behalf of SAP among 751 IT decision makers in Brazil (n=126), China (n=125), Germany (n=125), India (n=125), the United Kingdom (n=125) and the United States (n=125) between January 15 and February 1, 2013."

Who knew that IBM's sales team was so bad? Or Oracle's? Or Tibco's? In a string of earnings calls, each of these titans of enterprise software put their respective sales teams to the sword, blaming them for the companies' poor earnings reports. 

If only it were that easy.

Shooting The Sales Messenger

While we've talked about the decline of legacy software vendors for years, it's only now that the rise of cloud and open source are showing up in the earnings reports of legacy IT vendors. First it was Oracle, signaling an end to the traditional enterprise software licensing model. Then Tibco. Now IBM.

As IBM chief financial officer Mark Loughridge argued,

We had solid profit performance in January, but as the quarter ended hundreds of millions of dollars of very profitable software and System z mainframe deals fell short of the goal line. On the software side of the house they had a very good listed deals and I think this was just pure execution. We should have closed those on a sales side.

It would be easier to believe this if similar results (and excuses) weren't popping up across the legacy IT vendor landscape, and this despite a flat to improving spending outlook by CIOs, according to recent Barclays survey data:

Perhaps the problem isn't the sales teams' execution - a "lack of urgency we sometimes see in the sales force" as Oracle president Safra Catz opined - but rather the very foundation for legacy enterprise software sales: the software license.

It's The Data, Stupid

As Redmonk analyst Stephen O'Grady persuasively argues, the value of software as software has been declining for years. Value has been shifting to data, and software has either become free (open source) or distributed services made available over the web (cloud). Software revenue growth for the big vendors, not surprisingly, has slowed to a trickle, according to IDC data.

This shifting emphasis away from software sales, toward data-based services, has crowned Google as the market capitalization leader among its "peers," a trend that will likely continue for many years:

In fact, as O'Grady highlights, among the PWC global top-100 software vendors, none of the top-20 was founded after 1989. He concludes: "The data is clear: while there is substantial money in software, the difficulty of employing it as a primary revenue mechanism is increasing."

A Flight From Software To Cloud

For this reason, we've seen IBM and others diversifying out of software, bulking up in services, differentiated hardware, and more, as PWC's segmentation of software revenue among the world's top-20 software vendors indicates:

Source: PWC, 2013.

Such a shift won't happen overnight, and will be painful along the way. Very painful.

For example, SAP has been struggling to become a cloud-friendly company, and it's having deleterious effects on its earnings. As Wells Fargo analyst Jason Maynard spotlighted in a recent SAP research note, "increasing demand for cloud solutions is creating a negative drag on software license revenue growth."

Having lived through this at Novell, when we had to replace super high-margin NetWare revenue with lower-margin, lower-priced SUSE Linux revenue, I can state with some certainty that it's a long, tough road (fortunately, one that SUSE seems finally to have completed). Still, some companies, IBM in particular, have managed to make the transition, though no legacy IT vendor has gone to the lengths that Google, Facebook, Salesforce and other new-breed "tech" companies have, essentially making the sales function an automated credit card transaction over the web.

This friction-free, license-free model is the future. 

In this new world, purchasing power moves away from CIOs to developers, in the case of open source, and to line of business executives, in the case of cloud. Where it's not moving, and likely never will again, is to the top lines of the legacy IT vendors. Software has become a service, not a big revenue driver. That fact won't change, and shooting the sales messenger won't help.

Image courtesy of Shutterstock.

Having slogged through so much bad news of late, last week Hewlett-Packard marketers were quick to run to their laptops to make hay out of a closely watched market report showing that HP remained the word's top-selling PC maker. But in their rush to shine a positive light on their struggling employer, the PR folks left out the most important point: HP is fighting to stay king of an eroding hill.

For HP, Flat Is The New Up

International Data Corp. (IDC) found that HP's fourth quarter PC shipments last year remained roughly flat from the year before. But that was enough to keep it at the top with almost 17% of the market. Soon after the scrap of good news hit the Web, HP public relations went to work. "We believe HP's position as the market share leader demonstrates out ongoing commitment to deliver superior PC products and experiences across customer segments," the press release said.

Woo-hoo!

Ironically, in tooting its own horn, HP highlighted its biggest problem, which is its need to cling to dwindling markets. The IDC report found that global PC shipments fell more than 6% in the quarter and more than 3% for the year. It was the first time in more than five years the PC industry had recorded a year-on-year drop during the holiday season, according to IDC.

The reasons behind the decline are well known. People increasingly favor smartphones and tablets, both fast-growing markets where HP remains a non-player. Heck, even Microsoft, which helped to usher in the PC era, sees its demise and is pushing tablets and smartphones as the future of computing.

But for HP, staying flat in PCs was so exciting it had to churn out a press release. That's not a good sign. But given what else is going on at the company, the temptation is understandable.

Due to management bungling over the last few years, HP has fallen ever farther behind its rivals in taking advantage of game-changing trends in the consumer and enterprise markets. The company paid a total of $24 billion for Autonomy and EDS to become a player in big data software and IT services, respectively, only to see both deals go down in flames through huge write offs.

HP Battles Workers

Meanwhile, HP is chasing distractions when its focus should be on innovation. In Texas, HP is in a tussle with customer General Motors, which is in the process of giving HP services the boot. Eighteen employees quit HP at the same time and without notice to join GM's efforts to take its IT work in-house.

HP is asking the state court for permission to depose two of the workers; a move GM has called "retaliatory" and a "fishing expedition," according to Bloomberg. It seems HP can't understand why anyone would want to flee a company that has promised Wall Street that it will fire 29,000 employees this year and next.

Bright Spots

HP's current state is not all dark. Last week the company launched a services center for in-memory computing, an emerging technology that significantly boosts application performance by keeping all data in system memory rather than on disks. The announcement came the same day SAP said it was making all its business applications available on its in-memory database called HANA. HP plans to throw its support behind HANA and is also working on its own in-memory platform, codenamed Project Kraken," according to InfoWorld.

Kraken-like initiatives are what HP's PR team should be crowing about, rather than the company's managing not to shrink in the cratering PC market. Chasing hot new markets - not scrambling to be the last PC vendor to avoid extinction - is the only way to change HP's image as a dinosaur.

Dinosaur image courtesy of Shutterstock.

SAP has taken a big step ahead of rivals IBM, Microsoft and Oracle with the announcement on Thursday that its in-memory database called HANA is now ready to power the German software maker's business applications. The pronouncement is sure to darken the mood of competitors, who one analyst says will need several years to match what SAP has accomplished.

What SAP has done is to provide one database that can perform both business analysis and transactions, something its rivals are able to provide only by using two databases, according to Gartner analyst Donald Feinberg. "It's the only in-memory DBMS (database management system) that can do data warehousing and transactions in the same database. That's where it's unique."

For SAP customers, HANA-powered applications can speed up the sales process dramatically. For example, today when salespeople for a large manufacturer takes a large order from a customer, they may not be to say on the spot exactly when the order will be fulfilled. That information often comes hours later after the numbers are run separately through forecasting applications.

HANA To Power SAP's Business Suite

With HANA running SAP's enterprise resource planning applications - called Business Suite - salespeople will be able to take the order and get forecasting information in seconds. "This changes the way they do business. It really does," Feinberg said. "And that's the kind of value proposition that HANA brings to the table because of the fact that it's an in-memory database."

During a multi-site news conference in New York, Palo Alto Calif., and Frankfurt, Germany, SAP demonstrated HANA's speed using its manufacturing resource planning software. In Palo Alto, Hasso Plattner, SAP co-founder and board chairman, said the database will eventually be available in all products, whether on-premise or in the cloud. "All SAP products will go HANA," he claimed.

Competitors Racing To Catch Up

Oracle and IBM are expected to match SAP in time. Microsoft has announced that it is working on the same technology for the next version of MS SQL. "I do believe that every other vendor is going to go in that direction, but it's going to take them two to five years to do it, which gives SAP a huge head start," Feinberg said.

SAP is expected to make HANA generally available for business Suite over the next six months to a year. In the meantime, the technology will be available through what SAP calls "Ramp Up." That means customers can get the new product if they agree to put it into production with SAP's help. This gives the vendor the opportunity to work out any kinks and to establish a number of customer references.

HANA, was first made generally available as a standalone database in mid-2011, and SAP now claims to have almost 1,000 customers. The company believes those numbers can rise even faster once HANA powers all of its products.

At the same time, SAP promises to support customers that stick with the traditional databases currently running SAP applications, whether the databases are from competitors or the company's own Adaptive Server Enterprise (ASE).

In-Memory Databases

Many companies today offer in-memory databases for a variety of tasks. The databases are much faster than traditional technology because all data is stored in system memory where it can be accessed quickly. Standard relational databases write and read to disks, which is a much slower process. (http://www.mcobject.com/in_memory_database)

In unveiling HANA for Business Suite, Plattner took a dig at Oracle Chief Executive Larry Ellison, who predicted SAP's six-year effort to power its business applications with HANA would fail.

"I have to admit. I enjoy that he is not smiling," Plattner crowed. "And I know that there is a weekly meeting [at Oracle] which has the word HANA in it."

Those meetings are likely to go on for a while as Oracle and other vendors race to catch up.

Image courtesy of Shutterstock.