SAP and Cloud Computing in 2012 and Beyond

By Robert Burgelman, Jean-Bernard Rolland
2013 | Case No. SM214 | Length 34 pgs.
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.

Learning Objective

The objective of the case is for students recognize three established key concepts and a fourth that is open for debate: (1) Strategic inflexion point, or event that results in a significant change in the progress of a company, industry, or sector situation. An inflection point can be considered a turning point after a dramatic change, yielding either positive or negative results. Companies, industries, sectors, and economies are dynamic and constantly evolving. Inflection points are more significant than the small day-to-day progress that is made and the effects of the change are often well-known and widespread. (2) Platformization, or a situation in which the technology provided by a company has grown into a complete ecosystem in which the costs of change are higher than the benefits, thus providing strong protection to the company whose platform an industry has embraced. Although a platform offers strong protection against new entrants or disruptive technologies, it can also make a change more difficult. The platform can act as a dam and if the dam collapses, the consequences can be catastrophic. (3) Rubber band, or a situation where entrepreneurial thinking can accelerate growth in large corporations. This entrepreneurial thinking can come either from the inside or from the outside. (4) Commoditization of IT due to the development of cloud computing and open standards. This concept is open for interpretation and debate.
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