Six months after signing an ambitious deal with Google Cloud to create a massive data cloud, SAP is close to completing a similar agreement with Microsoft to further enhance the value of the data within SAP systems that power huge portions of the global economy.
As the generative artificial intelligence (GenAI) revolution unfolds, companies in every industry and across every part of the globe are aggressively seeking to tap into larger and more-relevant stores of business data to power their nascent GenAI initiatives.
Following the SAP-Google Cloud agreement in mid-May, I wrote a piece called “SAP and Google Sign Blockbuster Deal to Create Massive Data Cloud” that includes this overview of what that data-powered alliance means for customers:
That potent combination can generate enormous value for customers by giving them not only access to all of their data — from their SAP systems as well as other sources — but also the power to derive new insights from this stunning combination of incredibly relevant business data and modern cloud and AI solutions.
That’s why I’m calling this a “blockbuster” deal because the expanded SAP-Google Cloud alliance gives customers vast new capabilities and possibilities that neither company could have come close to offering on its own.
In light of the potential of that collaboration between SAP (#5 on the Cloud Wars Top 10) and Google Cloud (#2 on the Cloud Wars Top 10), SAP CEO Christian Klein grabbed my complete attention when, during SAP’s recent Q3 earnings call, he alluded to a conversation he’d just had with Microsoft CEO Satya Nadella on a very similar subject: “Yesterday, I met with Satya in Berlin. And Microsoft is extremely interested on how can we join forces to also further combine our data.”
An expanded partnership of this type makes perfect sense for a number of reasons:
- Microsoft and SAP have been close strategic allies for decades;
- a significant percentage of SAP’s cloud applications run on Azure infrastructure;
- as part of SAP’s cloud transformation across the past few years, Klein has bullishly boosted SAP’s profile and capabilities around providing customers with new and better ways to fully exploit the power and value of not only their own data but also relevant third-party data; and
- Microsoft, under Nadella’s astute leadership, has aggressively pursued and executed a wide range of partnerships and alliances with Cloud Wars Top 10 companies that have in some cases defied tradition — e.g., the recent expansion of its multi-cloud deal with Oracle: “How Larry Ellison and Satya Nadella Have Rocked the Tech Industry.” In that context, Nadella is fully aware of how, in the race for leadership in the extraordinary GenAI revolution, of the enhanced value that SAP’s data could bring to Microsoft.
Another major impetus behind Klein’s desire to reach an expanded data agreement with Microsoft — by far the world’s leading provider of enterprise cloud services — is SAP’s intention to charge premium prices for its AI and GenAI portfolio. You can read all about this in “As Generative AI Price War Looms, SAP CEO Klein Makes Case for 30% Premium.”
Klein made the case for that during the Q3 earnings call after a financial analyst asked him to explain why SAP feels it can charge for GenAI services such as copilots, while some competitors have said they will definitely not charge for AI-enhanced services. Here’s the key part of the question: “Could you talk a little bit about what’s different in the SAP portfolio? Is it the data that you have access to, the complexity of the processes, the value of the roles that you can automate further that would make you different in terms of being able to extract value on this versus some of your peers?”
And here’s the core portion of Klein’s reply:
“In the B2C end, you can ask ChatGPT to outline a speech and you get a proposal for a speech. But in the B2B world, accuracy and data quality is of utmost importance. So all the work we did on BTP over the last three years to not only integrate but also to harmonize our data model is now extremely paying off in high-quality data and is the foundation for SAP Business AI.”
As we are all witnessing on a daily basis, GenAI is driving remarkable changes in the business world and customers are accelerating their business transformations to keep up with rapidly evolving customer demands. In turn, those new and disruptive forces are triggering new and unprecedented types of alliances among the Cloud Wars Top 10 companies as traditional approaches simply won’t meet the emerging needs and requirements of customers.
That’s why I believe that Klein and Nadella will make sure that their companies lock down the opportunity to, as Klein put it, “join forces to also further combine our data.”
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