SAP's new strategic investment in Canada is part of a strategy to help its Canadian channel partners significantly grow their cloud business

 

On Monday, SAP Canada made a major strategic investment in Canada, opening its first Canadian data centre in Markham, Ontario. The infrastructure is currently being built into the datacentre and data will be hosted there by the end of 2014.

“This speaks volumes to our commitment to the cloud,” said Bob Elliott, managing director for SAP Canada. “We’ve invested in our partners in Canada in our ecosystem ahead of the revenue coming in, and that’s the only thing that has been close in terms of the level of investment.”

The Canadian data centre will be one of 16 SAP has globally, as it expands its data centres in different geographies globally to meet customer demand. Earlier this year SAP opened new data centres in Sydney, Australia, and in Tokyo and Osaka in Japan, and an additional data centre in Brazil is planned for later in 2014.

“I was surprised how few data centres we had before,” Elliott said. “Ariba was a very mature business that had transitioned all their revenues to the cloud, and they just had one data centre when we acquired them in 2012. But customers, especially in the public sector, are demanding this today. They want the data housed on Canadian soil, because of confidentially issues. No matter how much we explained the data was secure, there is this emotional tie with having it on Canadian soil, so we called uncle and gave up and said we would do it.”

SAP’s cloud business, assisted mightily by its SAP HANA in-memory computing platform, is growing at an exponential rate in Canada.

“Today, cloud is only a quarter of our on-prem business, but we expect to grow the cloud at a vastly higher rate than on-prem,” Elliott said “My goals this year are 100% growth in cloud this year, compared to 12% growth in on-prem.”

New business, Elliott said, is almost entirely cloud.

“Almost every net-new account we sign now goes on HANA immediately, and never has a relational database, and that’s especially the case when a channel partner is involved in the sale,” he said. “I believe that we are out of the early adopter phase on HANA, which was mainly legacy customers converting, and moving up the Bell Curve. We think a lot of customers will switch off Oracle relational databases and come to the HANA enterprise cloud.”

Elliott said SAP is committed to supporting its Canadian partners as they expand their cloud business.

“We have some brand new partners who are only there for the cloud, and some legacy partners who have moved to cloud business well, and some others who are still mainly the old ERP business, but we are feeding them all with qualified leads to move the Bell Curve,” he said. “We are completely committed to building out channels capability to sell cloud.” Elliott also noted that by the end of Q3, SAP will no longer have any direct coverage in cloud at all in the channels space, as part of a global policy.

SAP has two types of partners in Canada — core system integrators like Accenture and IBM, and resellers, who handle organizations of less than a billion dollars. They have between 30-50 resellers active in Canada today, with the ubiquitous 80-20 rule, in which 20% bring in 80% of the business, holding firm.