Tuesday, February 19, 2013

Hana: Game Changer for SAP

One of the very few European technology companies that enjoys success globally is Germany's SAP AG ADR (NYSE: SAP). More than 60% of all global transactions involve a SAP system.

Yet, it was feared that the German firm's best days were behind it. The perception among investors was that it had missed the change over of applications to the cloud and on to mobile devices. It was this change that was powering new challengers to SAP such as Salesforce.com.

New Leadership

But the appointment of co-CEOs – Bill McDermott and Jim Hagemann – in 2010 refocused the company on innovation and its customers.

What followed was 12 straight quarters of double-digit growth in sales of software and related services.

But that wasn't enough. Doubts still lingered about the company. Would it go down the path of HP towards obscurity or remain relevant and successful?

Luckily for SAP, the man who developed its flagship software system - chairman Hasso Plattner, is still hard at work. He developed a new system architecture that may catapult SAP ahead of its competitors.

Hana Is Born

Plattner and a team of computer scientists designed new architecture that is now SAP's solution to the rapid growth of mountains of complex data and companies' desire to exploit this information to their advantage.

The new architecture, Plattner's brainchild, is called 'Hana' and should be the catalyst for SAP's future growth.

SAP says Hana will allow companies to run complex reports on voluminous data in a matter of mere seconds instead of hours. That is due to the fact that Hana's computing takes place directly in the memory chip of the computer, instead of on a separate hard disk.

This entire concept was originally sneered at a few years ago by SAP's rival, Larry Ellison of Oracle (Nasdaq: ORCL), who often likes to poke fun at everything SAP.

However, he seems to have changed his tune. Oracle now has its own in-memory product, called Exalytics, which was released in February 2012. It is quite a bit different than Hana, but both at their core do in-memory calculations.

Microsoft (Nasdaq: MSFT) is also expected to launch an in-memory product by 2014 or 2015. It is currently working on it – project “Hekaton” - to compete directly with Oracle and SAP. Hekaton is Greek for 100 times.

It is expected that customers will be able to install Microsoft's Hekaton on the commodity servers they are using today. 

Hana is one of the key factors that is expected will allow SAP to keep pace with rivals including Oracle and International Business Machines (NYSE: IBM). IBM recently reported excellent earnings (up 11%) powered by gains in “analytics, cloud computing, [and] Smarter Planet solutions”.

Last year's acquisitions of Ariba and SuccessFactors and 2010 purchase of Sybase are also expected to help SAP to keep pace with rivals.

The Future

SAP forecasts it will pass 20 billion euros in sales by 2015, powered by three key areas: mobile, cloud computing and database computing.

Sales of Hana are expected to reach 700 million euros in 2013, which may be a conservative estimate by the company. Hana had sales of almost 400 million euros last year with about half of those sales coming in the last quarter of 2012.

An additional key selling point for SAP this year is the fact that it reported earlier this month that Hana will support SAP's business suite management software, its cash cow.

Hana could turn out to be a real game changer for SAP, which may set it on the right path for the foreseeable future. As Hasso Plattner told the Financial Times, “I see now a clear future for SAP for the next five to 10 years.”
This article was originally written for the Motley Fool Blog Network. Be sure to read of all my articles for the Motley Fool at http://beta.fool.com/tdalmoe/.


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