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/.

The Battle for Leadership in Network Virtualization

There is perhaps no hotter area in the technology space than cloud computing and network virtualization. Two recent deals put the spotlight on that fact: the $1.26 billion acquisition of Nicira by VMware (NYSE: VMW) and the purchase of Xsigo by Oracle (Nasdaq: ORCL) for an undisclosed sum. Xsigo's software simplifies cloud infrastructure and data center operations. Oracle now can offer clients a full set of virtualization capabilities for cloud-based computing.

Both Nicira and Xsigo have some of the world's biggest companies among their customers and the deals highlight how fast the market for virtualization software is consolidating. It also shows the growing conflict coming between virtualization software firms and the network equipment companies.

The move by VMware, 80 percent-owned by EMC Corporation (NYSE: EMC), is particularly interesting. It already has a leading position in the market for virtualizing servers in data centers. Now VMware will be able to add a leader in virtualized networks products to its portfolio. Its chief technology officer, Steve Herrod, said that Nicira software-defined network virtualization will provide “the architecture for the cloud” to its users. Its main benefit is that it will provide corporate users the ability to cut hardware costs, offer lots of flexibility and speedy deployment.

In effect, this purchase by VMware fired a close shot across the bow of network equipment companies like Cisco Systems (Nasdaq: CSCO) and Juniper Networks (Nasdaq: JNPR), whose stocks initially lost 6 percent and 3 percent respectively on the day of the announcement of the Nicira deal by VMware. Israel Hernandez of MKM Partners said that there are “significant negative implications for Cisco and Juniper” from the Nicira-VMware deal. Both Cisco and Juniper have pushing into the nascent network virtualization market with their own technologies, albeit slowly. The overall global data networking market is currently valued at $37 billion.

Many Wall Street analysts believe that Cisco has the most to lose from VMware's push into this sector. The fear is that what VMware did to the server hardware industry – allowing companies to share servers in data centers – it will now do the same thing in networking routers and switches. Cisco does have a strategic partnership with EMC and VMware in virtual computing.

There is a real question out there as to whether Cisco has missed the market. That would be a difficult pill to swallow for Cisco, whose chairman and CEO John Chambers has always said that he was proudest of his company's “ability to capture market transitions that matter most”. It did lay off 1,300 employees due to slowing demand for IT equipment. But competitors like Alcatel also struggled due the weak global economy. And don't forget that Cisco it does have a $100 million investment in a Nicira competitor, Insieme.

Both Cisco and Juniper had better speed up their move into the network virtualization market, through acquisitions if necessary. Or else someday companies like AT&T and many others will wake up, slap themselves in the head and ask 'why have we been buying all this expensive gear from Cisco and Juniper?'. It will dawn on them that they no longer have to do so.

This article was originally written for theMotley Fool Blog Network. Please read all of my articles for the Motley Fool at http://blogs.fool.com/tdalmoe/.

A Look at the Social Media Marketing Sector

It is one of the hottest spaces in the technology sector right now...social media marketing. The torrid growth over the past several years of social networking services such as Facebook (Nasdaq: FB) and Twitter has presented companies with both new marketing opportunities and new marketing challenges.

Companies today need to keep pace with their customers, many of whom now use social media to talk about firms and their products. Companies gaining intelligence from conversations by consumers across social media will allow them ideally to create a stronger brand image, products more suited to consumer tastes and improved customer service. Since this industry is still in its early stages, even companies in the same sector such as GM and Ford, are pursuing differing social media strategies as my recent article pointed out.

Because of the rapid growth in this area, there is hotly-contested race between software powerhouses – Oracle (Nasdaq: ORCL), SAP AG ADT (NYSE: SAP) and Salesforce.com (NYSE: CRM) to become a dominant player in the sector. The field is one where Facebook has generated a ton of traffic, but with no direct revenues flowing through to the bottom line. As many analysts have said, it is a “missed opportunity” for Facebook to generate additional revenues.

Facebook allows companies to market on its platforms for free. As companies look for ways to monitor and manage an increasing number of Facebook pages and fans along with other social media sites like Twitter, social media marketing firms (which did not exist not long ago) are stepping in to help companies. Facebook calls these firms “partners” and gives access to its platforms free of charge. But, in turn, these firms are charging corporations a fee for use of their software which track their performance on Facebook and other sites.

A number of these firms have been snapped up recently by the aforementioned Oracle, SAP and Salesforce.com, folding these companies into their portfolio of software offerings. Some of the most recent deals include Salesforce.com's $689 million deal to acquire Buddy Media and two purchases by Oracle – Virtue for $300 million and Collective Intellect for an undisclosed sum. Last year, Salesforce.com started the feeding frenzy with its purchase of Radian6.

These deals highlight a growing macro trend technology investors should be aware of...the line between marketing and technology firms is becoming increasingly blurred and morphing into one. As Salesforce's CEO Marc Benioff said recently, “The marketing industry is undergoing the biggest transformation it has seen in 60 years. Facebook has become the new corporate homepage.”

Investors should expect the trend of software firms acquiring social media intelligence companies to continue. Zach Hofer-Shall of research firm Forrester stated this week “This social technology arms race is the start of something very big to come.” He should have added that the big – Oracle, SAP and Salesforce.com – will only get bigger in the field. Their profits will grow larger too unless, maybe, Facebook decides to monetize the marketing occurring on their site and start charging the software companies fees for access to their platforms.

This article was originally written for the Motley Fool Blog Network. Make sure to read all my daily articles for the Motley Fool at http:blogs.fool.com/tdalmoe/.