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/.

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/.