A former colleague of mine manages SAP projects for a French IT service company serving SAP customers in Germany. I had a conversation with him and would like to briefly outline the key points from my perspective.

An SAP system consists of an operating system (Linux), SAP Basis, a database, and applications. Originally, all of these were run on servers at the customer's site. An IT service provider handled the operation. Various products were used as databases, most commonly Oracle.

SAP now has its own database called HANA, which is technically superior. Almost all customers now use it, cloud-based.

SAP's goal is to migrate the SAP Basis to the cloud for as many customers as possible. As leverage, customers are given the choice of continuing the service outside the cloud at a 5% higher price for licenses, or having the migration carried out at SAP's expense.

In Germany, this cloud migration has already been completed for approximately half of the customers in the last five years.

This leads to increased service revenues, as SAP now handles the operation of the SAP Basis itself. Furthermore, it makes sense to also have SAP manage the applications and necessary customizations in-house, instead of outsourcing them to IT service providers as before – resulting in further revenue growth and higher margins.

Take care,
Josef