As SAP customers continue to evaluate their cloud strategies for migrating to S/4HANA, venerable enterprise vendor IBM is positioning the hybrid cloud as an alternative to the public cloud hyperscaler trend.
IBM doesn't want customers thinking its hybrid cloud locks them into a single approach to S/4HANA transformations. Instead, it aims to provide the infrastructure that best suits the needs of the company, according to Keith Costello, IBM's general manager for global SAP business.
"It became very obvious to us early on that the clients were coming at their SAP journey to S/4HANA from different angles and different perspectives," Costello said. "Whether they are in a regulated industry, a non-regulated industry, part of a government or are in a certain country, they all have different perspectives about things like data residency, security and compliance."
While the hybrid cloud has its advantages, particularly in some industries that have to adhere to strict regulations on where data resides, there are questions about whether IBM is the right vendor to pull it off.
No single deployment approach
Most IBM customers that run SAP systems are not focused on one deployment method but are instead interested in running their systems in the way that best meets their individual needs, according to Costello.
"Some of those applications are deployed on premises and will stay so, and some of those applications are ripe for the economic benefits of public cloud -- IBM Cloud, Azure, AWS, Google Cloud Platform," he said. "Many companies in regulated industries, governments and defense agencies, and some very large Fortune 500 companies, will continue to run their applications on premises. At IBM, we want to support all of that."
One of IBM's keys to enabling a hybrid cloud environment is Red Hat OpenShift, an open source container platform that enables customers to develop or re-platform applications for any deployment choice.
"All of IBM's software has been re-platformed to run on OpenShift and therefore can run in any environment," Costello said. "Many of our clients choose to run certain kinds of software on premises, and they choose to run some of that software in a cloud environment -- private or public."
In February 2021, IBM introduced IBM Power Private Cloud Rack Solution, preconfigured systems with tailored versions of Red Hat OpenShift that are designed to enable customers to deploy hybrid cloud environments quickly.
"IBM Cloud is fully certified to run S/4HANA in any configuration you can imagine today," Costello said. "So you can run S/4HANA in IBM's public cloud capability; you can run it on a private cloud; you can run it on Power Systems [servers], and many of our clients do."
Costello added that IBM's agnostic approach to cloud deployment is also evidenced by its participation in Rise with SAP, a program aimed at simplifying migrations to S/4HANA Cloud by offering customers a SaaS-like model on the cloud hyperscaler of their choice.
The IBM Global Business Services team is working with SAP on dozens of Rise with SAP deployments, Costello said, regardless of whether their deployment is IBM Cloud or another hyperscaler.
"Our interaction with clients is about their business, their business problems, the business case and what they're trying to solve for," he said. "The question of what cloud to run this on doesn't come up."
Late to the cloud party
The idea of the IBM hybrid cloud is sound, according to analysts, and keeping some systems on premises may be attractive to customers.
While IBM missed the boat on becoming a major public cloud provider, its deep experience with on-premises SAP deployments should help it carve out a niche as a hybrid cloud and managed services provider, said Dan Elman, research manager at Nucleus Research.
SAP's large customer base still maintains complex and heavily customized on-premises systems and moving those systems wholesale to any public cloud hyperscaler is not feasible, Elman said.
IBM's hybrid cloud enables customers to move only what they want to move. IBM will also help to connect to assets, including IBM's portfolio of AI, machine learning, data management and analytics on top of the SAP deployment, he said.
"This hybrid cloud approach is a differentiator and they are differentiated with some of their products like Red Hat OpenShift, which gives the ability to unify assets across public cloud, private cloud and on premises," Elman said. "In that sense, they're coming to market for some customers with a maybe more value-add proposition than just these primarily public cloud players."
IBM might also benefit because some customers don't want to put their systems and data in the hands of public cloud providers that compete in some lines of business, he said.
"That's becoming an increasing issue for a lot of customers because they want to diversify away from those big names because they have so much data already," Elman said.
Joshua Greenbaum, principal of Enterprise Applications Consulting, agreed that the IBM hybrid cloud offering makes sense, given the company's customer base.
"IBM really is late to the [cloud] party in many ways, which is fine because the idea of supporting a hybrid cloud is a very legitimate one -- and in fact, is absolutely necessary," Greenbaum said. "Their legacy customer bases that are living on all those mainframes are going to want to maintain a lot of that functional code, despite the trend and view of the world that everything has to be modern SaaS on the cloud."
Joshua GreenbaumPrincipal, Enterprise Applications Consulting
Security is also becoming an increasing concern for the enterprise cloud strategy, he said.
"Ironically, what's happening with ransomware and the 'hackability' of public networks is there's starting to be a bit of a retrenchment back to looking at what companies can do inside the firewall to protect themselves better than they would be if they're exposed to the public internet," Greenbaum said.
While hybrid cloud will be a viable option for some time, IBM has some catching up to do to remain a serious player in the market, he said.
"It's absolutely spot on in terms of what large enterprises need, and those large enterprises will need hybrid for long time," Greenbaum said. "The fact that IBM is saying this years after everyone else has been saying it is unfortunate, but it needs to be said as many times as possible."
IBM not seen as innovation leader
Plus, IBM will have to overcome its legacy reputation, which Len Riley, sourcing and commercial advisory practice leader for UpperEdge, said is not helping it to convince customers that it's the right vendor to provide innovation and transformation. UpperEdge provides ERP implementation and systems integrator (SI) selection consulting services.
Historically, IBM has had strong relationships with CIOs and leaned on this to build a business with managed services contracts for infrastructure, application maintenance and support, Riley said. But over the years, IBM's managed services commitments lagged and the company spun off its managed services infrastructure unit last fall as a public company, which has affected customer confidence in IBM as a hybrid cloud provider.
"The spin-off of the infrastructure group has confused people as to what is residing and staying with IBM versus what's going away from IBM," Riley said. "The office of the CIO now wants to go to the cloud but doesn't inherently look at IBM as the company to take it there because of its legacy relationship with IBM."
The emergence of Rise with SAP has complicated things further for IBM, he argued. Companies must decide if they want to go through SAP for the entire stack, purchase perpetual software licenses from SAP and go directly to a hyperscaler, or do a managed services contract with a provider like IBM or TCS.
"How you work through those decisions needs to be really thought through, because there are a lot of decisions to make," Riley said. "Before you would buy the software, get an implementation provider, and then pick a managed service provider on the back end, but the solutions now are all integrated, so the decision-making isn't serial anymore."
Still, Riley said, IBM has a strong case to make with its hybrid cloud approach, but it will need to work hard to do so.
"Ultimately, when it comes to IBM's ability to scale and bring capabilities to the table, they've got global reach that it's very hard for others to even compare, so if they're able to leverage their global reach in the partnerships that they have, there are absolutely hybrid cloud solutions that make perfect sense for some customers," he said. "But IBM has a hill to climb relative to legacy perception and the dominance of the mindshare that the hyperscalers and the SIs have with the office of the CIO today."
Jim O'Donnell is a TechTarget news writer who covers ERP and other enterprise applications for SearchSAP and SearchERP.