SAP: Private Clouds Have a Role in the Enterprise

PALO ALTO, Calif. — Do private clouds have a role in the enterprise? Or should IT departments and CIOs place their bets on innovative services from public cloud providers like Amazon and Microsoft?

To enterprise software giant SAP (NYSE: SAP), the answer to both questions is yes.

“Public clouds have scale, but there are lots of benefits to having a private cloud,” Kaj Van de Loo, an executive in the office of the CTO at SAP, said in a panel discussion here at the AlwaysOn Summit at Stanford.

“Using the cloud infrastructure internally makes perfect sense to me and then you can increase its value by connecting to services outside” via a public cloud provider, he added.

SAP has been criticized for being late to the cloud-computing party, while Salesforce.com (NYSE: CRM) has built a billion-dollar business based on enterprise applications and services that reside in the cloud.

Van de Loo challenged the idea that all enterprise applications are inevitably moving to the cloud.

“First of all, moving to the cloud is not the right way to think about anything,” he said. “There will be new things in the cloud — redoing something doesn’t make a lot of sense. If you want to argue we’ve been somewhat slow in expanding to the cloud — fair enough — but customers have a lot of interest in seeing that our applications maintain their core value, the data integrity and consistency. Taking that to the cloud takes a lot of work.”

Fellow panelist Ron Wastal, vice president of worldwide alliances at Cast Iron Systems, an IBM company, backed Van de Loo. “To be fair to SAP, not all apps are created equal,” he said.

“Certain applications are playing out faster on getting to the cloud because they’re easier to do,” he added. “SAP is working on the harder issues.”

SAP’s Business ByDesign, a suite of cloud-based applications, has been hit by numerous delays since it was first announced two years ago. But in an earnings call earlier this week, SAP Co-CEO Jim Hagemann Snabe said Business ByDesign will be released later this week, and that SAP has a pipeline of “thousands of customers” waiting for it.

Steve Shah, a member of the marketing team in the NetScaler and Cloud Product group at Citrix, said the benefits of a private cloud are limited. “Amazon can do things at scale even a large enterprise can’t do,” he said.

His view mirrors comments made earlier this week by David Girouard, president of Google’s enterprise division. Girouard called the private cloud a misnomer because it has the same limitations as a traditional, on-premises data center.

Another panelist, Tom Lamoureaux, a partner at KPMG, said cloud computing has been mainly discussed from a technology point of view, a focus that has limited its adoption in the enterprise.

“When we start talking more about what advantages cloud computing can bring to solving business objectives, that will show its maturation beyond IT to the entire group of C-level executives,” he said.

David Needle is the West Coast bureau chief at InternetNews.com, the news service of

RELATED NEWS AND ANALYSIS