SAP's co-CEO and Microsoft's sales chief explain why they're teaming up for a cloud partnership that could mean trouble for Amazon (MSFT, SAP)


SAP CEO Jennifer Morgan

  • Microsoft and SAP announced a new partnership that would make it easier for the German software maker’s customers to move to Microsoft Azure, the tech giant’s cloud platform.
  • The move highlights Microsoft’s push to forge alliances with rivals in the enterprise software market as it competes with Amazon in the cloud.
  • For SAP, the partnership creates new opportunities to offer its cloud software applications to existing and new customers.
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Microsoft and SAP just unveiled a new partnership that would make it easier for the German software maker’s customers to move to the US tech giant’s cloud platform.

The move highlights Microsoft’s push to strengthen its position against Amazon in the cloud, by forging alliances with rivals in the enterprise software market, including arch-nemesis Oracle.  For SAP, the partnership promises to boost the company’s ability to maintain and strengthen its relationship with its more than 400,000 customers, many of whom are looking to access applications in the public cloud.

In fact, many of them were clearly drawn to Azure, Microsoft’s platform, said SAP’s new co-CEO Jennifer Morgan. Morgan, who has been president of SAP’s cloud business, and Christian Klein, SAP’s former chief operating officer, were named co-CEOs two weeks ago after longtime Chief Exec Bill McDermott announced he was stepping down.

Morgan said many of SAP’s largest customers “were very clear with us that they had already chosen to move their largest workloads to Azure, or had plans to do that.”

“A lot of times with companies today, everything is about either I win or you win,” she told Business Insider of the decision to work with Microsoft, a longtime rival. “It’s not a zero sum game anymore.”

But it’s a potentially big win for Microsoft, which is now “SAP’s preferred cloud,” Microsoft CEO Satya Nadella said in an emailed statement to Business Insider.

“Our unique and extensive partnership with SAP will help organizations accelerate their journeys to the cloud,” Nadella said. “With Azure as SAP’s preferred cloud, we will make it faster and easier for customers to migrate to Azure, unlocking new business opportunities and innovation.”

The new partnership would make it easier for SAP customers who use the company’s applications on private data centers or on its private cloud platform to migrate seamlessly to the Microsoft public platform where they would be able to access SAP’s cloud-based tools. 

The Microsoft-SAP announcement follows a series of earlier agreements, including a 2017 partnership aimed at making it easier for customers use one another’s applications and platforms.

Versus Amazon

The partnership could make Microsoft more competitive against Amazon, the dominant player in the cloud, the fast-growing trend which lets businesses to set up networks on web-based platforms, making it possible for them to scale down or abandon private data centers. This trend has disrupted the traditional enterprise software market where SAP, Microsoft and Oracle are competitors.

Microsoft has also been stressing a so-called hybrid approach to the cloud for businesses that want to make the move but still hope to maintain huge chunks of its data and applications in private data centers. Given its bigger footprint in the enterprise market, where products like Windows are ubiquitous, Microsoft is widely seen as having an edge over Amazon in this trend.

Microsoft is clearly also using alliances to gain an edge over Amazon. In June, the Redmond, Washington-based company unveiled a new partnership with Oracle, which is making it own bid to be a stronger player in the main cloud infrastructure arena. Judson Althoff, executive vice president of Microsoft’s worldwide commercial business, said its partnership with SAP is deeper and more comprehensive.

“We’re not stepping forward and reselling Oracle,” Althoff told Business Insider, noting that the Oracle arrangement is focused more on making it easier for businesses to run their networks on both platforms. “Oracle business applications don’t run natively on Azure. With SAP, we’re very far along in having optimized native capabilities” of SAP software available to customers.

‘Strong move by Microsoft’

Analyst Ian Campbell, CEO of Nucleus Research, said the move made sense for Microsoft as it looks to strengthen its cloud business. 

“Strong move by Microsoft since it’s clear the future of Azure is in supporting all solutions, not just those from Redmond,” he told Business Insider. “Azure needs to grow and supporting all comers is key. The Microsoft Apps folks need to compete, and they are doing a great job, so there’s no need to hamper Azure’s growth by shunning Microsoft competitors.”

SAP is not a major player in the public cloud platform business, but the Microsoft alliance underscores its own cloud strategy which focuses heavily on expanding the reach of its cloud applications, especially within its huge customer base. Morgan said its a strategy that recognizes the desire of many customers to work with a variety of vendors and platforms.

“Just like Judson is going to have customers who run Oracle, we’ve got customers who maybe running on AWS or GCP,” Morgan said, referring to Amazon Web Services and Google Cloud Platform, the other major cloud platform.

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