SAP Cloud Computing – SAP SaaS, SAP PaaS, or SAP IaaS?

SAP cloud computing - PaaS, IaaS, and SaaS.

More than 90% of all companies already are using cloud computing. Because of this, SAP finally gave in and entered the world of cloud computing as well. It is finally time for SAP cloud computing.

The trend of cloud computing is obvious: worldwide spending for cloud computing climbed from $67 billion in 2015 to $117 billion in 2018 – spending almost doubled in just 4 years.

Worldwide public spendings on cloud computing from 2015 to 2020 in a chart.
Worldwide public spendings on cloud computing in billion $ from 2015 to 2020.

Therefore, it was high time for SAP to join the cloud computing train. SAP’s fiercest competitor in CRM is a prime example of the success of cloud computing: Salesforce.

Salesforce is a provider of CRM software and is offered exclusively as a cloud computing service, doing so since its founding in 1999. Salesforce has become the market leader in CRM software through cloud computing.

Sketch of the Salesforce logo.
Salesforce is the market leader in CRM software and offers only cloud computing, a model used since its founding in 1999.

CRM until now has been the only business area for Salesforce. Who knows in which other business areas Salesforce would be the market leader by now, if they did not restrict themselves to CRM.

Furthermore, Salesforce has become not only the leader in CRM software but is the leader by a large margin over its competitors.

Graph which showes that Salesforce is the market leader for CRM software.
Salesforce has become the leader in CRM, doing only cloud computing since its founding in 1999, so there must be something to cloud computing.

Cloud Computing in a Nutshell

First of all, the way things were done before cloud computing – the opposite of cloud computing: on-premise.

On-premise was the typical way for a company to run its business software, dating from the beginning of time and up to recent years.

On-premise means basically to possess and maintain one’s own data center: hardware, software, a huge basement, and employees who take care of all that.

Opposing on-premise, cloud computing means to not own any data center but to use the data center and the services surrounding this data center performed by someone else.

It is like with a car: instead of making a massive investment in buying a car and owning it, most people lease a car. Therefore, they do not own the car but pay a small sum every month to use it.

3 Layers of Cloud Computing

One level deeper into the term cloud computing, cloud computing splits up into three layers:

  1. Infrastructure as a Service (IaaS)
  2. Platform as a Service (PaaS)
  3. Software as a Service (SaaS)

To put it simply: IaaS means to use the data center just for the servers and some software to run these servers. How much server power that is supposed to be is changeable at any moment.

PaaS means to use the servers, their software, and some software to develop or run other software.

Lastly, SaaS means to use the servers, their software, software to develop or run the software, and the software that is supposed to run on the other software.

All services regarding maintenance of the hardware and software is done by the owner of the data center, including all updates, upgrades, and other services, such as backups, security, and compliance with data privacy regulations.

As you might have noticed, the different types of cloud computing are layered. At the bottom is IaaS, on top of that is PaaS, and finally on the top is SaaS.

Pyramid consisting of the three cloud computing layers IaaS, PaaS, and SaaS.
Cloud computing consists of three layers: IaaS is the foundation, PaaS can be built on an IaaS, and a SaaS relies on an IaaS and PaaS.

Downsides of Cloud Computing

Cloud computing at its core is the complete or partial outsourcing of a data center with all that belongs to it – it is outsourcing the on-premise as a whole.

To have a provider who takes care of the hassle of owning and operating a data center is, for most companies and at first glance, a great option.

This is especially true when it comes to guaranteed uptimes, security, data privacy standards, scalability, and automatically obtaining the newest updates and upgrades for hardware and software.

But cloud computing comes with a downside, especially for the SaaS layer. SaaSs are usually restricted or not customizable. This is because the software needs to stay easily upgradeable and updateable for the provider of the SaaS, so the provider does not allow any customizations.

In addition, SaaS development of customizations are more complex and often take longer than in an equivalent on-premise system, so the limit is established.

In order to do customization, there is the need to take detours, due to the SaaS architecture. In an on-premise system, it is possible to go straight for the customization in the coding without any restrictions.

If SaaSs would be easily customizable, as some leasers wish, then SaaS providers would need to take care of each of those customizations with every update of the SaaS to not interfere with each customization.

Therefore, the customization qualities of SaaSs are purposefully restricted. However, customizations in SaaSs are, to a certain degree, possible – that is, for a reasonable amount of time and money.

SaaS has extension points by which a customer can customize the SaaS.

A SaaS that is extended by a customer through such an extension point is upgrade-safe because the SaaS provider knows that there is an extension point in the SaaS, and he knows that he should not mess with this extension point or the developments that are related to this extension point.

However, through those extension points, it is often not possible to customize a SaaS application in the same way as an on-premise system – in the sense that the only limit is the imagination because an extension point offers just a little peephole into a SaaS.

Very rough: SaaS is especially great for companies with a lot of standard business processes and which therefore do not need a lot of customizations. SaaS is not so great for very large companies with a lot of customized business processes requiring lots of customizations.

Using SaaS applications might be cheap in the beginning, due to not having investing costs for hardware, software, or employees, but when it comes to customizations, then SaaS applications quickly become expensive in comparison to on-premise applications. An accurate prior assessment is crucial.

That is especially valid for SAP cloud computing, because of the deployment variations of some of its software: on-premise, cloud, or a hybrid version of both. Do you know that SAP has a cost estimator for its cloud services?

Digression: Cloud Computing vs. Server

Maybe you are wondering what the difference is between cloud computing and a simple server from a hoster. That is a great question, and the answer is sobering.

It is more of a virtual difference, and that is only in comparison to a dedicated server: cloud computing is shared hardware. Your data resides in a shared virtualized environment distributed over servers which are used by other companies as well.

On the contrary, a dedicated server is physically dedicated solely to your business, as the name suggests. No other business uses this hardware. Every single bit of the server is yours. You can install, uninstall, shutdown, and restart it the whole day long, as often and whenever you like.

If a server is not dedicated and hosted by a service provider, then it is cloud computing. This also means shared servers, which have been for years now, such as hosting a simple website at GoDaddy.

Hence, at least for IaaS, there is no difference between cloud computing and a shared server which has existed for almost forever. When it comes to PaaS and SaaS, there is a difference in comparison to buying the software, in so far as the PaaS and SaaS providers take care of the installation, upgrades, and updates of the platform or software as well.

Cloud computing is for one thing, like the concept of a shared server (IaaS), plus leased and maintained software, which is either a platform to put other software on top of (PaaS) or the actual software for the end-user (SaaS).

Marketing, marketing.

Cloud Computing: History Repeats Itself

Looking at today’s data centers would be similar to looking at power plants in the early 19th century: almost all large companies had their power plants, because there was no uniform standard for power supply, nor was there a grid.

Once both came to be available nationally, large companies were happy to forego generating their own power. The new utility companies delivered electricity as a core competency. This was done more effectively, due to economies of scale – that means cheaper than a company which is not in the energy branch could do it.

Cloud computing providers are in a similar place today. Operating hardware and software is not a core area of expertise for most companies.

On the other hand, an outsourced data center in the style of cloud computing can offer specialized services, ranging from computer power and storage to complete applications in a larger variety, security, and quality levels that any business would be hard-pressed to achieve.

SAP Cloud Computing

There is a huge portfolio of cloud-based services from various companies. Now that SAP has caught the cloud computing train, there are now SAP cloud computing services as well.

Infrastructure as a Service (SAP IaaS)

SAP allows for access to some of the most commonly known IaaS providers – Amazon Web Services (AWS), Microsoft Azure, and Google Cloud – but SAP offers its SAP data centers for IaaS as well.

IaaS allows users to exploit the benefits of a provider’s infrastructure by cutting the costs related to buying and maintaining on-premise infrastructure. Furthermore, scalability and elasticity in responding to workload variations are key reasons to use an IaaS, instead of an on-premise system.

Another relevant factor in migrating to an IaaS is compliance with governance and security standards. That is primarily geared to the majority of businesses whose core business is not technology.

Cloud adoption allows non-tech businesses to delegate security nationally and internationally to the cloud computing providers whose core business is maintaining industry standards in security and compliance.

SAP’s IaaS are:

Platform as a Service (SAP PaaS)

SAP has provided with the SCP (SAP Cloud Platform) a PaaS designed to assist SAP product integration, development, and business innovations.

The SCP is based on Cloud Foundry to integrate and extend applications with agility, flexibility, and options for use.

Innovate with applications: the SCP allows for creating and integrating new solutions efficiently using leading technologies, like machine learning, artificial intelligence, internet of things, and predictive analysis.

Extending your options: through the SCP, it is possible to quickly add new functionalities to meet unique business needs using cloud extensions or on-premise applications. The work can be segmented and therefore avoids disruption to the core business.

Integration: Cloud applications and on-premise applications are easily integrated, along with securely allowing connectivity to people, processes, data, and devices.

Whether a pre-built integration package or a custom solution flow, PaaS offers business connectivity with 3rd-party applications and APIs.

User experience: Personalization of the user experience can be achieved across multiple device and deployment options.

The SCP works well to accommodate collaboration across multiple channels, including mobile, web, and customized user interfaces accessing relevant business content.

Analyze and Manage Data: Anticipating business outcomes and uncovering new opportunities are assisted via the management and analysis available through the SCP.

Impactful and actionable insights are seen using predictive analysis and machine learning in real-time.

Future-proofing: Done to applications to maximize flexibility, adaptability, and choice using SCP allows for scaling infrastructures within the cloud technologies as needed.

SAP’s PaaS is SAP Cloud Platform.

Software as a Service (SAP SaaS)

SAP’s SaaSs makes use of SAP’s IaaS options and PaaS. Therefore, SaaS is the top of the SAP cloud computing pyramid.

The advantages of SAP’s SaaSs in comparison to on-premise applications are:

  • faster adoption of SAP technology updates and upgrades (automatically receiving the newest version)
  • easy integration with other SAP SaaSs and on-premise applications
  • easy ability to integrate third-party applications to work with SAP SaaS applications
  • no need to buy, set up, and maintain any hardware or software
  • easily accessible from a web browser

Popular examples of SaaSs from companies other than SAP include Microsoft Office 365, Dropbox, and Google Suite.

Most of SAP’s SaaSs are former applications from companies that SAP bought.

Do you know Star Trek? If yes, then keep reading on; otherwise, skip the next paragraph, please.

SAP’s cloud computing acquisitions reminds me of the Borgs: ‘We are the Borg. Lower your shields and surrender your ships. We will add your biological and technological distinctiveness to our own. Your culture will adapt to service us.’ Haha.

DateCompany NamePrice (B$)SAP SaaS
2011/12SuccessFactors3.4SAP SuccessFactors (HR), SAP Jam Collaboration (Collaboration Platform), SAP Jam Communities (Community Platform)
2012/10Ariba4.3SAP Ariba (Procurement)
2013/03Hybris1.4SAP Marketing Cloud (CRM), SAP Commerce Cloud (CRM), SAP Sales Cloud (CRM)
2014/03Fieldglass1SAP Fieldglass (HR)
2014/05SeeWhy1.1SAP Marketing Cloud (CRM)
2014/09Concur8.3SAP Concur (Finance)
2016/12Abakus-SAP Marketing Cloud (CRM)
2017/09Gigya0.35SAP Service Cloud (CRM)
2018/01CallidusCloud2.24SAP Sales Cloud (CRM)
2018/06Coresystems-SAP Service Cloud (CRM)
Companies that SAP bought in order to assimilate their SaaSs.

Right now, a major challenge for SAP is integrating into the SAP landscape and into each other all those cloud applications from different providers they have bought and giving them a consistent look and feel with SAP Fiori and/or SAP UI5.

SAP’s SaaSs are:


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4 Comments. Leave new

Thank you! This is very informative and helps put all SAP cloud offerings into perspective!


Thank you for the great article!


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