SAP And Microsoft Expand Cloud Alliance, Offer HANA Enterprise Cloud And S/4HANA Applications On Azure

SAP and Microsoft are expanding their cloud alliance, making SAP's private managed cloud service available on Microsoft Azure in a move that will allow customers to run the SAP S/4HANA financial planning/ERP application suite in a secure managed cloud.

The two software giants are also committing to expand their use of each other's products: Microsoft will deploy S/4HANA on Azure to run its own internal financial processes while SAP will move its internal business-critical systems to the Azure cloud platform.

The announcements extend an already substantial alliance between the two companies, which for years have developed links between each other's product lines. In May 2016, for example, the two vendors unveiled plans to run SAP's HANA database on Azure and link Microsoft's Office 365 cloud applications to SAP's business software.

[Related: SAP, Microsoft Strike Software Integration Alliance ]

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"We see this as the next step in the evolution of our alliance," said Arlen Shenkman, SAP executive vice president of global business development and ecosystems, in an interview.

Running SAP HANA Enterprise Cloud, the company's private managed cloud service, on Azure will provide customers with a way to run the SAP S/4HANA cloud application set in a secure managed cloud environment, according to the two companies.

Cloud computing has reached a stage of maturity where businesses are increasingly moving their mission-critical applications to cloud platforms to cut costs and improve agility – often as part of a broader digital transformation initiative, said Julia White, Microsoft's corporate vice president for Azure, in an interview.

The two companies will provide the new service to early preview customers before making it generally available.

Microsoft and SAP executives also said the expanded alliance would create new opportunities for solution providers among enterprise customers. White said the two companies share many implementation partners and the extended product integration would instill confidence in prospective customers about the efficacy of the joint solution.

Making the S/4HANA applications available on its Azure cloud platform is an interesting move for Microsoft given that it sells its own Dynamics 365 cloud ERP application suite. But White said the two application sets have different line-of-business and use-case approaches and don't overlap much in the market.

White expects SAP HANA Enterprise Cloud with S/4HANA to primarily address core financial applications "where SAP is so strong," she said.

"This is really in response to customer demand," she added.

"Building on our longtime partnership, Microsoft and SAP are harnessing each other's products to not only power our own organizations, but to empower our enterprise customers to run their most mission-critical applications and workloads with S/4HANA on Azure," said Microsoft CEO Satya Nadella in a statement.

SAP's Ariba procurement network is already utilizing Azure and SAP is exploring further use of Azure by its procurement applications.

In addition to the technology integration aspects of the alliance, SAP and Microsoft will also engage in joint sales and customer support around the SAP software running on Azure.

As far as adopting each others' software for their own use, SAP and Microsoft both will run S/4HANA on Azure for their internal operations.

Microsoft is transforming its internal systems, which include legacy SAP finance applications, and will implement SAP S/4HANA Central Finance running on Azure. Microsoft also plans to connect SAP S/4HANA to Azure AI and analytics services for financial reporting and decision-making tasks.

SAP is migrating more than a dozen business-critical systems to Azure, including the SAP S/4HANA system that supports the Concur cloud expense management application.

The companies will document the internal projects to provide customers with guidance and architectural specifications for SAP applications on Azure.