SAP's Way Into the Cloud: A Case Study on Incumbents' Role in Disruption

Kristian Kromann & Lucas Almstrup

Student thesis: Master thesis

Abstract

Cloud computing is fundamentally changing the playing field of the enterprise software industry, and the change has been well underway for the past decade. Large incumbents in the enterprise software industry have dwelled in the traditional on-premise industry and have consequently been rushed to action by the mass adoption of cloud-based enterprise applications, brought by innovative cloud-only companies with origins in the early ‘00s. These applications were provided as a service hence fundamentally challenging the conventional on-premise delivery model. The German software incumbent SAP SE engaged in the market for cloud-based solutions in the end of 2011 when it acquired the cloud-based enterprise software provider SuccessFactors. SAP has since acquired several companies in the pursuit of rapidly increasing its cloud-based business to eventually become the world’s leading cloud-based enterprise software company. Through a case study on the acquisition of SuccessFactors and an analysis of the disruptive path of the cloud technology, this paper aims at aiding SAP in its quest to lead the cloud-based enterprise software market and to provide corporations in general with guidance on how to identify and respond to new disruptive technologies. The analysis of this paper finds first and foremost that SAP was unable to look beyond its industry boundaries and identify macro-economic trends that would alter the way customers preferably would access its enterprise software. In the meantime, born-in-the-cloud start-ups matured, hardware incumbents integrated forward, and tech giants entered the cloud computing industry, forming a highly competitive business environment. Subsequently, as time was scarce, the paper finds that when SAP finally realized the value of cloud technology, it appropriately reacted to the emergence of the technology by acquiring a proven cloud-based company, SuccessFactors. Hereafter, the paper finds that the integration of SuccessFactors into the SAP organization was a success due to SAP’s ability to transfer relevant knowledge from SuccessFactors to SAP while maintaining organizational distance between the two companies. Also, the close integration of the acquired leader from SuccessFactors into the SAP top management played a crucial role in retaining and motivating key employees at SuccessFactors during the integration. Finally, the paper recommends SAP to enhance its engagement in foreseeing relevant macro-economic trends by improving its corporate venturing activities and to continue acquiring external innovations through acquisitions with an arm’s length approach to preserve the embedded capabilities of the acquired firm.

EducationsMSc in Management of Innovation and Business Development, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2019
Number of pages201
SupervisorsJacob Norvig Larsen