SAP Kills Two Birds With One Stone, Integrating Predictive Analytics with Big Data & IoT

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Last month, global software giant SAP SE (NYSE:SAP) announced that its Predictive Analytics Software has been upgraded to include integration for big data and Internet of Things (IoT) analytics. [1] The stronger integration of SAP HANA analytics with IoT serves the increasing number of customers that apply analytics to the enormous amount of data generated in IoT applications. From an analytics standpoint, customers will now be able to gain insights into big data derived from IoT. On the other hand, IoT enterprises will be able to gain analytical insights that were insofar not available as easily. This gives SAP a dual advantage in the two budding and highly sought after markets, namely predictive analytics and IoT.

SAP has been aggressively making a push into IoT (Read: SAP Prepares to Take On The Internet of Things, Announces String of New Partnerships), and the latest update to its Predictive Analytics software further expands its product portfolio in the IoT market. It also gives the company another step up against competition from leading cloud computing vendor, Salesforce.com (NYSE:CRM), which is targeting the cloud analytics market as its next growth frontier. (Read: Salesforce Posts Robust Q1 Results, Raises Fiscal 2016 Guidance)

We have a price estimate of $80 for SAP SE, which is about 10% higher than its current market price.

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See our complete analysis for SAP SE here

Analytics and IoT Markets Carry Immense Potential

The cloud analytics and Internet of Things market are part of the next big phase of innovation that is being developed by software companies. Salesforce, one of SAP’s major competitors, has its targets set on the over $5 billion cloud analytics market to drive the next phase of its growth story. SAP itself is looking to capitalize upon the immense IoT market, size estimates for which range from a “mere” $300 billion [2] to an absurd $7 trillion. [3]

Analytics as well as the IoT market remain relatively untapped and are only now gaining the commercial attention of software bigwigs like SAP and Salesforce. Oracle Corp. (NYSE:ORCL), another major competitor of SAP in database software, is generally considered to be a laggard in exploring new markets. It has only now begun to pick up pace in the cloud computing market. (Read: Currency Headwinds Dampen Rapid Growth of Oracle’s Cloud Business in Q4) Oracle’s focus remains on the cloud computing market, leaving relatively nascent markets like cloud analytics and IoT ripe for the picking by the likes of SAP. Thus, SAP’s move to bring predictive analytics and IoT together puts it a step ahead of its rivals and could potentially give it a first mover advantage.

Integration With SAP S/4 HANA Unclear

Details of integration of the latest features with SAP’s new SAP S/4HANA were conspicuous by their absence. It’s not clear if SAP will provide the latest features in SAP S/4HANA also. The fact that the company focused the launch on SAP HANA rather than S/4HANA suggests that the latter might still need chinks to be ironed out, making addition of new features difficult.

SAP launched S/4HANA earlier this year (Read: Has SAP Bet The House With The Biggest Update to its ERP in Two Decades?) as the culmination of years of development and the answer to the growing competition from Oracle and Salesforce.com. However, the company decided to hedge its bet on S/4HANA and decided to continue updates and support for the legacy SAP HANA for another decade, so as to support existing users of the platform. Nevertheless, it is worth noting that SAP’s founder, Hasso Plattner himself believes that the company’s future is riding on S/4HANA. [4]

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Notes:
  1. SAP Expands Analytics Portfolio with New Features in SAP Predictive Analytics Software, SAP Press Release, June 16, 2015 []
  2. Gartner Says the Internet of Things Will Transform the Data Center, Gartner, March 19, 2014 []
  3. Market in a Minute: Internet of Things, IDC) Of course, the huge disparity between the estimates may be partly due to use of different definitions of Internet of Things by researchers. Nevertheless, there is no doubt that the IoT market is set to be the next big thing in technology. ((Gartner’s 2014 Hype Cycle Report, August 11, 2014 []
  4. SAP founder Hasso Plattner: ‘If this doesn’t work, we’re dead. Flat-out dead.’, Business Insider, February 5, 2015 []