The partners said they can assure enterprise clients they will be able to access, run and store all their SAP applications safely and accurately in the cloud from data centers in the U.S. and Canada, as well as Australia, Brazil, France, Germany and Japan, with a new site in Spain coming online by midyear.
The effort deepens the ties between IBM, of Armonk, N.Y., and SAP, which have collaborated closely for 20 years to provide more services, including database analytics, employee resource planning and customer relationship management, over a secure cloud and to access “big data” applications.
It also poses a challenge to Oracle Corp. (NASDAQ:ORCL), the No. 1 database company, which competes against both companies in software and cloud applications. Oracle, which acquired the former Sun Microsystems in 2010, now sells enterprise server and storage systems that compete with IBM.
“This is a logical evolution of IBM’s sourcing business,” said Jim Comfort, general manager for IBM SmartCloud Services. The cloud-based services provide the same quality and service levels as private hosted information technology environments but cost less.
IBM also announced its SmartCloud for SAP applications, also on a global basis.
Vishkal Sikka, a member of SAP’s executive board for technology and innovation, said the deal, involving IBM’s SmartCloud and SAP’s business applications, “will help drive differentiated applications to our clients.”
For IBM, services have been the key to increased earnings for the past decade. Last week, the company reported 2012 net income rose 4.7 percent to $16.6 billion, or $14.37 a share from $15.85 billion, or $13.06 a share as revenue eased 2.3 percent to $104.5 billion.
Revenue from the cloud soared 80 percent, though, as Smarter Planet revenue jumped 25 percent. IBM didn’t break out its cloud revenue but previously announced its goal of reaching $7 billion by 2015.
SAP reported cloud subscriptions and support rose 1,400 percent in 2012 to €270 million ($363 million), while software and cloud subscriptions advanced 19 percent to €4.93 billion last year.
IBM already has several customers deploying the new applications, including the Smart TV Platform from Philips (NYSE:PHG), Summit Healthcare and the Catalonia regional government in Spain, which wants the applications for health care administration.
Shares of IBM closed at $203/90, down $1.03, in Tuesday trading while those of SAP closed at $81.22, up 86 cents. IBM shares, with dividends, have gained 9.7 percent over the past 52 weeks while those of SAP have soared 36 percent.