 This is SAP's annual conference where all their business gets done, they showcase their technologies. I'm John Furrier, this is Silicon Angle and Wikibon's exclusive coverage of Sapphire. Now this is theCUBE, our flagship program. We go out to the events, extract the ceiling from the noise. We'll go wherever there's a story to be broken. Every, any action, we will go there on the ground. We are live in Orlando and behind us, you can see they're getting ready for the press conference for mobility. Really we had Bill McDermidon, a lot of sports athletes, tech athletes as we say. This is theCUBE and I'm here going to break it down so far here at Sapphire. Day one's halfway in the books. I'm going to bring in analyst, co-founder David Floyd from wikibon.org and big data analyst Jeff Kelly from Wikibon to break down the analysis, the breaking analysis here at Sapphire. We've heard some messaging. We've heard some vendor spiel. We've heard some customers. David Floyd, you're out in the ground. You're squirreling away all those nuts of value and signal from the noise. Break it down for us. What's the signal? Break away the signal from the noise for us. Okay, there's two pieces that we could look into and I think the more interesting one is the potential added value. Where does SAP go next? So what I think is the strategy that their ambition here is to start connecting different companies together. For example, the supply chains through, just to take one example, the car industry. How can they provide SAP not just for one organization but for a series of organizations pulling the pieces together, creating extra additional value by going across different companies? I think that is their long-term strategy and they're obviously struggling with it, how to get it out there. And one of the struggles that there is for them implementing this sort of thing is just the size of the database, the response time across all of these different things. So they have to start designing the system in my view in a different way. HANA is the start of it, but they have to really start thinking about database design in a completely different way. And again, with their acquisition of side-base, et cetera, they could be in a position to think in a different way about how they can go across company, how they can, for example, have mega-data centers where a particular industry is focused on it. Those are some of the exciting things that I think are in the future for SAP. I want to get Jeff Kelly in here and I want you guys to riff on the following concepts and discussions from Bill McDermott, the CEO, the co-CEO on stage said they want to know what, customers want to know what their customers are thinking, what they're interested in, what they're doing so they can be in sync and be real-time at the speed of business. That's the innovation agenda. That's essentially speed and analytics. Obviously, the cloud's going to enable that guy, so you've got big data, Jeff, there to talk about. But also, David Floyer, the cloud is under flux. We saw SAP three years ago on a path and strategy, not a lot of strategic changes for SAP. However, the force major, as they say, is HANA, has changed the game big time, the acceleration of how relevant HANA is in the equation. And also, the on-demand pressure from Amazon. So you've got the business model pressure of licensing, deployments, and integrations. At the same time, you've got the cloud is evolving and SAP doesn't have a clear cloud vision based on my certain early opinions as of today. What's your take of the cloud? And then, Jeff, I'd like you to talk about big data. Well, it'd be just to comment on the cloud thing. They've tried to have SAP as a service and to provide it. But the fundamental architecture of their system means that they have to have a separate instance for every single customer. And it becomes very little different from putting it on their own piece of hardware. So they haven't got multi-tenancy built in. They haven't got a database which really scales and becomes a true software-as-a-service type offering. And that's really what I was alluding to in those remarks about the database. They need to really start restructuring it so that they can provide that sort of service across organizations as a cloud service. That's the area that I really think they need to focus on. And if they don't do it themselves, we're going to see some of the other cloud providers come into that space. And that, to me, is the biggest risk that SAP has. If they don't change the fundamental structure of their software, they're going to have problems. So, Jeff Kelly, you commented earlier that based upon your data and talking to customers, and then recently validated by the New York Times report where Visal Sika was quoted saying that they're running clouds bigger than Salesforce.com's entire operation. That's SAP quoting. That's New York Times quoting some of the data that you've been finding the same thing. I mean, you have kind of an identity crisis. I'll see the analytics on the mobility message, home run, love that. However, the clouds influx, where that's going to fit in, it's kind of a jump ball right now. Where does Ana fit in and big data, et cetera? Right, well, I think a couple of things. One, to comment on what David was mentioning, so what we're hearing is that SAP's new HANA cloud service is really they're actually pricing this kind of similar as they would with an on-premise license, which suggests to me that you're right on, David, they don't really have a true cloud offering in that sense, that it allows you to scale up and scale down and take advantage of those real cloud capabilities for the reason people go to the cloud. In terms of big data fitting into their cloud strategy, I think, again, what we're seeing in the industry, with having talked to a lot of customers in both the Hadoop space, but also in other big data platform spaces, is a lot of companies will often start big data projects in the cloud. It's easy on Amazon, for instance, to spin up a Hadoop cluster and start doing some experimentation. What we find next, however, as we're kind of moving from that early adopter phase to the early majority, is that more and more organizations want to then take that early in the cloud deployment and move it back in-house. For a variety of reasons, it could be security, it could be just the scale of the economics actually does make sense to bring it back in-house at some time. So I think perhaps SAP is recognizing this trend and realizes we've got to make it easier for customers to get up and running with HANA quickly, so that they can start doing some of that experimentation with the analytics and predictive analytics. And then if we can bring them back in-house, great. But we really got to give them an opportunity to get up and running quickly, rather than going through the entire traditional sales cycle and getting it on-premise deployment. So I think that's really where they're trying to go with this. Again, the challenge is going to be the actual, the pricing model and the business model. There's a technology component as David talked about. And people, when they want to go in the cloud, they want that scale, the elasticity, and it doesn't appear from what I can see and from the customers I've spoken with that SAP offers that at this moment. So I was really impressed, David. I want to get your take on this because obviously at EMC World last week, we heard the transformation message. Obviously it's a big deal, IT transformation. We heard Jed York up on stage talking about how they've transformed IT. He's saying things like, we wanted to build things like in Star Trek, Star Wars. We want to eliminate the back office hardware, focus on the software to give that user experience to the fan in the billion dollar stadium that they have. But in a way, IT is looking to transform. What conversations have you had early on here with Sapphire and what's your analysis of the SAP landscape for businesses? As business tries to transform, what are you finding? Obviously virtualization of SAP, something that you've looked at recently. I know you're going to present that tomorrow. But what have you talked to any customers and practitioners here and what have you finding? Well, we talked to a number of practitioners and customers and on the infrastructure side, most customers have a strategy of moving towards IT as a service. They've woken up to the fact that if they don't do it, they're going to be outmaneuvered by the Amazons of the world and the new cloud service providers. They've got to do that. They've got to show that they are competitive with those offerings and that they can offer the same sort of deals, the same sort of services quickly, effectively, on the in-premise circumstances. The other interesting thing is that when you look at the cost of SAP on the infrastructure, et cetera, the most expensive component of that is the database itself. It's the Oracle database or even if they use the Microsoft SQL database, it's the database itself. And they are looking for ways that they can reduce that cost by consolidation. So there's a big move towards consolidation of SAP databases, consolidation of the SAP instances, getting SAP instances off old hardware that's been around for ages. I was talking to one of the customers who uses a HP 3000 system still. They must be cannibalizing the spare parts for it. So bringing those in, reducing the cost of the number of software licenses, the database licenses. Those are areas where you can save on infrastructure cost. But equally, they need to consolidate all of those SAP instances because there's opportunities to save business costs as well. By reducing the number of, for example, by having a common financial definition across all of the SAP instances and being able to reduce the number of financial analysts that they have. Okay, we're here live. This is SiliconANGLE, looking at exclusive coverage of SAP behind me. You could see the action going on. You can see that. There's a press conference. We're in the Global Communications Center. We're on the ground live in Orlando. We're going to hear from Sanjay Putin and a bunch of other execs, the president of the company, talk about mobility. We're here with David Fleuer and Jeff Kelly, senior Wikibon analysts breaking it down. I got to ask you, David, and Jeff to comment on some of the messaging. Obviously, Bill McDermott's a showman. We're going to have Schnabe tomorrow to put some more meat on the bone. But obviously, SAP loves to try out the customers. And one thing I really love about SAP's conference is it's very relevant. But they let customers do the talking. And ultimately, in my view, you're always judged by the company that you keep. And that's certainly an indicator. And they have some good customers. But up there, Jed York from the San Francisco 49 has said, we are software-driven. Now, I'll convert that to say software-led. And David, you've been doing all the seminal work around software-led infrastructure, AKA software-defined. But he was referring to, I'm not relying on the hardware. I want a software world. I want to be nimble. I don't want to build a big scoreboard for $60 million because I can guys have their own phones. They're spending the money. I'll put that money into other things. It could be analytics. But when he says software-driven, kind of take that to the next level. For customers out there that are looking at this, what does that mean? They want the flexibility of creating the infrastructure. We've got a one-minute hook here, adapting it so that they can, from a software perspective, separate out the hardware itself, the disks and the servers from the way that that's all orchestrated together and use much cheaper services, keep the hardware for longer and keep the services above it, software-led, as opposed to having standalone services and arrays. Okay, we are going to go to the live press conference now. Let's go to start in a few minutes, but we want to take a break here. We're under tight deadline by the SAP Global Communications team, we want to respect that. We're here exclusive coverage, SiliconANGLE, looking by breaking down the analysis. David Floyer and Jeff Kelly, the analysts on the ground. We are going to go where the stories are. We are here in the Global Communications Center. This is where all the access happened and talked about the top execs. Deputy Commissioner of the NBA. We have top execs from the SAP and customers right back and we're going to carry the live press conference here at Sapphire now and we'll tune in and keep watching.