By Sanjana B

Copyright thehindubusinessline

What is the requirement to establish a sovereign cloud?

Martin: Sovereignty is all about control and national security. When we started 20 years ago in the US, there were certain requirements because our customers within the government and regulated industries had restrictions that could not be fulfilled in the public cloud since you can’t scale on that. Now, Canada, the UK, Australia, and New Zealand also have dedicated sovereign cloud launches; we serve the government and regulated industries there. A similar debate started in Europe recently, following which we launched a sovereign cloud set-up in Germany. We are not looking at the world map, saying we will bring sovereign cloud to a random country just because it’s a good business idea. It’s often the other way around. Governments and regulators approach our executive board for help with migrating to the cloud because innovation will only happen there. This is the main reason — there is a demand, and a national security requirement for strategic autonomy and digital competitiveness.

How do you place the sovereign cloud solutions as part of SAP’s larger offerings?

Oliver: It is an addendum to our other services. We are not trying to replace our commercial offerings and are not after the mass market since it is covered. The mass market is our commercial cloud offerings, which we have had for years. We are targeting a specific segment of customers. Of course, we expect this to be a profitable business, but it is a niche offering. We don’t want hundreds of customers, but want to be an elite niche because the customers we intend to attract need us and require an elite solution. That being said, we expect this offering to provide significant revenue and profit. The business is profitable in the countries we are in, but it’s the usual hockey stick. For instance, in India, we decided to pre-invest, which will run against our books before we have it ready next quarter. Before that, we can’t have any customers on it. In the first few months or years, it probably won’t be profitable per country because of the cost. But in the countries where it’s profitable, there has been a good return on investment in a short time.

Which areas and geographies will the €20 billion investment be directed towards?

Martin: This investment will be made across the world and over the next 10 years. We will hire in said country to abide by the national standard workloads. Alongside, the investment will also be in technology, innovation, R&D, and certain infrastructure.

Oliver: We build special facilities so the cost needs to be paid. We also have to undergo more certifications than the usual cloud, which is rather cost-intensive. Distributed teams from multiple countries work to create the software, the environments and toolsets we are deploying. The people in-country, like in Bengaluru and Gurgaon, are also driving the cost. The more successful we are, the more we will hire. It will be in triple digits over the next few years. We are in the hiring phase, and before the year end, expect to have the first 30 people on board. Infrastructure is a big part. Usually, our solutions are built for hundreds or thousands of customers. Now, we will not look at that many customers, but we still need a substantial setup, which is good for our customers because it’s flexible. Even in the most extreme case, the on-site model has all the benefits of the cloud, but with the highest level of compliance and secrecy.

Which type of customers are you aiming to serve?

Martin: The public sector and regulated industries. The latter is a critical infrastructure area. These players are too big to fail for their country. Think of electricity, water or certain supply chains that form the lifeline of the country. If they fail, it becomes a national security topic. The other set is government customers, who are also part of the critical infrastructure side and deal with classified information. Think of the Ministry of Defence, police departments and intelligence agencies. For example, in Germany, a big customer is the Employment Agency. If tomorrow they cannot pay the people because their systems are down, it is a huge setback. They are our customers because this is a critical infrastructure.

Are you working with local data center partners or setting up your own infrastructure?

Martin: We will use AWS data centers as an infrastructure provider here and will work with them on the hyperscaling bit. On the other hand, we will work with the government or customer data centers. If a regulated industry customer requests an on-site solution in their chosen data center, we can partner with that center and deploy our sovereign cloud setup there to meet their requirements.

Oliver: We will partner with a government-accredited data centers outside of the hyperscale. The AWS offering should be sufficient for the vast majority of customers coming on board. But we are aware that due to the legislation, for the government, we will have to work with a specific government partner. We are already talking to the first partner.