SAP teams up with Alibaba to host Cloud ERP workloads in China

SAP has a big new customer in China that, it hopes, will also help it do business there.

Alibaba Group, the Chinese e-commerce giant and cloud computing infrastructure provider, is adopting SAP’s Cloud ERP Private for its own enterprise infrastructure, and the companies plan to jointly sell their services.

Together, SAP and Alibaba will help enterprises implement SAP Integrated Business Planning and deploy SAP Cloud ERP and SAP Cloud ERP Private suites on Alibaba’s cloud infrastructure, according to an SAP spokesperson.

The partnership will include offerings such as RISE and GROW, SAP’s application management-and-hosting bundles for large and growing enterprises respectively. Initially, the two companies will focus on the Chinese market, later expanding to Southeast Asia, the Middle East, and Africa.

The deal is also a sign of a reboot for SAP in the region: in March, it appointed a new president and managing director for its SAP Greater China division, ex-Microsoft executive Bessie Yuan. Her predecessor left in October 2024 following a restructuring of SAP’s operations in Asia-Pacific.

Data sovereignty

Having a regional cloud provider on board for SAP’s RISE and GROW offerings may be beneficial, said Akshara Naik Lopez, senior analyst at Forrester.

“Many countries are getting extremely strict with data privacy and data residency regulations. Heavy reliance on US based infrastructure providers such as Google, AWS, and Microsoft has been a big issue for companies from China and the Middle East. Having Alibaba Cloud as an option is great to address these regions’ sovereignty requirements,” Lopez said, noting that Chinese enterprises also have access to another local SAP-certified option for ERP applications, from Huawei Cloud.

Bob Parker, senior vice president of research at IDC, views the partnership as providing leverage to enterprises in the China region in choosing their infrastructure provider, as they are getting additional choices.

“Many of these enterprises may already have consumption commitments with Alibaba relative to other, non-ERP workloads so it will give them the opportunity to deprecate those commitments,” Parker added.

Having access to more infrastructure partners in China, particularly for running AI workloads for ERP, could help SAP customers weather China’s stormy trade relationship with the US, which has seen the US chop and change technology export bans that have impacted data center infrastructure and fueled sovereignty concerns across both nations.

AI too

As part of the collaboration, SAP is also planning to integrate Alibaba’s Qwen large language model to SAP AI Core — a platform for training and deploying AI and machine learning models in SAP and non-SAP offerings. That integration is still in an exploratory phase, and there is no defined roadmap for when the model will be available to enterprises, an SAP spokesperson said.

Moor Insights and Strategy principal analyst Robert Kramer looked forward to the model’s introduction saying, it will bring localized AI capabilities into SAP AI Core, which is beneficial for enterprises, as the large language model has strong regional contexts.

Lopez saw the possible integration of Qwen into SAP’s platform as another way to address sovereignty concerns.

“Sovereignty is not just a configuration, access and hosting task to worry about at the infrastructure layer but actually at all layers — where the infrastructure is, where the platform resides, where the applications are hosted, where does the data reside and also where the AI capability models are sourced from. So, sovereignty considerations even at AI level are crucial,” Lopez said.

The partnership will also see SAP exploring the deployment of its AI Foundation — its suite for developers that provide AI tools — on Alibaba Cloud.

In addition, the partnership with SAP will see Alibaba use SAP Business AI, SAP Business Technology Platform, and SAP Ariba, SAP Integrated Business Planning, SAP SuccessFactors, SAP Concur, and SAP Emarsys suites to further optimize its technological backbone, the company spokesperson said.

Alibaba isn’t the only cloud services provider that SAP has close ties with. Amazon, Microsoft, and Google all use SAP’s ERP software and partner with it in various ways. In the last two weeks, the company has extended its partnerships with Microsoft and, notably, with AWS to accelerate enterprise adoption of its offerings.