SAP joins growing competition in S. Korea's cloud market

SAP, a German enterprise software giant, is expected to heat up competition in South Korea's cloud market as it unveils plans to build a data center in Korea by the second quarter of next year.

During a media roundtable on Nov. 4, SAP Korea announced that it will provide solutions for cloud platforms, analytics cloud, high-performance analytics appliance (HANA) alongside the business technology platform (BTP), a portfolio of integrated solutions, to Korean companies through a local data center. 

Until now, Korean companies that used SAP software-as-a-service (SaaS) had to go through the SAP data center in Japan.

“Setting up a data center in Korea will make it easier to convince clients to shift over to our cloud system while also satisfying the government’s request to keep industrial secrets and the public's private data within the country,” said an SAP Korea official.

SAP Korea's data center will be created by deploying its system, using the data center infrastructure such as the cloud infrastructure-as-a-service (IaaS) built by Amazon Web Services.

SAP's construction of a Korea-based data center is seen as a strategic move to encourage domestic clients to adopt SAP solutions in their core operations.

In particular, it will meet the requests of domestic companies that have been reluctant to have private data transferred outside of the country and opted to process key data through their own servers instead of SAP's cloud.

The company's core business is a cloud-based enterprise resource planning (ERP) system that boasts around 450,000 clients. SAP forayed into Korea in 1995 and has since steadily increased its client base,  particularly after launching SAP HANA, an application that allows high-speed processing of massive amounts of real-time data.

Lee Sung-youl, the chief executive of SAP Korea, said: “Many large companies in Korea, including Hyundai Motor Group, are our clients.”

SOUTH KOREA'S CLOUD MARKET SEES SHARP GROWTH

SAP says that Korea’s cloud market has huge potential, given its sharp growth in the past few years. According to market research firm IDC, the size of the domestic cloud market increased by 33.7% to 1.3 trillion won ($1.2 billion) last year from 973.1 billion won ($862 million) in 2018.

Industry watchers expect the uptrend to continue, given that an increasing number of companies are undergoing digital transformation amid the global coronavirus pandemic.

Many domestic and foreign cloud companies have been ramping up their operations in Korea by building data centers and expanding cloud capacity. 

Korea’s portal giant Naver plans to build its second data center by 2022 and the country’s largest mobile messaging app operator Kakao is also set to construct its first data center by 2023.

Riding on the increased demand for cloud solutions, AWS also recently expanded its Seoul-based data center’s capacity. Microsoft, which operates data centers in Seoul and Busan, recently shared plans to build an additional data center in Busan.

Write to Han-jong Choi and Joo-wan Kim at onebell@hankyung.com
Danbee Lee edited this article.