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SAP Knows Something Oracle Does Not (Correct)

(Corrects article published at 10:23 a.m. ET to fix the first name of the CEO of SAP and to remove other references to Brian McDermott.)

NEW YORK ( TheStreet) -- SAP (SAP - Get Report), long the main rival to Oracle (ORCL - Get Report) in the database applications space, is rising today after reporting double-digit growth in the third quarter.

More important than the growth was the cause, an enterprise cloud unit run by Bjorn Goerke, who was appointed the company's chief information officer this week.

The transition from "enterprise" architectures, with server farms on customer premises, to cloud-based systems is as tricky as the movies' transition from silents to talkies in the 1920s. Many stars didn't make that leap, and many companies won't make this one.

While SAP is technically a German company, it also trades on the New York Stock Exchange and the co-CEO is an American, Bill McDermott, who works out of the company's offices in Newtown Square, Penn., outside Philadelphia.

Unlike Oracle CEO Larry Ellison, McDermott keeps a low profile. McDermott has been co-CEO, with Jim Hagemann Snabe, who works out of Walldorf, Germany, since 2010, which was also the year SAP decided to focus on cloud.

Under McDermott and Snabe, SAP has evolved its HANA in-memory database architecture into a cloud platform. By storing key data in-memory rather then on disks, HANA is able to work in real time. Complete systems can be up and running for as little as $300,000, according to a Wikibon primer on it, but many installations cost $2 million and more.

It's a different way of evolving from old-fashioned enterprise systems to new cloud architectures, rewriting the way databases are handled rather than trying to build hardware, as Oracle does. SAP says HANA combines database and application platform capabilities. In practical terms it means SAP gains full control over its customers.

SAP offers hardware through a collection of business partners, rather than making it itself. These include IBM (IBM), but also Hewlett-Packard (HPQ), Cisco (CSCO), and Dell, along with Hitachi and Fujitsu of Japan.

Just how dependent SAP has become on HANA was demonstrated last month by its decision to shift its small business ByDesign business onto the mainstream HANA platform.
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