Who Owns the Context Layer?

While everyone argues about agents, two giants are quietly fighting over the thing that decides whether any agent works — and the answer will reshape every SAP customer's next decade

Spend a week with the podcasts the analyst firms and the big consultancies put out, and you will hear one word until it loses meaning: agents. Agentic this, autonomous that, the agent that books your travel and the agent that closes your books. It is the entire conversation. And in the rooms where that conversation is loudest — the AI-native circles, the hyperscaler keynotes, the strategy-house webinars — it is genuinely the right conversation to be having.

Here is what I have noticed, though, from a different seat. The VP running applications at a mid-market manufacturer, the one whose team keeps the SAP estate alive, is not in those rooms. And the fight that will actually determine whether their company’s AI works is not the fight about agents at all. It is a quieter fight, one layer down, that almost nobody outside the data-platform world is narrating for an SAP audience — and the two largest vendors in that company’s life are already deep into it, wired directly into each other, each betting the other is about to lose.

The fight is over who owns the context layer. And it is worth understanding, because whoever wins it sets the terms for every AI decision that company makes for the next ten years.

What the context layer actually is, in one plain paragraph

Strip the branding off and it’s simple. An AI agent, on its own, is a capable stranger. It can reason, but it doesn’t know your business — that revenue is computed your way, that a customer relates to an order through your particular process, that the thing labeled one way has meant another since a reorg years ago. The context layer is whatever supplies that knowledge. It’s the difference between an agent that gives a confident, plausible, wrong answer about your business and one that gives a right one. Everyone in the industry now agrees this layer is where the value is — one vendor calls the problem of an agent starting without it the “cold start” problem, which is a good name for it. The disagreement — and it is a large, expensive, strategically loaded disagreement — is over who gets to own that layer for you.

Two answers are being fought out in public right now. They are not subtle, and they are not compatible.

Microsoft’s answer: live in our house, and everything else becomes a guest

Microsoft’s play is the most straightforward land-grab in enterprise software, and they are not hiding it. The stated strategy is to make their data platform the center of gravity for your entire data estate — one place where all of it lives, or at least is seen, governed, and activated. Their pitch is that the fragmented mess of systems every enterprise actually runs should resolve into a single logical home, and that home is theirs.

Watch what that does to your ERP. In the Microsoft picture, your SAP system doesn’t stay the center of your operational world — it becomes a source. Its data is mirrored or shortcut into the unified lake, sitting alongside your documents, your spreadsheets, your collaboration history, your email. And then — this is the part worth sitting with — Microsoft builds a context layer over that combined pile and offers to ground every agent in it. They’ve even started building the application surfaces that traditionally lived around the ERP: the order-management screens, the vendor portals, the exception queues — the operational work that today runs in spreadsheets and manual report-pulls. The logic is coherent and, honestly, compelling: if your company already lives in this vendor’s documents, email, and collaboration tools every day, making that the home for your business’s meaning is a small, natural step. Your ERP becomes one connected room in a house someone else owns.

For a company whose people spend their whole day in that vendor’s productivity tools, this is a genuinely strong offer. It meets them where they already are. That is exactly what makes it dangerous to accept without noticing what you’ve handed over.

SAP’s answer: keep your data anywhere, but the meaning is ours

SAP is not conceding the house. It is fighting on different ground, and the ground it chose tells you everything.

SAP’s counter, said almost precisely this way by one of its own reference customers, is that compute can happen anywhere and the data can stay at the source — but business context is managed once, centrally, in SAP’s foundation.

Read that again, because it’s a genuinely clever move. SAP is effectively saying: fine, Microsoft, host the data, we won’t fight you for the storage. But the meaning — what your order-to-cash actually is, how your processes actually relate, the semantics that came from decades of running your business on our software — that’s ours, managed in our layer, and you’re all just borrowing it.

SAP claims this layer goes beyond a simple knowledge graph to model “how your business actually works, not just what the data says.”

So the collision is clean. Microsoft says the data lives in my house. SAP says host it wherever — the meaning is mine. Both are claiming to be the context layer. They are claiming it from opposite directions, and both claims can’t win.

The tell: they’ve wired themselves together instead of going to war

Here’s the detail that turns this from a vendor cage-match into something more interesting and more revealing. Microsoft and SAP are not blocking each other. They’re interconnecting. SAP’s foundation and Microsoft’s lake now share data bidirectionally, zero-copy, with SAP’s models publishing natively into Microsoft’s environment and Microsoft mirroring SAP’s data into its own. On the surface, that reads as partnership. Underneath, it’s the opposite: it’s two companies who’ve each concluded that their layer is the one that will matter, so they can afford to be generous about the layer they think is becoming a commodity. Microsoft will happily let SAP’s meaning flow in, because Microsoft is betting the home is what wins. SAP will happily let its data live in Microsoft’s lake, because SAP is betting the meaning is what wins. The friendliness is the confidence. Each is giving away the thing it thinks is losing.

And it isn’t only these two. The large data-and-AI platforms are making a third version of the same bet — be the context layer that sits across everyone’s estate, SAP and Microsoft included, grounding every agent from the middle rather than from a home or a system of record. Which tells you how big the prize is: not one major vendor has looked at this and decided it isn’t worth owning. They have all concluded the same thing — whoever owns the meaning of your data owns the account. The whole industry is racing to own this layer from every direction at once.

Which raises the question the whole race is stepping around.

The layer nobody is fighting for

Notice what every one of these context layers actually models. Microsoft’s, SAP’s, the data platforms’ — read their own descriptions and it’s the same thing every time: the definitions of your customers, orders, products, revenue, and the relationships between them. What your data means. That’s the layer being fought over, standardized, commoditized, and claimed from four directions.

It is not the layer that decides whether your AI works.

Here is the distinction that the entire agent conversation is missing, and I want to be precise about it because it’s the whole point. There are two completely different things an AI has to understand about your business, and they get collapsed into the one word “context” constantly.

The first is what your data means — revenue is computed this way, a customer relates to an order like so. This is the layer Microsoft and SAP are at war over. Definable, model-able, and — because the whole industry is racing to own it — on its way to becoming a commodity.

The second is whether your work actually came out right — this order shipped but was never billed, is that revenue quietly leaking or a legitimate arrangement that bills later; this step happened out of sequence, does that break the transaction or is it a valid exception your business has run for years. Not what the data means. Whether the thing that happened was the thing that was supposed to happen.

No context layer in this fight models the second one. And here’s the part that should stop you: the vendors know the second one is the real risk. SAP, describing why you need its context layer, warns that without it agents can “optimize for the wrong outcome.” That’s precisely a whether-your-work-came-out-right problem — and SAP, having named it exactly, answers it with a what-your-data-means solution. Everyone in this race is selling the meaning of your data as the cure for a problem that lives in the meaning of your work. The two are not the same layer, and the gap between them is where enterprise AI actually fails.

That gap is invisible in the agent conversation because it’s invisible in a demo. A demo runs on clean data and the happy path, where the work did come out right and a confident reading happens to be correct. Production is where the exceptions live — and production is where the layer nobody’s building would have earned its keep.

Why this matters more for the SAP customer than for anyone else

Put the two things together and you can see why the VP of Apps at a CPG manufacturer is in a stranger position than the CIO reading the analyst reports.

The context war is happening above their head, in a vocabulary they don’t live in, between two vendors they can’t avoid — one hosting their estate, the other owning their meaning, both wired together and both certain they’ll win. Whatever the outcome, that company’s SAP data will end up grounded in someone’s context layer. That part will get solved; four of the largest technology companies in the world are competing to solve it.

But the thing that determines whether their AI survives go-live — whether it can tell a real problem from a legitimate exception in their specific order-to-cash, across the messy operating reality of a live business — is the one layer nobody in the war is building. It won’t arrive as a product from Microsoft or SAP, because it can’t be defined once and shipped the way a semantic layer can. It has to be understood, in the specific, by someone who knows how that business actually runs in every mode it runs in. That knowledge doesn’t live in a data platform. It lives in the practitioners who’ve watched the process behave across a go-live, a quarter-close, a cutover, a quiet month — and it is the least documentable, least commoditizable thing in the enterprise.

And sit in the CIO’s chair for a second, because this is where it stops being a strategy story and becomes your problem. Whichever way you go, you are choosing where your business’s meaning lives — and that is a more permanent decision than where your data lives. Move your data and you pay a migration cost, once. Move your meaning — re-encode what your business means inside a different vendor’s layer — and you may find you simply can’t, because by then a thousand agents, reports, and decisions depend on it computing exactly the way it does today. Owning the semantic layer is stickiness for the vendor. For you, it is the most durable dependency you will take on this decade, and you are being asked to grant it to whichever side wins a fight you didn’t know you were in. That would be a defensible bet to make deliberately. Almost nobody is making it deliberately.

The one line to carry out of this

The agent conversation is loud, and it’s loud in the wrong rooms. One level beneath it, two giants are fighting over who owns the meaning of your data — and they’re so confident it’s the prize that they’ve wired themselves together and started giving away everything else. They might both be right that it’s worth owning. They are both missing that it isn’t the layer that decides whether your AI works.

Whoever wins the war for the context layer, the same question survives it, unowned: does your AI actually understand whether your business did the right thing? The meaning of your data is being fought over by the largest companies in technology. The meaning of your work is still sitting in your own people, un-modeled, unclaimed, and — for now — entirely yours.

And if your instinct at this point is fine, then I’ll have someone build that layer myself — hold that thought. There is a whole market now selling the tools to do exactly that, and most of the companies that buy them never reach production. Why that happens, and what it reveals about which layer is actually hard, is where this goes next.

That’s the layer worth watching. Not because a vendor is about to win it. Because none of them is even fighting for it.