SAP and the Magic of Success – Laying the Groundwork for the Inevitable Future of Business

Sometimes covering SAP and its innovations reminds me of what it’s like being the parent of school-aged children. Good parents complain endlessly – typically commensurate with the cost of tuition or property taxes – about curricula, testing, homework, and the like. While all too often forgetting that the one true test of a good school is whether the kids wake up in the morning excited about school or dreading the ordeal of the coming day, and whether the parents sleep well at night knowing that they’ve at least covered the bases when it comes to their children’s future success.

SAP’s myriad innovation strategies can be nitpicked almost endlessly as well – commensurate with the cost of upgrading older systems, deploying innovation, and building roadmaps into uncharted territory – all the while forgetting that the one true test of an innovative vendor is whether there’s something in the mix that gets the line of business users up in the morning excited to go to work, while covering the bases on technology and functionality that allow the executive leadership to sleep well at night.

I would venture that SAP managed to put forth a message at its recent SAPPHIRE user conference that finessed that dichotomy – a measure of assurance that new functionality in S/4 HANA, the HANA platform strategy, SAP’s fledgling IoT strategy, its industries and service delivery strategies, the business network initiative, and other components of the multi-layered messages thrown at the assembled audiences at SAPPHIRE contained something to help users get up in the morning and something to help executives sleep well at night.

Is the message complete? The strategy fully-formed? The path forward clear and well-understood? Not yet: SAP is, like virtually everyone one of its peers in the enterprise software market, a work in progress. Come to think of it, most of the SAP customers I talk to or work with are themselves works in progress. Just like parents looking after their school-aged children, everyone is making investments for a future that is both hard to fathom and coming up faster than anyone would like. The trick is to find the right school, the right curriculum, the right teachers, the right social context – or the right tech partner, the right innovation strategy, the right service partner, the right industry or geographically-specific functionality – and then hope that, when it’s time for the magic of success to happen, the groundwork has been laid as carefully as possible.

Meanwhile, it’s legitimate to complain about the fine points of how things are progressing – at your kid’s school or in your company’s IT and business strategy – as long as fundamentally you’re sleeping well at night and most everyone gets up in the morning eager to start the day.

I think SAP did well on both accounts: The fundamentals, as I read them from my week at SAPPHIRE, all looked pretty good. S/4 HANA turns out to have a lot more functionality than I had thought – one of the original two product names under the S/4 HANA brand, Simple Logistics, turns out to have a whole lot more than just logistics under its rubric: there’s supply chain, sales, sourcing and procurement, manufacturing, asset management, and support for sustainability, engineering/R&D, marketing and commerce, HR, service delivery, and IT. Add Simple Finance to it, and there’s a decent start on meeting the needs of many SAP customers.

This should in part help folks feel reassured, and at the time excited, about what these new capabilities mean. There was plenty of eye-candy at SAPPHIRE – cool new analytics, demos of Ariba, Concur and Fieldglass all working in sync in an asset management scenario, and HANA advancing epidemiology and treatment options in the cancer world. There were lots of examples of the Fiori user experience, and lots of insights into new capabilities in IoT, including IoT deals with Siemens and Intel, and, of course, Steve Singh talking about business networks that promise new business processes and new added-value for existing and future tech expenditures.

And there was even some sleeping pills for the IT side of the house, courtesy of Hasso Plattner. In what had to be a best case scenario, Hasso gave a breakdown about how a 54 tbyte SAP system running on what SAP now calls “any DB”, which Hasso priced at $20 million in total hardware and systems cost, would be priced if it followed SAP’s migration path from “any DB” to HANA, and then to S/4 HANA. The HANA option reduced the total database size to 9.5 tybtes, with a hardware cost of $5 million. Going all the way to S/4 HANA turned the original 54 tbytes into 3 tbytes and a hardware cost of $550,000.

Okay, not every company will see this order of magnitude savings, but there’s a lot of wiggle room here for the real world savings to be pretty huge for anyone. (With one caveat – this math assumes a clean escape out from under the respective hardware and software licenses that are being sunsetted in many real-world user scenarios. Termination clauses might drive some of those numbers in a different direction. SAP needs to help customers figure this one out too. And it doesn’t include the S/4 HANA price as well.)

Of course, assuming there’s something there for most customers, and some economic value in migrating (Hasso also didn’t include the cost of migrating in his calculations, something else that needs to be considered) three big questions quickly follow: when will all this be available, can SAP make the case for migrating towards the S/4 HANA vision, and, most succinctly, will customers agree to move in sync with SAP’s aspirations?

The first is easy: The list of functionality above is GA now, if you want to run with S/4 HANA on-premise. If you’re looking for an all-cloud S/4 HANA, the first version, with the 12 functional areas, will be available this quarter, with more functionality rolling out at the end of the year and again next year. I think it’s safe to say that if planning were to have started the day after SAPPHIRE it’s likely many companies would get to the actual software implementation phase of the project by the time SAP had a critical mass of cloud-based S/4 HANA on the street.

There’s a good reason why the application implementation side of an S/4 HANA project would be down the road a bit no matter what: There’s a lot of moving parts to making a change of this magnitude, and much of the hard work lies in carefully preparing the data cleansing and migration tasks (a potentially fraught process in any migration or upgrade), consolidating systems and business processes to reflect new functionality in S/4 HANA and the need to move to the smallest number of instances possible, retiring and replacing hardware and database licenses, and otherwise doing the things that are needed when the goal is to eventually change database, platform, and applications, and make similarly significant changes to core business processes.

(I’ll stop and make the point that, despite the opinion of some critics who write books claiming that complexity is the sole purview of SAP, none of this is in any way unique to SAP – all enterprise software vendors, and even leading pure-play SaaS vendors, are asking their customers to make the shift to a new generation of business platform, and there’s no way to dumb down how hard it’s going to be to.)

The answer to the other two questions – will customers be ready and will SAP make a good enough case – are less straightforward. It’s clear that SAP’s customer base is by and large less ready than SAP would like, at least coming into SAPPHIRE. ASUG CEO Geoff Scott called it straight when he said that the sales pipeline might not move as fast as customers’ account execs would like. But don’t discount the solid endorsement for the overall S/4 HANA strategy that Geoff served up to his membership. That wasn’t done on a whim, nor was it done to curry favor with SAP (believe me, Geoff isn’t paid to suck up to SAP.) It was done simply because the ASUG board thinks moving over to S/4 HANA is fundamentally a good idea.

Which really leaves everything up to how SAP tells the story, and that’s not as easy as anyone – vendor, customer, partner – would like. It’s not just a product story, it’s also a story about service delivery, something SAP’s recent blending of its service and support arms into a single global entity was done in recognition of. As the tech and business worlds move towards the new models that SAP and others are defining, everything will change, including how technology is deployed, serviced, and supported. Even purchased and licensed: former SAP CMO and newly christened Chief Digital Officer Jonathan Becher showcased a new online storefront that will sell enterprise apps the way the Xbox store sells games, including in-process functional upgrades that “level up” the user the way in-game purchases level up the gamer. I’ll dig into the specifics of how SAP is articulating these stories in a follow-up post.

In the meantime, the fact remains that SAP’s customers, and every other worthy and unworthy competitor’s customers, need to make massive transitions in tech and business process in the coming years. When it comes to pretty much every highlighted announcement SAP made at SAPPHIRE, all the technological fundamentals behind the scenes of SAP’s announcements are not nice to have, but must haves. And the question is not if, but when.

New, faster database technology, cloud native applications, cloud-based integration, new user experiences, IoT, extended business processes, business networks, advanced, predictive analytics, a completely new relationship between customer, services, and support – none of these advances are optional in the long run. And every vendor is asking its customers to make these and many more shifts in platform and business strategy, and to get on with it already.

And while some patience is required, the clarion call from SAPPHIRE needs to be acted on now – these shifts take time, careful planning, and the usual blood, sweat and tears when it comes to migrations and upgrades. Meanwhile, the clock is ticking on new levels of business innovation that will define the competitive environments for SAP’s customers. The groundwork is being laid, a roadmap – the curriculum for the future of business – is now discoverable. It’s up to every company to start placing its bets, lining up its strategies, and then rolling up its sleeves and getting the work done. So far, what SAP is proposing looks like it will cover all the bases. The customers’ striving for the magic of success can now begin.

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