I went to SapphireNow in Orlando last week. I am getting requests to write an update to SAP Nation. There is plenty I could write about – how thousands of SAP customers are trying out one or more of the “coping strategies” I had outlined in the book to manage their exposure to SAP and partners – ring fencing with cloud apps, third party maintenance, two-tier ERP etc. The anxiety in the customer base is palpable as SAP gets aggressive with the indirect access clause. As I have written before the clause has poisoned relations with many a customer. I could write about the changed competitive landscape where Oracle appears more obsessed with Amazon than it is with SAP. Where Workday says it is not worried about either SAP or Oracle.
But I am a Camus fan, especially of his quote 'In the midst of winter, I found there was, within me, an invincible summer”. I feel SAP is poised for a turnaround. So I approached them to get a balanced perspective for the book, not just input from competitors and less than happy customers. I want SAP to put its most positive foot forward. SapphireNow, which is usually a very polished event, gave me a chance to see some of their positive marketing. I hope they also follow through with my request to interview several of their executives and customers that stand out.
While most of my Sapphire notes are for the book, here are some perspectives I picked up after a break of a few years from the event.
Executive depth and continuity
It was good to see “The Professor”, Hasso Plattner do his annual keynote. His sense of humor has improved as he took gentle swipes at Larry Ellison, President Trump, the digital agency for his hockey team, the disconnect between his development teams around the world, even SAP marketing for going overboard with some of their claims.
CEO Bill McDermott came across as a statesman as he answered a question about nationalistic trends around the world – “in the US, we have not seen free trade being inhibited” and the EU is likely to hold after the recent French elections. He came across as a very respectful interviewer as he hosted two sports greats – Derek Jeter and Kobe Bryant.
It was good to see diversity in the form of a friendly Rob Enslin (a South African who has traveled the globe with SAP) and two ladies, Adaire Fox-Martin and Jennifer Morgan on the Executive Board.
Empathy as watchword
McDermott introduced the word last year to snickers. He doubled down and used it often this year and so did many other speakers. Kicking off Sapphire, McDermott tackled right away the cloud hanging over the event in the form of its Indirect Access clause claims against customers like Diageo and InBev. I was pleasantly surprised when he said (italics mine) “static, read access in third party systems is your data. Competitors charge you for static read in third-party systems, SAP will not." He also announced “simplified pricing” with “procure to pay’ and ‘order to cash’ processes to be priced based on orders.
As they say the devil is in the details, and I heard from a couple of customers – “what took them so long on the indirect access? After a decade, it’s not empathy”. On the pricing by orders another pointed out how many SAP product prices would need to be rationalized on the procure to pay cycle– in ECC, Ariba (for indirect supplies), Concur (for t&e), Fieldglass (for contractors). I like the sentiment behind the word empathy, but having raised the stakes this year, now McDermott and SAP have to deliver.
I would also like to see them lean on partners to adopt the sentiment. Sapphire is still dominated by massive partner booths, a very visible sign of the expensive ecosystem around SAP. Way overpriced MPLS circuits and storage, way too many bodies implementing and supporting SAP systems – time for empathy there too in the form of relief to customers.
S/4HANA update
In volume 2 of SAP Nation, I presented the industry track record on next-gen products – at Oracle, J.D. Edwards, Infor, Microsoft and even at SAP with NetWeaver and I concluded:
a next-gen product takes years of development and maturation. Migrating a legacy customer base takes even longer. Those are just the laws of physics. SAP may be able to bend these laws slightly with S/4, but will likely not be able to break them.
So, personally, I have had modest expectations of S/4. SAP , or at least its marketing, does not agree and they claim it is “the fastest adopted product in SAP history (and) is available for all industries”
What I have seen and what was confirmed at Sapphire is there are plenty of small to midsized “net-new” customers which are adopting S/4. Nothing wrong with that, and the larger customers which are adopting it in small bites (given the functionality is growing gradually) are doing interesting things. A Caterpillar executive told me they are ruthlessly making sure ECC customizations are not ported over. I saw a Walmart presentation where they described Near Zero Downtime (NZDT) techniques to migrate 3TB of data into S/4, and plans to scale that to 100TB. Whoa! That’s the kind of big thinking the whole industry can benefit from.
What I would have liked to have seen is more public cloud use cases of S/4. Lots of on-premise/private cloud deployments which could potentially continue the bad habits from ECC world. With lots of exposure at the event to what they called the Big 3 “cloud infrastructure” vendors – Google, Microsoft and Amazon, we will see more interest in public cloud deployments of S/4.
I also did not like Plattner announcing in his keynote S/4 is “basically done” or the fact that he said some bloggers had confirmed to him he was correct. Not this blogger - to me S/4 is where R/3 was in 1995. As we saw over the next decade, SAP (and other ERP) vendors had to expand functionality in CRM, SCM, EAM, BI and many other categories. SAP also had to launch a wide range of IS, industry solutions.
Dr. Plattner pointed out he was shocked to hear every single screen and report in S/4 had to expand the material id code from 18 to 40 characters. Changes in the auto industry demanded it. As a customer told me “the world has changed so much in the last 30 years since R/3 was designed many similar change requests will come from other industries.”
At this event, SAP launched a tool called Transformation Navigator. It allows customers to see a “from-to” – existing functionality to that in SAP’s portfolio of contemporary products. “It features the full set of SAP products and a comprehensive business capability model across all industries and lines of business. And it features 1,000 value drivers compiled over years of working with leading enterprises on creating the next business practices.”
In the demo I saw (see image below - click to enlarge), even in the finance area where S/4 has been maturing over the last couple of years, there is a need for many other surround applications. If S/4 is SAP’s future, it will need to keep expanding in functionality and absorb these “satellites”.
Dr. Plattner also acknowledged to a question I asked, there are many “humongous” industry applications like utility billing which should be candidates for updating with new architectures to see if they can get 10X performance improvements. There are countless similar applications like retail merchandising, healthcare EMR, hospitality/airline reservation systems which are decades old and need to be brought into cloud/in-memory/micro services world. I wrote recently after the Workday analyst summit, these are opportunities nobody is tackling and SAP, the world’s largest application vendor could certainly step up.
Intelligent apps and Leonardo
Over the last few months, Brian Sommer (my sparring partner for three decades) and i have been comparing the state of application software today to that in the 90s when he was at Accenture and I was at Gartner. Never before has technology been so ubiquitous and affordable (a theme Michael Dell emphasized on stage), and that this is a great time to re-imagine every process, product and place with a wide variety of SMAC (social, mobile,analytical, cloud) and sensory and AI and other automation technologies. Never before have CEOs been so excited about technology to create smart products and services and rethink business models. Technology is influencing the top line – it’s unprecedented. The re-engineering efforts of the 90s would have drooled to get some of the technologies we have today. The problem is today they have to be sourced and integrated by enterprises on their own.
So, I was excited to hear SAP expand Leonardo beyond just IOT to a toolkit for machine learning, Blockchain, its Digital Boardroom, design thinking, digital assistants and its multi-cloud environment. Analysts said it sounded like buzzword bingo. I say they should add mobile and social apps and other automation like drones in distribution, robotics in shop floors etc (and many more I showcase across 50+ industries in my new book, Silicon Collar).
It was exciting to hear Dr. Plattner describe his vision of “intelligent apps” which leverage many of those technologies.
Watching a demo of SAP’s digital assistant, CoPilot analyze a maintenance issue with a wind turbine I was taken back to GE CEO, Jeff Immelt’s pitch when he launched his Industrial Internet vision. His prop on stage was a giant GEnx aircraft engine which generates a terabyte of data a day. That was 5 years ago and Immelt has been relentlessly turning GE from an industrial to a digital company. That is the complex world SAP has to catch up to and create intelligent apps for.
I had an epiphany during the event. I had finished listening to Rudi Hois present the S/4HANA roadmap. He had crisply summarized a decade of decisions and development in 30 minutes. I marveled to Mike Prosceno of SAP how much detail he had covered without breaking a sweat. Mike responded you should see his boss, Wieland Schreiner present that. Or even his boss, Bernd Leukert, member of the Executive Board. Mike’s answer took me back to trips we used to make as Gartner analysts to Walldorf in the 90s. At every level of the organization, we could count on articulate, intense staff. That SAP appears to be back. I heard from several customers they had dealt with an innovative group within SAP - something they would not have expected just a few years ago.
It’s that SAP turnaround I hope to catalog in Volume 3, along with the efforts customers are continuing as they try to protect themselves in case SAP does not deliver. It’s those counteracting forces and the global crosscurrents McDermott’s team are navigating which will make the book interesting.
On a personal note, I want to thank Nick Tzitzon for inviting me to Sapphire and to Stacey Fish for making my couple of days there very productive. I was not sure what to expect after an absence of a few years and every one was warm and welcoming.
