I am looking forward to hearing Christian Klein tomorrow as he presents on “SAP Business Unleashed”. In many ways, in his 5 years as CEO he has already unleashed SAP growth especially in stock market valuation. It now stands at over $350 billion, more than twice what it was when he was appointed co-CEO. It has the largest market cap of German publicly traded companies.
While that is impressive, technology market leadership has decisively shifted away from enterprise application vendors (not just SAP) to the Magnificent Seven as I wrote here. Microsoft alone is valued at $3 trillion, and just its data center capex will be more than double SAP’s revenues.
As I start my research for SAP Nation 5.0, I will be doing my usual 360 degree set of interviews with customers, partners, competitors and fellow analysts. I hope to learn more about how SAP plans to unleash even more growth in a dramatically changing world. Christian is sharing the session with several other speakers so won’t have much time, but hope to hear more from SAP over the next few months.
I am encouraged that David Lowson of Capgemini thinks SAP is already looking ahead to 2030.
“I’m pretty confident that SAP's growth and increasing cloud revenues are secure for the next few years. The move to RISE and BTP, and their acceptance in large programs, is driving that. Many large clients have committed to RISE journeys that will last several years of growth. I really think that SAP is using this period of comparative calm to think about what’s next and actually focusing on 2030, not just the end of Q1 2025. “
I would like to see a bit more urgency than 2030 given all the changes we are likely to see in business and in technology and particularly if it wants its market cap to rocket to hyperscaler levels.
Clean Core in ERP – too small a focus?
SAP has been very focused the last few years on migrating on- prem ECC customers to S/4HANA in the cloud with hyperscalers. And there it has been pushing a “clean core” message. While that makes for less custom code and facilitates IT hygiene, it narrows the functional scope to mostly accounting and inventory processes, and encourages customers to “ring fence” S/4 with even more functional specialists than they have in the past. SAP’s own presence in many non-ERP categories has suffered. I was at Paul Greenberg and Brent Leary’s IRL25 conference in Atlanta recently. They used it to announce the award winners in Paul’s CRM Watchlist. That’s not just Paul’s view of the CRM vendor space. He polled 27 analysts for input. I must have been one of the few that nominated SAP for some of the awards. There were 21 categories of awards (16 at the company level and 5 at the executive level and their assistants). Salesforce dominated the company awards, Zoho the executive ones. SAP didn't even make finalist for a single category! Its leadership is similarly challenged in HCM, EAM and many other market categories.
Trump and China impact on business
Trump’s tariffs should lead many MNCs to make and hire more in the US. These are likely to be next-gen manufacturing, logistics etc. with a lot more automation than in the past. His immigration policies will similarly lead to changes in farming, construction, other sectors. His thoughts about crypto, Greenland and Mars should impact fintech, space, mining and other sectors. China’s expansion plans are as ambitious. How is SAP preparing for changes in various verticals? SAP has historically been a leader when it comes to industry depth but many of the industry thought leaders that I had helped profile in “Business as Unusual with SAP” have moved on. I am also seeing a lot more momentum of newer players like Palantir and C3.ai and established ones like Salesforce and ServiceNow when it comes to operational experience in several verticals
The coming blend of agentic AI and humanoid robotics
In our new (fiction mystery) book, The AI Analyst, Polestar is a next-gen vendor which combines agentic AI with humanoid robots, drones, UAVs etc. Not just a software or silicon focus. Polestar also has an expansive definition of its verticals as each of the 800+ occupations the Bureau of Labor Statistics tracks. Their solutions automate limbs, eyesight and other human faculties, not just cognitive skills. Salesforce, Workday and others have already started introducing their agents to customer care, HR and other back office functions. Nobody is thinking yet like Polestar at the micro-vertical, occupational level where productivity and ROI will be pretty easy to quantify. Will SAP?
A rapidly shrinking world
SAP has led the enterprise world in localizing for 60+ countries for changing taxes, payment protocols, customs and other nuances. However, they have had sales and product leadership changes in the last year. And players like Zoho are rapidly growing data center and customer presence especially in fast growing BRICS, Middle East, ASEAN, Africa and other markets. They are selling way above their positioning as a SME focused vendor in those markets at far more competitive economics than Western vendors. Last week at a Zoho event, I heard a Dubai-based company glowingly describe their rollout of Zoho Expense for T&E management across 70+ business units in 50+ countries.
In SAP Nation 3.0 in 2019, I had invoked the US’s westward expansion in the 1800s. The rallying cry used the term “Manifest Destiny” to do so. Trump is now setting the country's visions on Mars and elsewhere as a continuation using the same term. In that book, I had described several markets SAP had missed in that decade. I had also said SAP needed its own Manifest Destiny rallying cry. I hope Christian does that over the next few months. I look forward to cataloging a much more ambitious SAP in Nation 5.0.
The joys of book reviews
I saw an article aimed at authors and publishers on how to handle critical reviews. And I chuckled to myself "I could have written that myself"
I took most heat for the first volume of SAP Nation - mostly from SAP fans and partners. It was actually a generous history of SAP as it grew from small German vendor to global powerhouse. What I drew attention to was its poor handling of partners and the massive costs and project failures in the ecosystem. Five years later, I can say with some pride that it had a significant impact. The strategies I highlighted in the book like ring fencing with cloud, two-tier ERP and third party maintenance have gone mainstream. Also, in writing volume 3.0 I saw customers have become cautious in their use of large SIs, they are minimizing change as they move to S/4 etc. That to me is gratifying. I was talking to the customer audience and many of them have benefited from the book.
I was criticized for not being alarmist enough with Silicon Collar. The book came out when prominent Oxford profs and Gartner analysts were screaming about catastrophic job losses from automation. Mine was a tone of optimism - automation makes us safer, smarter, speedier workers. Machines typically impact repetitive tasks not complete jobs. Automation takes time to mature, it is not cheap. History has proved me right so far. Very few job losses from machines. We are pushing back dates for autonomous vehicles, for payback from machine learning. Two disappointments from the book- I had hoped SIs and outsourcers would automate their own operations - but they are mostly sticking to labor intensive models. The other was software vendors would reshape processes to reflect growing drones and telematics in logistics, sensors, 3D printing and wearables on the shop floor, robotics everywhere but it may take a wave of greenfield vendors to come along to do that.
I am starting to hear criticism I am "too nice" to SAP in the latest, volume 3.0 of SAP Nation. I am actually pretty tough on SAP in a number of chapters. What I do point out is how little its competition has evolved in the last 5 years. So many missed opportunities. Some of the criticism is coming from them for highlighting their performance. To me, again, that is background noise. The book gave me a chance to highlight 200+ pages of case studies talking about a slew of new SAP products. Hopefully, the customer audience benefits from that and sees that this is not "your Dad's SAP". And the competitors realize the clock is reset and they can show much more progress by the time I start to write volume 4.0 in the series.
I tend to be a tough critic myself. The New Polymath was one of my best reviewed books and it was gratifying to get a number of comments about people wanting to expand their own skillsets. What I had hoped in addition was it would spur Polymath organizations like the GE Global Research Center I described in the book "Conversations in the cafeteria, in the hallways, and at the 40 - room lodge attached to the center effortlessly drift from pathology to holography, from one “ aha ” to another. The Global Research ethos is “ Innovation occurs at the intersection of disciplines. ” So, put chemists, mathematicians, engineers of all stripes, and biologists in close proximity and who knows where the conversations will lead."
The New Technology Elite was about smart products (analog products made digital with software, sensors and satellite support) and covered design, IP issues, the application of Moore's Law, a need to plan multiple releases, product documentation and training and a number of other dimensions. I see so many smart products launched in the last decade which could have used that advice. You wonder, for example, how things would have worked out if Boeing had provided better documentation and training around the MCAS software and the Angle of Attack sensor on the 737 MAX.
I write books to stay in touch with practitioners - my case study heavy style makes me reach out to over a hundred for each book. They provide me the reality checks and validations for the themes of each book. They also provide fodder for our advisory work. The ultimate compliments and criticism also comes from them, not from social media. Nothing is more pleasant than a note from a client which says "thank you from saving us from a $50 million mistake" or "you forced us to consider couple more scenarios we had not factored"
Having said all that, I happily sign my books, and enjoy presenting on themes from my books especially to audiences on campuses. See you at an event soon.
April 18, 2019 in Industry Commentary, SAP Nation, the book | Permalink | Comments (0)