Is blockchain eating SAP’s lunch?

The blockchain technology is making a huge media impact. Enterprise leaders are pushing their IT departments to set up blockchain projects just to be part of the trend. For some established enterprise software vendors - like SAP - blockchain can be a threat or a big chance. For those not in the enterprise application software business - like IT infrastructure vendors - it is "just a big opportunity".

Blockchain is about secured and anonymized transactions. SAP is in the business of trusted enterprise transactions. To be clear: this blog post is not about the blockchain technology as an artificial currency such as Bitcoin. The technology is basically a distributed ledger (chain of blocks with a high trust level due to its distribution and no central point of failure). Based on the blockchain technology is the Hyperledger project driven by a consortium of companies trying to establish an open source ledger system.

This approach goes to the heart of SAP. SAP’s core assets once were in the FI/CO module (finance/controlling); this is where trusted transactions take place. At the same time, SAP is breaking up the consistent and monolithic core of the ERP system, dreaming (and promising because customers have a need for that) about a suite of microservices deployable in a hybrid fashion (on/off-premises). One may come to the conclusion that it may be a good idea to replace the finance/ledger core of the SAP system by the solution from the Hyperledger project. This would be a massive attack on the very heart of SAP.

Consequently, SAP has to address this threat early on. Therefore, SAP is embracing the blockchain technology and got involved in the blockchain forums and committees to have access to relevant information and see the options early on. Additionally, SAP has built an neutralization layer between the SAP software universe and blockchain, arguing that this way SAP becomes independent from unexpected blockchain technology changes. However, this step can also be seen as a sort of insurance, keeping the SAP software solutions intact while customers drive the implementation and usage of blockchain solutions from SAP competitors. At the same time, SAP can implement its own solutions using the blockchain technology in completely new business and solution areas. The SAP blockchain announcement ("27 customers and partners have joined SAP's blockchain co-innovation initiative") at SAP TechED in Barcelona on November 14th, 2017 is proof of this conclusion. Business and technology areas that had not been covered by SAP until now are being addressed by the toolbox of SAP Leonardo.

Bottom line: The blockchain technology has the potential to attack SAP at its core if not taken seriously. SAP is turning this situation around, trying to make a weak point into a strength: It has embraced the technology and is developing solutions outside its previous comfort zone, experimenting, transforming itself, and developing a new business field.