Sapphire Now 2017: key take-aways on SAP's innovation roadmap
Last week, Julia Reichhart and I took part in the Sapphire Now 2017 conference in Orlando/Florida, where we had the chance to talk to SAP representatives and many of its partners. In this blog post, we would like to share some of the key take-aways from this conference as well as from the SAP Partner Summit.
When introduced in January 2017, SAP Leonardo was “just” SAP's IoT platform. At Sapphire, Leonardo became the brand name for SAP’s digital toolset for innovative solutions. For SAP, Leonardo is positioned as the toolset to drive innovation, while its business application, namely SAP S/4HANA, is to run the core business processes of the company. SAP Leonardo is an umbrella for a number of existing technology assets from SAP, including analytics, machine learning, IoT, SAP Cloud Platform and blockchain technologies.
In our view, the main idea behind SAP Leonardo is to create new, data-driven applications by using these components. To do that, Leonardo combines the technology components with design thinking services and a fixed amount of consulting services to deliver business value and solve a specific business problem in a short timeframe. This can be an application that collects data from devices or machines and combines it with data from an ERP backend, such as order data, customer data and HR data. The idea is for Leonardo to be designed in an open way that can be used to work with whatever data infrastructure is available in the customer's environment, be it SAP or non-SAP systems. Moreover, Leonardo will be a platform on which companies can deploy applications developed by SAP or SAP partners.
A detailed PAC post about SAP Leonardo can be found here.
The Ariba business is expanding – for SAP as well as for its partners. This has to do with a change in Ariba’s strategy: while in the past, Ariba has delivered the bulk of the professional services work itself, its partners now have much more room to deliver services in the area of consulting, systems integration as well as development of add-ons. In support of this and to scale the business, SAP Ariba has opened up its platform to partners and is leaving the services part to them.
We have the impression that a number of SAP customers are willing to make use of Ariba to extend the SRM capabilities of their ERP backends.
We liked IBM and SAP's announcing that they were going to combine cognitive technologies (Watson) with Ariba. The idea behind this move is to improve procurement processes and gain more insight based on the analysis of procurement-related data. IBM wants to use the developments around cognitive procurement in various ways: for one thing, IBM's Global Business Services will leverage it within procurement projects, and for another, by combining Ariba and IBM Watson IBM is planning to transform its procurement BPO services.
With the cloud edition of its core product, SAP S/4HANA Cloud, SAP is following on its path to become a dominant provider of ERP solutions in the cloud. The new cloud solution is relatively new, however according to our research, there is growing demand. We believe that the solution can be a good fit for companies that do not have high requirements for individual customization, e.g. professional services organizations.
In terms of the cloud, we expect a large number of companies to move to hybrid cloud scenarios. They may run some of their processes in the on-premise edition of SAP S/4HANA while other processes will be managed using SAP S/4HANA Cloud (e.g. for subsidiaries of large corporations as well as management of global finance processes across many different entities within a multi-national enterprise).
Also, companies that run on-premise ERP today are looking for ways to migrate these systems into a cloud environment, be it public or private. It must be added here that the public cloud more and more becomes an option for SAP customers. AWS and Microsoft Azure are currently dominating the public cloud segment, however SAP's recent partnership with Google adds another player.
SAP Business ByDesign
Due to SAP's strong focus on SAP HANA and SAP S4/HANA over the past few years, products for the mid-market have been somewhat left behind. This is especially true for SAP Business ByDesign. In recent months, however, SAP has brought its business around cloud ERP solutions back to life and intends to push the out-of-the box ERP suite, reactivate old partners and also win new ones.
We believe that this solution provides a number of features for manufacturing companies, which may give it a competitive advantage over other cloud ERP solutions on the market. That said, SAP is now facing the challenge to position two cloud ERP solutions that – to a certain extent – address an overlapping customer base: SAP Business ByDesign and SAP S/4HANA Cloud.
SAP Business ByDesign is becoming even more important for SAP now that its rival Oracle has bought NetSuite, a provider of cloud ERP solutions that also addresses medium-sized businesses.
SAP and the SME sector
For quite some time, SAP has been trying to expand its presence in the SME sector. Although SAP has in fact solutions that address companies of this size, e.g. SAP Business ByDesign, SAP Anywhere and SAP Business One, there is still some work to do to engage with the ecosystem. We have learned about SAP’s plans to win more partners for the SME market as well as to enable its partners to become cloud-ready.
One of the basic principles here is a shift from a solution-focused strategy to a customer-focused one. The solution-focused approach is about providing a personalized product for each customer with a standardized customer experience. Nowadays it is, however, more important to provide a personalized customer experience to make the client happy, while still offering a standard product. This means that if a standard product (an SAP cloud solution) may not meet all of a customer's requirements, intellectual property (IP) from partners (add-ons, vertical solutions) as well as custom-developed apps can bridge the last mile.
It is SAP’s explicit wish that its SME partners do not only resell a product as a VAR. Rather, these companies should be able to offer a more comprehensive service that includes IP (their own or someone else's). Also, it is SAP’s intention to create an ecosystem of different types of partners. SAP expects that a combination of the various competencies and offerings of different companies can better support the entire customer lifecycle. One basic principle in this regard is a more diversified partner ecosystem comprising IT services providers, companies that provide services for certain lines of business as well as providers of business services such as payments.
We believe that SAP has still some way to go to achieve the same degree of relevance in the SME space as it enjoys in the upper mid-market and large corporations. The biggest challenge will probably be to increase the number of partners as well as bring existing partners into the cloud era. From what we learned, the latter can be particularly challenging for smaller companies, given that margins and revenue streams in the cloud business are way different.