by Robert Holland, VP Research, SAPinsider
Understanding that many customers are anxious about SAP’s Q3 revenue announcement, SAP CEO Christian Klein took the time in early November to speak directly to North American customers and answer questions about what the announcement means for them. At a high level, Klein focused on the fact that SAP is planning on staying true to the core principles of the move to SAP S/4HANA and transformation into the cloud, but he also acknowledged that there are challenges along the way and that SAP is committed to helping customers address those challenges.
Customer Transformation and Integration
The number one priority for SAP coming into 2021 is that of transformation, both in terms of moving to the cloud and in moving customers to SAP S/4HANA—something Klein mentioned several times during the call. But what Klein described was a “transformation of customers” and how SAP wants to invest in making customers successful. He acknowledged during the conversation that 2020 has been a challenging year, with many customers and partners under financial duress. But Klein emphasized that SAP has been working with these customers by doing things like extending payment goals. SAP also reorganized earlier in 2020 to put the entire customer-facing organization into one board area in an effort to have all the ways in which customers interact directly with SAP managed by a single organization under Adaire Fox-Martin. To tie everyone in the company to this customer focus, SAP’s 2021 bonus plans will also be directly connected to customer success.
When it comes to the cloud, Klein emphasized that SAP’s goal is to triple cloud revenue by 2025. He said that there has definitely been an uptick on the adoption curve that he hasn’t seen before, particularly when it comes to the ERP customer base moving to the cloud—though numbers from SAPinsider research suggest that less than 10% of those deploying SAP S/4HANA are running SAP S/4HANA Cloud. Part of this cloud focus will also involve the Industry Cloud which will offer specific features for each industry, building on SAP’s history of innovation and expertise in that space. Klein mentioned that SAP is working with co-innovation partners during the development process, as well as using partner solutions on top of Industry Cloud to extend what SAP offers.
Talking about SAP S/4HANA, Klein indicated that SAP continues to focus on expanding its core business with SAP S/4HANA being a key growth driver. One thing that Klein mentioned more than once in the conversation was that, for many organizations, the biggest challenge in transformation is not how to apply the technology, but how to redesign business processes to use that technology. The topic of working to improve architecture and TCO is something that Klein mentioned multiple times. SAP is looking for simplification in the stack, which very much acknowledges that today’s landscape is complex and signifies that organizations need a clearer and less complex path towards deployment if that is to be successful.
Related to that clearer path for success is the topic of integration. This was something else that Klein returned to several times during the discussion, and in discussing it he acknowledged that while SAP is improving SAP to SAP integration, they are also working on new APIs to open up integration with non-SAP solutions. This integration complexity is connected to the challenges that Klein acknowledged organizations are facing as part of the migration process. Along with redesigning processes and making the data model work, getting all the SAP systems within an organization integrated, and then ensuring that they can also integrate with third party applications, are issues that SAP is looking to both solve and prove the value of to customers.
SAP wants its customers to move forward, but in talking to North American customers Klein admitted that the environment in 2020 has not been conducive to that move. Part of this has been the global pandemic which has impacted everyone to at least some degree, but the need to improve the business model and make integrations work has been another barrier. As a whole, the SAP audience is highly customized and change is not easy. SAP is looking to help customers make these changes with industry specific cloud and by improving solution integration and the data model that is behind everything. However, they also know that they not only need to do better with making the move to the future possible, but also make it achievable.
What Does This Mean for SAPinsiders?
Klein did not reveal anything unexpected in this tightly scripted conversation, but rather emphasized that customer success remains a focus for SAP in 2021. SAP will also continue to push the move to cloud-based solutions, with SAP S/4HANA being a central part of that transition. However, SAP has acknowledged that customers face challenges in taking these steps, particularly around integration where they will focus resources and efforts. SAP knows that they must solve their existing issues and prove their value to customers for their strategy to be successful.
To be prepared for 2021, SAPinsiders should:
- Look for better integration options both between SAP products and with non-SAP solutions. Integrating solutions like SAP SuccessFactors, SAP Concur, and SAP Ariba with SAP’s digital core has been a complex process that SAP has been working to improve. Klein stated that SAP Cloud Platform Integration Suite now offers two thousand APIs for on-premise customers with a focus on hybrid landscapes, and he said that SAP will expose further APIs in 2021. They will also work to make APIs available to integrate third party applications. Customers should keep pushing for these improvements and look for them to be more available to link their own SAP applications.
- Expect to see more industry-specific solutions in Industry Cloud. While Industry Cloud has seen significant interest from SAP customers who are looking for SAP to provide cloud-based solutions equivalent to the available on-premise options, SAP knows that they need to make more progress on this topic in 2021. Where SAP cannot develop these solutions in house, they are looking to extend their capabilities through partner solutions. It is vital for SAP’s continued cloud progress that there is feature parity between cloud and on-premise solutions. This isn’t available yet, but SAP will be pushing increased cloud adoption ahead of this.
- Evaluate how SAP is making a cloud move easier. The SAP audience is highly customized and is not easy to change, so SAP knows that it needs to find ways to make any transition both easier and more attractive. Working to improve the overall architecture in the move and reduce TCO will partially achieve this, but SAP is looking for other incentives to make organizations more likely to consider the move. Look for these changes and evaluate how they will impact your organization to determine whether these moves make sense for you.
- Educate your teams on what SAP is doing. For SAPinsiders in EMEA, November 17-19 offers the opportunity to hear more from SAP about their 2021 strategy and direction at the SAPinisder EMEA Virtual event. The same week will also feature an SAP S/4HANA summit with sessions running later into the day to support a community members in the Americas. Attendance is free to registered users, so use this opportunity to learn more as you make your own plans for 2021.