SAP S/4HANA – the Q1 FY2017 update and glimpse at SAPPHIRENow 2017

SUMMARY:

SAP S/4 HANA is maturing rapidly and according to the company is on the cusp of broad based adoption. The customer count on S/4 is still relatively small but the promise of acceleration is there.

SAP S/4HANA
Markus Schwarz – SVP and GM SAP S/4HANA

As has become customary over the last year, I spoke with Markus Schwarz SVP and general manager SAP S/4HANA as part of the conversations around SAP Q1 FY2017 earnings.

The headline new adds of 400 customers in the quarter caught everyone’s attention as did the fact that nearly half of those adds were net new logos. The total customer count on S/4 now stands at 5,800 with SAP CEO Bill McDermott claiming that 80% of SAP customers are now in the SAP S/4HANA pipeline. Be that as it may, attention now turns to what’s happening on the ground.

Regular readers will recall that a year or so ago, much of the S/4 attention was on S/4 Finance – or simple finance as it was known. There was a perception that SAP S/4HANA ran the risk of being a ‘rinse and repeat’ of 1990’s R/3 implementations where the focus was on driving out back office cost through process improvement.

Fast forward to today and the picture has changed dramatically. Schwarz told me that SAP is now seeing 33% as finance led, with 67% being what SAP terms ‘full stack,’ for the digital core, which includes supply chain.

The difference today is that (version) 16/10 got us the much needed supply chain content integrated and available for general use. Customers have been waiting for that and now you see fast adoption.

I wanted to know whether in SAP’s view, this represents something of a tipping point in the sense that the company can expand its horizons beyond the obvious strategy of protecting the installed base. In that context, I wondered whether the persistent questions from user groups about the value proposition are fading away. So what do the ‘mittelstand’ (mid-size) customers think?

The largest customers have been the ones who moved first as you’d expect but I am also seeing momentum in mittelstand. I don’t see any difference in terms of adoption, I sometimes see it in geographies, we have a very good adoption in the mid-size.  There are no anomalies I can detect when you compare to SAP other software.

Of course there are different adoption patterns emerging so for example the large companies pick a line of business to go live fast to collect the experience and plan in parallel the large move. That’s a pattern we see firming up. That way you can create early proof points and trust. The days of the big bang are over.

The ongoing concern about value has plagued SAP since the launch of SAP S/4HANA and I wondered how SAP is tackling that in the context of so many buzzwords around digital transformation, AI, IoT and so on. In his quarterly remarks, McDermott didn’t fight shy of talking up those topics but in my conversation with Schwarz it became clear that SAP is matching its offering to specific business change patterns.

Every industry is faced with some sort of transformation problem that requires they develop service based models. The consumer company that becomes a retailer, the chemicals company that becomes a supplier for automotive, the utility that starts selling solar panels. I’ve seen Air-as-a-service for example. Farm machinery companies are looking at how they can rent their equipment to many customers.

With manufacturers we see this motion to get to a segment of one at a lot size of one at large scale. Nike, any sports apparel company today sees people ordering personalized through multiple channels and that impacts through the supply chain at a fine granularity.

These are very different ways of doing business that require a digital framework, which is what we are offering.

On the ground, Schwarz says that his soundings among the top 50 partners suggests that they are seeing a boom in business that they’ve not seen since the 1990s. I have not tested that extensively although the partner representatives with whom I keep in touch tell me they are run off their feet.

During our conversation, Schwarz advised me that we will see many customers at SAPPHIRE talking well beyond where they were a year ago.

Last year most customers were really in the early stages of their experience – mostly 5 or 6 months in. Today they have much more experience and are expanding their S/4 commitments and I think you will find that the stories they have to share will be much more detailed.

My take

That was a good place to bring our conversation to an end. With SAPPHIRE just a few weeks away, Jon Reed and I will be on the ground, hunting down those customers, hopefully getting some of them on our video couch while at the same time checking in with colleagues in the field we have known for many years.

If what Schwarz says is validated in the manner he promises then I suspect we are in for interesting times as  SAP watchers. I, for one, will be glad. While it has always been possible to get glimpses of the vision, the marketing clarity has been absent as have the expression of outcomes.

Last year for example, SAP got a nasty shock when it realized customers had huge problems understanding how to achieve value fro S/4. McDermott was quick to acknowledge that and tasked his delivery teams to fix the problem as quickly as possible. That work is done and in delivery.

Personally, I am looking beyond SAP S/4HANA as it has probably been best understood so far. What I now want to see are the business model patterns where S/4 and surrounding technologies provide the technology support for the kinds of transformation we are observing among industries. To that extent, I want to hear how SAP will support an expansive third party ecosystem for industry solutions at what today appear to be the edge but which may well become the business core of the future.

Image credit - via SAP's YouTube channel

Disclosure - SAP is a premier partner at time of writing.

    Comments are closed.

    1. Ranjan says:

      I am not aware of S/4HANA adoption but as far as HANA ROI , it’s not there. Even after doing forced upgrade of Gateway system on HANA, which just produces OData the performance of Fiori App is abysmal. Even if you write CDS views and AMDP to get data for filtering etc in Fiori App the performance suffers in dev environment. The complexity has increased manifold with HANA analytical, factsheet and transactional app having different skill, tool, transport mechanism it’s all a bigger ball of mud with lots of hair. I don’t understand what is the whole point if you have to change something now you have to start from database abap Gateway Fiori all the way up. All the best for Sapphire

      1. Mike Kurian says:

        …a bigger ball of mud with lots of hair

        hahaha Ranjan! this is one of the best descriptions of that mess SAP calls “digital core” hahahah!!!

    2. says:

      Have you checked this post and the accompanying links? https://answers.sap.com/questions/110996/s4-hana-1610-how-to-improve-fiori-overall-performa.html

      Have you posted to (I still call it) SDN with specific issues?

    3. ranjan says:

      Thanks for responding. I had checked all forums ( sdn, marketplace etc) it’s been reported but not resolved ( depends on specific case) . I am not even sure where the lag is, but certainly not in Fiori as I can see the web developer console where it waits for response of 19 seconds for filters.
      SAP recommended an upgrade of Gateway system to HANA to boost performance, esp of financial analytical app which is inappropriate. Well it didn’t improve the performance as well and this is the point I am trying to make that SAP HANA needs to perform on Fiori front out of box. And we aren’t even hitting millions of records, just 4000+

      1. Spokey latency in cloud apps isn’t unusual in newly emerging architectures. Almost every cloud vendor or major online site has experienced these types of stalls. Generally comes down to a shared resource that shouldn’t be shared. If you have access to a sandbox configure the very simplest S/4HANA instance. Check Fiori app for response time (don’t be surprised if response is instant). Often at fault is an app developer has a query spanning a ‘sharded’ database resource. Make sure nothing is shared when resources are sharded.

      2. Björn Goerke says:

        Ranjan, I am sorry to hear of the issues you seem to be experiencing. If the problem still persists, please get in touch with me so we can have our technical experts dig into it.

        Best regards,
        Björn Goerke (SAP)
        Twitter: @_bgoerke