SAP’s IIoT and blockchain ambitions – a heady mix but will it blend?

SUMMARY:

SAP jumped on the IIoT and blockchain bandwagon in 2017 in big style. But do they really understand what’s required to be competitive?

SAP TechEd las vegasIt is hard to imagine another software vendor that has access to as many of the world’s largest businesses as SAP. Yet it’s equally hard to view SAP as on the leading edge of the thrust towards Industrial Internet of Things (IIOT) and blockchain. It was in that context that Tanja Rueckert, President, IoT and Digital Supply Chain SAP fielded media and analyst questions at SAP TechEd this week.

One of SAP’s problems is that it has a lot of explaining to do. In part that’s because, in the last year, it has suddenly positioned itself as THE go-to provider for IIoT, blockchain and AI topics in the enterprise space. Apart from the fact all these topics suffer from insane amounts of hype in the general media, it is surprisingly difficult to discover real-world cases where customers have gone from being vaguely curious to proof of concept and out to live solutions. It was in that context that we spoke with Ms Rueckert and Gil Perez, SVP IoT & Digital Supply Chain; General Manager Connected Vehicles & IoT Security at SAP.

On blockchain, Ms Rueckert said:

We believe blockchain needs to be applied very specifically, in highly collaborative environments, where you need secure transmission of data or when you want to have a specification secured. For these scenarios, we have already highlighted track and trace. There, I think it’s a no-brainer, right?

She went on to provide examples of advanced tracking in pharmaceuticals, complex asset management and maintenance scenarios, where SAP is endeavoring to offer a ‘Facebook of assets’ style of ‘ledger’ where many stakeholders can gain access to information and out to distributed manufacture where visibility into the supply chain matters among different organizations.

No brainer it may be, but as Ms Rueckert acknowledged, technology is not the impediment to getting projects off the ground.

The collaboration conundrum

In the customer groups that she encounters, there is a general sense that data is like gold and should, therefore, be carefully guarded. The blockchain provides an immutable ledger system that has in-built transparency. Provided you can trust in the security of the blockchain implementation, then, in theory, the transparency it implies should transcend the data-as-gold objection. She goes further:

I think we are looking at competitors in the wrong way. If you need to push out cost and want to optimize in the supply chain then collaboration among your competition is the starting point to deliver that value. We, SAP are welcomed as the agnostic provider but yes, getting that collaborative alignment is not easy.

Emphasizing the trust question and contextualizing the use cases, Gil Perez said:

We are contributing members of Hyperledger, (the so-called blockchain for business) and we are creating a layer on top of Hyperledger, as well as other blockchain capabilities to make ‘blockchain as a service.’ So we were actually adopting and pushing forward Hyperledger and we believe it will be an important part of our portfolio moving forward. That said, blockchain as a whole is not the answer for everything and there are many, many use cases where SAP is already very strong. Manufacturing, specifically at plant floor, when you’re not talking about real-time response. So, I think that distributed solutions and networks will obviously become more important moving forward which is where this fits best.

That raises an interesting philosophical debate about whether the supply chain morphs into supply networks. This is something that SAP would naturally like to see happen since that fits with the solution portfolio, its future trajectory, and the Ariba network. For now though, the topic is a work-in-progress with companies preferring to keep with that description rather than complicate what they already see as complex problems.

Where are the experts?

Moving on, I asked about subject matter expertise in the context of what SAP is seeing from an industry by industry perspective. Here, Ms Rueckert wasn’t overly concerned, despite the fact that the early projects with which her team is engaged often require a high degree of industry knowledge.

I think we are confident that our business process knowledge is deep in a good number of industries for the problems that customers are wanting to solve. They are not radically rethinking in the way that you might imagine from reading about business model transformation. They’re not asking for that. They hear about the capabilities of some technologies and ask us to help them to use those for cost reduction or other efficiencies.

That struck me as odd given the amount of attention we see given to ‘business transformation’ as a discussion topic.

That depends on what you mean and you should remember that in Germany for example, where we have done a lot of work, companies are conservative and risk-averse to an extent, much more so than say the United States. They know they need to do things but they want to take small steps to start.

The difficulty for everyone involved, whether that is SAP, consultants, SIs and customers, is that we are entering into largely uncharted territory. It’s not as though there is a range of common problems where there are products that can be brought to bear as was the case with BPR in the early 1990s.

Customers have highly complex businesses with IT landscapes to match,where project starting points are not always easy to spot. What’s more, the experimental nature of newer technologies means that there will be a degree of project drop out as the relative values delivered come into view – or not – as the case may be.

Licensing

More prosaically, as projects get underway and move towards full production, the thorny problem of licensing and indirect access for IIoT rears its head. SAP recognizes the licensing issue is not going away anytime soon and Ms Rueckert said the company will have more to say on this in the early part of 2018.

As part of that discussion, I made the case that SAP will surely have to find a way to move out to a consumption model. If the company can do that then not only does it solve the indirect access (and unknown risks issue) problem, it also positions SAP as leading the thinking behind how multiple solutions are coherently deployed across supply chains at a fair price. For its part, I confidently expect that SAP will argue value-based pricing but that won’t cut it when competitors are willing to find ways to ensure that cost is not a hurdle.

My take

Finally, my sense is that SAP needs to find a way to market itself that captures the value (sic) their approach implies, dials back use of some of the buzzwords that infest my email inbox, and gets customers out front talking about what the technologies are delivering. The installed base is certainly listening and SAP can rattle off a whos-who of global brands where it has achieved success. But that’s not enough when others in the market are making noise.

As always with SAP it’s a case of watch this space, but at least from the technology perspective, I came away believing that SAP does understand what can be delivered.

Image credit - via SAP TechEd and © Melpomene - Fotolia.com

Disclosure - SAP is a premier partner at time of writing

    1. SAP seems to be thinking very traditionally about new database technologies just as Microsoft under Steve Ballmer kept thinking about preserving Windows as mobile, social and cloud was happening in new competitors such as Google and Amazon. Case in point if SAP’s strategy is to foster cloud computing why is HANA viewed as the critical database technology. When Google, Microsoft, Facebook, IBM now look at database as a log of immutable facts. Facts that drive event driven architecture, turning vast serverless applications ecosystem such as Salesforce has fostered into value. I’d post SAP is living like Microsoft was on it’s considerable past successes and cash cow. Meanwhile others are innovating all around SAP. Eventually the penny will drop (just as it did at Microsoft). Lastly do SAP customers actually want decentralized cloud based systems federated globally. Assuming so, then blockchain is the core enterprise application log for building next-gen ERP apps (HANA sits on top of blockchain logs).

    2. greg misiorek says:

      Hi Clive,

      as a fellow blockchain/heperledger observer, who’s been engaged with SAP technologies, for about 20 years or so, i can see HANA playing the role of rocksDB, levelDB, or couchDB. SAP are also very interested in making their cloud more prominent as all their new product offerings have the mandatory cloud component.

      obviously, they are also an “IT incumbent”, having been spawned from IBM just like Microsoft and Oracle indirectly also have, and very present in the largest enterprises of the world.

      there’s the risk they will want to protect their installed base before venturing into something as rapidly growing as blockchain has, but they all really have a choice?

      thx, greg

      1. says:

        Yes they do. We have started to see this with companies like Airbus dumping for Workday. Not directly relevant but the cloud equivalent fo ‘tip of the spear.’ There are way too many companies doing fantastic things out there and to me, SAP seems defensive rather than owning breakthrough innovations. And you are right – this is about defending the existing turf.

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