Can the upstarts at Electric Last Mile win the urban delivery vehicle market? An SAP RISE use case

Profile picture for user jreed By Jon Reed May 6, 2021 Audio mode
Summary:
We've heard enough marketing fanfare on SAP RISE - time to bear down on the customer use cases. Here's why the team at Electric Last Mile opted for SAP RISE on Microsoft Azure, and what lies ahead for this automotive industry upstart.

SAP Rise - ELMS EV vehicle
(ELMS van in action - via ElectricLastMile.com)

Give the SAP community this: they are never short on strong opinions, including where SAP is falling short.

My last SAP Rise piece generated the expected vigorous feedback (SAP RISE in review - CEO Christian Klein responds to the "one handshake" issue, and SAP user groups air out their top question).

You can't sort the world in one blog post - I left issues unresolved. I believe the underplayed role of smaller SIs in SAP RISE deserves more airtime, as does implementation quality.

How are SAP's SIs accountable for successful SAP RISE results, given SIs are on a separate RISE contract? On that question, SAP CEO Christian Klein challenged me: take a closer look at SAP's progress on customer success.

Electric Last Mile - ramping up for an "urban delivery vehicles" niche

Klein had more to say, and I'll get back to that. But the buck stops with customer use cases. SAP is vocal about the enthusiasm of early RISE customers. So, let's find out. First up: an interview with Electric Last Mile. There is a misconception that SAP RISE applies only to existing SAP ERP customers, looking for a better move to S/4. Electric Last Mile (ELMS for short), represents a different avenue into SAP RISE. They are a new - and rapidly growing - SAP S/4HANA customer.

ELMS plays in the electric vehicle space, a chaotic and promising area jammed with startups, venture capitalists, and contested niches. ELMS seems to have found a good market: urban delivery vehicles (pictured above, right). But as ELMS CEO and Co-Founder James Taylor explained to me, arriving at that niche was not without drama. Like many VC-funded startups, ELMS has a backstory of twists, turns, and pivots.

ELMS is gearing up to hit the market with its signature EV (electric vehicle). What is the van's purpose? Enabling "last mile solutions," from e-commerce companies to customers. Here's the ELMS vehicle pitch:

Our new Urban Delivery Vehicles have a class-leading 170 cubic feet of cargo capacity, a range of 150 miles and are capable of fully charging in as little as two hours.

Why is there momentum now? As Taylor told me, multiple trends are converging: 

We all think this industry is about to hit a huge inflection point. The technology is coming due. I've been doing this for ten years in various startups. There were a lot of issues: battery pricing was too expensive; the  technology was not ready. The economics now become much, much better as compared to traditional vehicles. It's not so much a premium - or maybe a wash.

Then there is the COVID e-commerce factor. Taylor continues:

Our particular space, e-commerce, was already on a rapid rise pre-COVID. Now, with all of us adapting to a brand new lifestyle with COVID, it's increased even more drastically. The delivery business itself has a huge amount of stress on it, for the deliverers to find hardware, and the A-to-B transportation for all their goods.

Enter ELMS:

If you consider these macro trends, with electric coming throughout the whole auto industry; e-commerce is coming at us like a tsunami - where those can crossover is where we picked up in this space.

Time to claim the urban delivery vehicle niche: 

We're initially launching in the class one area of very small vans. It's a great market opportunity, a big white space for us to get into as a new vehicle company. We're not going into the storm where there's a lot of competition, and a lot of other startups.

Initially, ELMS will have a plant in Indiana, and a home base in Troy, Michigan. Within weeks, they expect to be listed as a public company, under the ticker ELMS.

S/4 HANA and... a startup?

And how does S/4HANA fit into a startup? Taylor:

When you're trying to stand up a car company, it sounds good. But to be honest, behind the scenes, there are a million moving parts. It's a very, very complex business. And so as a startup company CEO, you want to try to minimize that challenge, and reduce that list.

Can I find large partners that take a big piece of that complexity, and reduce my list from a few million to a few hundred? System solutions are obviously a big advantage in that regard, and then finding companies that can take care of that. We have several examples of this on the vehicle side, where we go to one company, and buy as much of the vehicle as we can at once.

So, in this area, going to SAP gave us a big advantage. We have one complete turnkey solution, let's say, that covers all aspects of the business, and moves me well down the road. SAP takes care of one enormous part of the putting the car company together, and moves it from complexity into just really execution and blocking and tackling, as the team at SAP and our team goes about putting that in place.

Why SAP RISE?

And tell us about SAP RISE?

It's smart by SAP to offer this as a complete soup-to-nuts menu. You can have the whole buffet, or you can go in and take the pieces that you need to. What I liked about the SAP solution was, again, it could shrink itself, from a cost standpoint, and a manageable size to adapt to us as a startup company, being small and not having huge budgets. But then it also can expand - I don't know if infinitely is the right word - but as big as it needs to be to run as big a company as we could ever imagine to become. So that scalability, and the ease of scaling it up was very important.

SAP's experience in automotive was another factor:

Some systems providers in these areas have great ideas, but they've never actually applied them to the car business. And so you end up with a lot of issues and teach modes, and endless meetings of altering it to make it fit your needs.

And did Taylor evaluate different hyperscalers? No - he stuck with his keep-it-simple mantra, and went with SAP on Azure.

We start out with the simplest possible approach. We don't take on too many things first, but we have the flexibility to work backwards. So having a flexible enough contract that if we want to later unplug something and do it ourselves, that possibility is there. But the flip side is that it's a fully integrated solution from the get-go. So at this point in time, we're relying on SAP's cloud services, as opposed to us inventing our own.

And what about the SI? In this case, Dickinson and Associates is the partner. Erik Grossman, Director, Communications and Investor Relations with ELMS, added color: 

The beauty of SAP RISE is that it's a one stop shop, so Azure is included with this subscription. SAP will manage all that is needed from the Microsoft side - that takes the burden off of us. That's our phase one implementation, which is: help us set the fundamentals to become a public company, all the requirements from reporting and auditing the transactions, to information security.

Jumping through the hoops to a public automotive company requires savvy partners. Grossman:

Not only is SAP the gold standard for the OEM automotive business, but also as a [soon-to-be] public company, it's so critical that the infrastructure is in place. For us, it is infrastructure as a service.

Grossman points out: it's a big advantage not to have legacy systems, technical debt, and migration chores.

We do have a clean sheet in many ways. So we can clearly articulate and define the end state that we want with SAP, and we can we can build towards that.

The wrap - fleshing out the SAP RISE use cases

ELMS isn't looking to do an old school automotive implementation. Yes, ELMS is betting heavily on the much-bandied "intelligent enterprise." As Grossman says:

For us, it's "How do we create an entire digital enterprise, an intelligent enterprise." That's not just the vehicle level; it's all the way back into our operations to produce and get the vehicles out the back door to the customers. That's everything from our logistics, our quality, our production, engineering, all of that, so that everything we do is connected.

As of this writing, the ELMS S/4HANA implementation is just six weeks in. I generally only write about projects after they have achieved a post-go-live result. However, exceptions are warranted. In this case, understanding SAP RISE use cases trumps other considerations. But it will be important to check back into this project after go-live, and see how well it's working - especially when you consider ELMS' growth ambitions. It's worth noting that the ELMS team isn't new to large-scale ERP. Their team has depth managing ERP landscapes, so they aren't going into this with new-to-ERP naivete.

The ELMS urban delivery vehicle is available for pre-order; Taylor says demand has been brisk - with prospects eager to learn more about the volume, time, and costs options of their orders.  As for that pending public stock listing, details are in this December, 2020 press release: EV Company Electric Last Mile to List on Nasdaq Through Merger With Forum Merger III Corporation. For now, Taylor has that startup CEO optimism:

None of the legacy manufacturers are going to be producing these small electric vans. So we're hoping as word gets out, we''ll get even more interest in these orders that you mentioned.

This story fleshes out scenarios for SAP RISE some might not expect. But that leaves open the need to examine the use of RISE by SAP customers with existing SAP ERP footprints. That's a different challenge. I'm hopeful that will be my next SAP customer story.

I've indicated to SAP it would be useful to see a public overview of different types of SAP RISE use cases, from net new customers to "moving to S/4HANA customers," to "not ready to move to S/4, but ready to look at hyperscaler options." SAP RISE has approaches for all of those. Seeing them laid out will allow for a more discerning evaluation.

SAP does have a public "Transformation on Your Own Terms" SAP RISE  slide deck, but it lacks the detail on each scenario. We'll do our best to delineate them; hopefully SAP will have more online documentation we can point to on this topic soon. SAP has provided me with more shareable information on the SAP RISE "equivalent use pricing," one of the strengths of the offering, which I believe SAP has underplayed. I'll plan on sharing that in my next piece - when I can provide more context.