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The cloud questions facing SAP at Sapphire Now

Jon Reed Profile picture for user jreed May 27, 2014
In less than a week, SAP has a huge opportunity to clarify its cloud strategy at the ASUG/Sapphire Now annual conference. It will not be easy.

After an epic research binge, here's the cloud questions I believe SAP must face.

bill mcdermott
In less than a week, SAP has a huge opportunity to clarify its cloud strategy at the ASUG/Sapphire Now annual conference. It will not be easy.

The departure of Vishal Sikka and the appointment of Bill McDermott as sole CEO has provoked another wave of SAP 'reorgs,' as well as rounds of layoffs. McDermott’s ascension has in turn fueled speculation about SAP’s focus on apps versus platforms.

With cloud chief Shawn Price’s exit from SAP soon after Sikka’s departure, questions about SAP’s cloud leadership resurfaced (those who ‘own' cloud at SAP have not lasted long in that role – 3 changes in the last 12 months by my count).

These hectic changes have led some pundits to assume that SAP is either not committed to cloud, or incapable of avoiding self-inflicted cloud chaos.

SAP has countered with aggressive messaging about being 'THE cloud company, powered by HANA,' talking points reinforced by McDermott in the wake of Sikka’s departure.

Sapphire Now is SAP’s chance to move beyond cloud bromides and provide a sensible view forward. With the ASUG co-location, SAP will be under pressure to not only articulate why the SAP cloud matters, but to speak to customers about on-the-ground realities, amidst tight margins and, in some cases, massive industry upheavals.

From the customer angle, that means addressing pesky matters of product support, coherent roadmaps, and ease of integration – none of which magically go away when the word ‘cloud’ is invoked. For this audience, 'We are the leading cloud company' proclamations will have all the rhetorical effectiveness of a soggy bowl of noodles.

As McDermott wrote in his technology taxonomy piece, customers don’t speak buzzword - they speak about pressing business challenges.

With that in mind, I polled SAP cloud experts and put my own questions through an epic research binge. I queried SAP to get as many points of clarification as I could before presstime. The end result? My list of the top cloud questions SAP needs to tackle in Orlando next week.

Who owns SAP’s cloud strategy across products?

At the highest level, this question is at least partially answered, with SAP confirming that Shawn Price will not be replaced. That means, technically speaking, Rob Enslin ultimately owns cloud.

As SAP sees it, there should not be a separate line of cloud leadership in the organization. Example: on the HCM side, Mike Ettling owns all of HCM, on-premise and cloud, and reports into Enslin.

When you drill further into products, the plot thickens. Not every cloud product has a confirmed leader at this point. I was able to confirm Chakib Bouhdary now heads Ariba, also reporting into Rob Enslin. Sameer Patel leads collaboration (Jam), on-premise and cloud, ultimately reporting into Bernd Leukert.

Those are the confirms. I’m also pretty sure Steve Winters now has cloud CRM, reporting into Enslin. It looks like new SAP CIO Helen Arnold will take charge of the HANA Enterprise Cloud (HEC), while Bjorn Goerke would (likely) take up the lead for the HANA Cloud Platform (HCP). Some of these roles are subject to change as responsibilities are clarified. Shocker: at presstime, I was unable to confirm a lead for Business ByDesign, SAP’s still-alive SME/subsidiary cloud ERP solution.

How committed is SAP to cloud?

Some will need to hear convincing words from SAP on this topic. Others believe SAP’s commitment to cloud is already proven by its sizable cloud acquisitions (I count myself in this latter camp). From the latter angle, it’s not about commitment – it’s about whether the implications of cloud are embraced and executed upon.

Transitioning to a cloud software company is hardly easy when all the pricing, design, and architectural ramifications are factored in. Putting the Business Suite on the HANA Enterprise Cloud (and selling it on a subscription basis) is not trivial, but from a cloud perspective, it's just a tiptoe into the water. Some would argue that HANA on HEC is a hosted solution, and not ‘cloud’ whatsoever.

Do customers care?

Not all customers are focused on cloud. But they want to know SAP understands the business potential of cloud (and other technical innovations, from analytics to mobile to process automation). If SAP avoids the keynote pitfall of techno chest-thumping in favor of industry success stories, I expect customers will welcome it.

Has SAP’s line of business cloud strategy shifted to the suite?

The last clear articulation of SAP’s line of business cloud strategy for the large enterprise focused on “my people” (SuccessFactors), “my suppliers” (Ariba), “my customers” (Cloud for Customers), and “my money”, with the bulk of SAP’s cloud revenues coming from SuccessFactors and Ariba. Will this presentation be shifted at Sapphire Now?

Especially with McDermott’s recent assertions that 'the suite always wins,' will that impact how SAP pursues its line of business cloud strategy? Does SAP plan to become a suite cloud player in the large enterprise? If so, how?

What’s next for Cloud Financials in the large enterprise?

The latest round of ByDesign changes has impacted SAP’s Cloud for Financials play. SAP has announced that ByDesign will continue only as a subsidiary and SME cloud ERP offering. That means Cloud for Financials based on ByDesign will not be further developed.

I posed a question to SAP about this on Dick Hirsch’s blog in February, and was told that an answer was coming in April. I suspect we’ll hear something at Sapphire Now. One possibility is that SAP’s 'Smart Financials' product, the new financials solution running on HANA, will be moved to the HANA Cloud Platform, and thus provide an answer for SAP’s cloud financials play.

I’m in the dark on this one, but given Workday’s aggressive pursuit of LOB Financials, as well as the increasing success of FinancialForce on the platform, it seems unlikely SAP would leave Cloud Financials up in the air.

Is SAP choosing apps over platform?

Many view the rise of McDermott as a referendum on Sikka’s platform strategy. Sikka committed to moving all of SAP’s cloud apps onto the HANA Cloud Platform (including SuccessFactors, Ariba and Business ByDesign). Is that still a plan? A priority?

Currently, the ByDesign, HCP, HEC, Ariba and SuccessFactors cloud stacks are led by different people in different data centers, and, in many cases, on different development platforms. This is where unification of cloud apps on a single platform (HCP) could simplify things for SAP and customer alike. But wait - that’s a platform discussion.

I’ve been told that 'customers don’t care about platforms, they care about apps.' I see it differently. I see customers as being uninterested in technical and implementation complexity, period. Apps can deliver functionality in easy to consume ways, but so can platforms. With so many SAP cloud products, the ability to put them all on one platform could be a potent selling point.

When will SuccessFactors and Ariba be generally available on HANA?

Should we read anything into the delays/challenges SAP has had putting its acquired cloud products on HANA?  Delays with ambitious projects are not unheard of – SAP’s customers and partners would like to learn about what SAP’s challenges are here, and how they are being overcome (example: is the issue more about performance and business case, or is it a grunt coding mission?).

One yucky consequence of not explaining the issues openly: analysts will likely return to another round of speculation that HANA is too proprietary, or doesn’t (easily) support multi-tenant SaaS. SAP got marketing fuel out of these SaaS-on-HANA announcements, but it also raised the stakes.

What is SAP doing to accelerate support innovation?

For the SaaS leaders, customer experience (including the support experience) is a big part of how they win business. SAP support issues reached a new level of visibility in a recent post by SAP Mentor Jelena Perfiljeva, with SAP’s own support team responding on the extensive comment thread. There have been subsequent backchannel discussions but, as far as I know, no official public response yet.

Jarret Pazahanick, SuccessFactors consultant, has talked extensively with SAP HCM customers on this topic. As he wrote to me, 'SuccessFactors cloud support is a major area of concern among every customer than I speak to. SAP recently announced it was rolling out a single support system for SAP cloud and OnPremise, but will this fix the foundational issues that have plagued SAP and SuccessFactors customers for years? Given the importance of customer satisfaction with SaaS based technologies and the subscription model, I will be watching this closely.'

Will SAP unveil a cloud transition program?

Some on-premise competitors have launched cloud migration programs intended to ease the process of on-premise to cloud. Will SAP follow? And: has the potential of HANA cloud apps been relayed as a differentiator? As John Appleby wrote to me, “How does SAP plan to use the true power of HANA for its cloud apps and what are the use cases planned, for example a Facebook style procurement graph powered by HANA?'

Is the cloud model now embedded into the salesforce?

SAP has consolidated cloud into its main business from a sales perspective. Will that change how SAP is sold, or will account reps emphasize the on-premise solutions they've  been selling for 30 years?

Bonus question: how clear are the differences between HEC and HCP?

This may be too 'techy' a question for Sapphire Now, but there is confusion-a-plenty on where the HEC ends and the HCP begins. Example: some smaller SAP cloud apps run on the HEC side, not on HCP (e.g. Fraud Management, Customer Value Intelligence). Without concerted effort, the distinctions between the two are going to fluster customers and observers alike. This will need clarification by D-Code in the fall.


  • SAP has a big chance to show it can talk cloud in a way that resonates. Sikka was a champion for the open innovation cloud ventures thrive on, but McDermott is a quick study. In our first blogger conversation with McDemott after Sikka's exit, McDermott advocated for the SAP Startup Program and pledged to listen to customers and address their concerns, including paying extra for modern UIs.
  • Inside of SAP, there are plenty of good cloud stories. SuccessFactors leaders had nothing to say about cloud platforms when I first interacted with them; now they are early adopters of extending functionality on the HANA Cloud Platform, and forging ahead with OData APIs. Ariba could get even more juice from the Fieldglass acquisition, and Jam is advancing its cause. With gutsy investment, HCP could become the best thing SAP has done outside of the Business Suite.
  • It’s when you ask SAP to put these pieces together into an overall story that satisfying answers have been hard to come by.
  • Can SAP’s UI renewal be a factor, driving cloud innovation into one Fiori-like UX umbrella?

If SAP can use cloud as a motivator for making their users’ lives better, no matter what their interface or product, that might stick. As for the cloud leadership question, the proof will be in the results. Let’s see what next week holds.

Special thanks to contributors to my background research – you know who you are, but in particular, John Appleby, Dick Hirsch, Luke Marson and Jarret Pazahanick.

Image credit: Tom Raftery

Disclosure: SAP is a diginomica partner as of this writing. Den Howlett and I will be attending Sapphire Now, filming a range of customers and spokespeople on conference topics. SAP is meeting most of our T&E for that event.

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