A conversation with Christian Klein co-CEO SAP

On this occasion, my topic list was limited to a single but far-reaching item: the SAP ecosystem and, in particular, the partner network and communities. Understandably, Klein had a broader list, including touching upon the COVID-19 issue. 

SAP canceled all global in-person events through March, but he expects SAPPHIRENow to go ahead in May. Even so, Klein says the company is watching the situation on a day to day basis and responding accordingly. It's the sensible thing to do. 

Klein then talked about how the latest re-organization has progressed. Drawing on his experience at SuccessFactors, Klein said: 

We have to prove positive customer outcomes and you can't have shelfware in the cloud world. You can't wait two out of a three year contract to discover the customer isn't using the software or isn't getting value. We now incentivize 20% of the compensation not just in sales people but development. We also had to realign how we are organized so that we remove as many overlaps as possible but still ensure we have the right people meeting the appropriate people inside the customer organization at the right time.

Getting the people onside has never been easy at SAP. Klein acknowledged that challenge but also noted the importance of ensuring that deep expertise, especially in the vertical markets, is not lost along the way. It is a tough balancing act, and ensuring the skills are kept in place has not always been SAP's priority. That is changing with the company bringing in specialists across entire processes rather than restricting themselves to single solutions. Speaking of overlaps, I wondered how SAP is getting on with the product suite. 

This was very disruptive internally but it is again something we have to do. Customers don't want to talk about products, they want to talk for example about procure to pay. We've brought the Ariba and procurement teams togother. We want to deliver one procurement solution, no matter if you do direct assets based buying or indirect. We moved CPQ configure price quote into the core because the quote to cash has to work out of the box. We had certain other overlaps between Fieldglass and SuccessFactors. We've sorted those out. In training we got overlaps between engineering and product management out of the way. Analytics is the same. There is no point in betting on three horses when in reality people are looking at the same thing. But yes, there is a way to go. 

Turning to my ecosystem and community topic, Klein said that the company recognizes it cannot do everything itself and that partners continue to be an essential part of their world. 

If you are serious about public cloud - and we are - then you have to be a lot more agile and no vendor can do that alone. It's not possible to provide everything the customer wants. But then as we make the case for innovation, we ask customers to look at the customizations in their 10, 20 year old code and ask whether those are really necessary today. As I am talking to customers I am looking to see what is already there in the core. But to your point, (operationalizing) in the cloud is extremely important and we know it is very different from the on-premise world. We need the tooling partners for sure, the same as we need the hyperscalers. 

Klein's acknowledgment of the importance of the partner ecosystem is welcome, but it has to come with a different business model that doesn't continue the 'catalog' approach of the past. I can see many obstacles to this, not least the stance that legal has traditionally taken that often leaves prospective partners viewing the process as one that has the same feel as wading through treacle and existing partners feeling like they are little more than a catalog line item. 

On community, I got the impression this is still very much a work in progress. I explained the way I have seen competitors' communities working, which is very different from the way SAP has gone, focusing more on the technical elements than dealing with the business community. At the same time though, SAP's SCN is an example where there are people who, while technical, understand the essential elements that make up a functional community, I expect to hear more about this in the coming months. When I mentioned the onging issue of customers not getting much requested enhancements for SuccessFactors, Klein could say little more than acknowledging  the need to fix the problem. 

During our conversation, Klein talked extensively about sustainability noting that sustainability was a top of mind topic at Davos, 

I'm personally convinced that the consumers of tomorrow will not only look at the quality of the product and at the price, they will also look at how sustainable is a company. So we have now a project called Climate 21 and we are implementing another currency in our system where we can measure the carbon footprint in a standard way because there is no standard. When you think about it in the digital transformation so far, when we talked about your business models, we talked about automation. We talk about how can we help them to become more productive with AI. But we never talked about, how to also become a more sustainable company, sustainable and profitable. Because if you are sustainable but not profitable anymore, it's probably also not going to work. And what we feel is this could be also key differentiator for us in the ERP S/4HANA supply chain procurement world.

It's an exciting idea, and one that sustainability experts believe is needed. The question remains - will customers buy into the plan?

As we ended the conversation, Klein turned to discuss what he wants to show at SAPPHIRE. In my view, his and Morgan's honeymoon period will be over. While it is clear that he, in particular, has made a good impression with DSAG and other user communities, the broader customer groups want to hear about progress. 

We are working on that for sure. We have a strong core, but now we are going into the verticals. This is for me an investment area. I want to present roadmaps customers can consume. Then clearly, I want to talk around the Climate 21 topic and of course the costs of getting S/4HANA projects done. 

My take

Much of our conversation centered around topics that have a future flavor to them. There's a lot to do and not a lot of time in wihch to get things done if SAP is to be competitive in the cloud marketplace. But then you don't turn an ocean-going cruise liner so quickly while at the same time steaming full speed ahead. On reflection, I see a lot of sense in what Klein is trying to achieve. SAP will need the help of subject matter experts, some of whom I know SAP already has, but who are not necessarily in the parts of the organization where they can have  the greatest impact.

Customers need to be brought forward, but the evidence to date is that will happen at the customers' pace, not one dictated to by SAP. That is a double-edged sword because customers will struggle to take advantage of SAP innovations unless they modernize. On the other hand, there are plenty of customers who believe that they have yet to get all the value out of their existing SAP estate. Others want to hold the line at ECC and innovate around the edge with more modern technologies that are already in the market. Some partners offer all three perspectives. 

One question we did not touch upon as it is too early - will the novel Coronavirus outbreak impact the sales cycle? We don't know the answer, but anticipate some customers will use this as a reason for holding back on investment.