Critiquing the SAP 2021 business roadmap

Earlier today, Thomas Sauerresig, Executive Board of SAP for SAP Product Engineering used LinkedIn to point at a story attributed to Jan Gilg, President SAP S/4HANA at SAP that appeared on Forbes BrandVoice entitled: 2021 Tech Predictions For A New Year That Can’t Come Fast Enough. Long time diginomica readers will know that we prefer unpredictions but that fact this story was posted on BrandVoice tells you all you need to know about how SAP used that media as a way of telegraphing its business roadmap for the year. Let's examine what Gilg says as this provides strong clues for the informed buyer considering its enterprise software strategy and the place SAP occupies. 

Supply chains stay local

Using the argument that fragility in the global supply chain forces companies to think more local sounds great in theory but reconfiguring supply chain both physically and digitally is far from trivial. The subliminal message is that with its deep experience, SAP is here to help but you have to ask - are there alternatives?

Cloud-based services overtake on-premise services

This can hardly be termed a prediction, and by its own admission in earnings calls, SAP's on-premises business is drifting away. But - and here's the biggie - SAP has yet to get its cloud act together. We expect announcements shortly, likely just after Q4 FY2020 earnings that will set out the firm's vision of how they see cloud models. Such clarity is vital given that SAP has tried, and so far largely failed, to provide a position from which customers can make strategic choices around both infrastructure and platform. 

Of particular note is the stated rationale behind Gilg's position:

From a technical perspective, improved accessibility of data is one of cloud data’s largest benefits, as it supports horizontally integrated solutions. Once in the cloud, organizations gain a simpler access route to content and information, a more consistent application with fewer operators, and greater transparency, improvements especially important in work-from-home environments. Some critical apps will demand edge services to maintain performance, but most will transition to cloud-based services to support virtual work, online commerce, and other pandemic-created facts of life. 

Does that jibe with what customers are looking for? Well yes, except that Gilg's characterization of a 'simpler access route' doesn't necessarily mean it is simple to use that same data in hybrid and multiple database formats. Far from it. As for online commerce, we know SAP has nailed its colors to the Emarsys mast so expect some talk on that front, especially given that SAP's CX guy Estaban Kolsky has been teasing the LinkedIn crowd with a promise to reveal SAP's next steps in this area. Kolsky is not only well respected in his field but also known for his sharp elbows when it comes to critiquing vendor positioning. We shall see just how influential he's been in getting SAP to both position and develop something the world wants. 

Programs that show incremental value will receive the green light 

Gilg says:

Organizations will fast track short-term projects that show incremental value to the front of their roadmaps. The spotlight will be on data as more organizations begin treating it as an asset, exploiting it through analytics or ever maturing AI capabilities, and making it sharable across the enterprise.  

His first statement is correct. Inquiries from customers and user groups firmly indicate that 12-week projects are likely to be OK but they must come with a clear cost/benefit and a frugal price tag. Incremental? I'm not convinced. If anything, we see those projects as designed to plug holes or solve specific problems. If that's incremental then fine.

On the data side, this is a clear play for SAC or SAP Analytics Cloud but customers are already looking at alternatives where communications services are baked in - think PowerBI and 365 from Microsoft as your starting point with a lashing of Zoom. 

2021 projects will start with a focus of bringing together internal data—but expanding to leverage external data by year close

This is playing catch up. Analysts have long asked SAP (and other vendors) to show how they consume both internal and external data sources as a way of building a complete picture upon which decisions can be taken and upon which strategy execution can be measured.

SAP has a special problem in that its HANA database is aimed squarely at SAP systems. Why is that a problem? Put simply, while SAP remains one of the most expensive pieces of the applications puzzle, it is a shrinking part of the overall business applications landscape. How about Snowflake?

Of greater concern is that this section conflates data with automation and AI. Those are different problems and I'm not sure SAP has fully understood that you have to solve problems in piece parts. Gilg says:

These projects will be around process automation and customer insight enabled by AI.

OK - that might be some sort of endstate but you have to look at the componentry to get a sense of the scale needed for such projects.

2021 is the year of the customer

The most obvious and admittedly cynical comment has to be: Oh really? So all those past 'year of the customer' statements really were BS. Thanks for that. More practically, you could collapse this back into the cloud-based services critique. Gilg says that:

Customer experience will drive all business decisions as companies push to make every portion of the customer journey seamless. The old distinction between front office and back office will go away.

No it won't. I can't think of an industry where we are remotely close to 'seamless' anything. Colleagues have rants, case studies, position analysis included in over 4.600 of our stories covering the CX issue. They all show pieces of the puzzle but none of them would claim the kind of endstate Gilg suggests. Phil Wainewright has talked about XaaS and the frictionless enterprise for years and while he is optimistic, it's anything but a done deal. Elsewhere, HfS has aggressively pushed the OneOffice roadmap and mantra but they see this as a multi-year project. 

For myself, I see far too many moving parts and gaps in the customer journey for Gilg's statements to be anything other than aspirational. 2021 is not a year to be aspirational about anything but about getting things done as never before. 2020 was the easy part. Spinning up Zoom instance and organizing virtual events was hardly challenging technically but the far bigger problems associated with doing business are far from solved. Simply talking about a collapse between front and back office may sound desirable but of itself it's 'meh.' 

ERP systems will evolve to manage people, money, materials AND natural resources

Gilg says these systems will be far more modular. I hope he's right but I'd like to see the detail explaining both what that means and how it works. Gilg also uses this element to make the sustainability play, a topic I know is close to CEO Christian Klein's heart. It's a nice idea and one that I personally hope gains traction. However, there are important cultural hurdles to overcome and a requirement to rethink what business means beyond 2021. It's a topic to which I will return in a separate story. Right now, the recurring theme in many industries is about survival. Where is SAP's agenda there? 

Every day will be a cash management day

I'm pleased to hear SAP say this although I sense it's a tad late in the day. SAP has to understand that their cash management solutions are not the only ones available and that they should actively consider partnering. One curiosity in this element is Gilg's statement that:

With so many unknowns in our future, cash management will elbow out past priorities such as automation, optimization, and cost reduction. Those areas will remain critical but take a back seat to cash management, cash flow, and liquidity.    

Isn't that contradictory to what has gone before? If not then how will SAP present the cash argument while at the same time encouraging customers to spend on 'automation, optimization and cost reduction?' I have no doubt that cash management remains top of mind but it has to be tempered with judicious spending, hence why the short-term project piece of the overall roadmap puzzle makes sense. 

My take

Despite its massive product portfolio SAP cannot be all things to all people and it knows that. While I admire Gilg's effort to lay out some of the 2021 themes, most of them have a feeling of reaction rather than pro-action set against that portfolio. The included topics are all on the C-suite agendas albeit with different emphases, depending on which industry you're looking at and the players within those industries. In my view, SAP needs to be more ambitious and expansive but without the specter of multi-year, overly complex projects. Here, I suspect the sustainability story has legs that were not apparent in 2020 but that requires a different approach to the 'its good for the planet' punchline. 

Missing from the list is a discussion about industries. Vendors that made the industry play in 2020 did extremely well as customers grappled with industry specific problems. Again, SAP knows this is an issue for its customers but in this story at least, chose to remain silent. 

Finally and perhaps adjacent to the industries story, Gilg chose not to say anything about IIoT. Again I see this as a missed opportunity but then it is perhaps a reflection of how its Leonardo project failed, requiring a reboot that's under discussion. In that context, I note that we haven't talked about Leonardo in over a year.