S/4HANA cloud customers emerge - a video review and analysis

SAP answered quite a few questions at Sapphire Now. Our diginomica Sapphire Now coverage gets into the reactions to their indirect access announcements, and what SAP's next-gen platform, dubbed "Leonardo," means for customers. Yes, there are plenty more questions still to be answered - but there is certainly new info to chew on.

That's less true of the S/4HANA (public) cloud. In our traditional Sapphire Now in review podcast, Dick Hirsch and I debated whether S/4HANA cloud took the back seat at Sapphire Now - and why. I argued it was downplayed. I believe there are very specific reasons for that, which I'll get into.

But SAP did advance their S/4HANA cloud pursuits in one important way: they made several customers available to media. Two of them, Sovanta and Dickinson + Associates, made their way to the diginomica video couch. Here's what we learned - including a surprise involving the SAP Cloud Platform, and the Google Cloud Platform as well.

Dickinson + Associates - adapting to a changing services industry

First up was Donald Dickinson, President of Dickinson + Associates. Founded in 1988, Dickinson + Associates is a management consulting firm and SAP Gold Partner. They implement a range of SAP products, from the Business Suite to analytics to mobility and All-in-One. Our video story picks up with Dickinson's decision to implement S/4HANA internally. Dickinson told me that he'd lost out on some deals because he couldn't offer the right SAP cloud solution:

We've been an SAP reseller in the on-premise space for awhile, and we did see there were times where there wasn't that cloud offering that offered the prescriptive solution, quick time to value, eliminating the hardware cost, and really gave a foundation for companies to get started with all the benefits and security that you get with cloud. It didn't exist a few years ago. And there were times where SAP was not winning.

If you're going to sell cloud, you should probably walk the walk. Dickinson found that the S/4HANA Cloud's Professional Services Cloud lined up well with their needs.

Internally for Dickinson, we had lived on a number of legacy systems, and we had never made the jump to say, "Let's take on something like a cloud product." And it was the perfect time because of what S/4HANA offered with the professional services version.

Dickinson + Associates are right on the verge of their go-live to S/4HANA Cloud, version 1705 - they flip the switch in June. From the configuration and testing, Dickinson can already see a new level of visibility:

We think S/4HANA is going to add a lot of insights for customer project profitability. We already see in what we've done in testing, the resource scheduling we're gonna be able to get. And really looking at truly real-time cost and budget burn on projects. In a services business, that's where your money is made, both in developing new products for customers as well as managing the services projects we do for them. And so it's going to give us great insights.

That's a vast improvement over the current processes, which include spreadsheets and piecing data together:

Our current accounting systems are not really at the project level. We never invested in those, because historically we were able to manage, but now...

By "now", Dickinson isn't just referring to the company's growth. The service industry is changing rapidly:

If I look at our business now versus ten years ago, we're in five different businesses now. It's not just a matter of providing resources onto projects. We're running projects. Some of them are fixed price. Some are time and materials.

SAP Cloud Platform - differentiating with extensibility

The next thing Dickinson said caught my ear:

We're developing HANA Cloud Platform apps, which are products, and we're selling software. We're providing SAP maintenance. Those are a lot of different things to keep track of, and we needed something far better than what we had.

Too often, modern SaaS is positioned as inflexible by necessity. That does a disservice to what an extensible app platform can do. With the SAP Cloud Platform (SCP), SAP has a chance to offer a high level of extensibility on S/4HANA, but so far, I'd heard little to validate it was actually happening. But Dickinson has tied this into his business model:

That's one of the things that differentiates S/4HANA Cloud. Because it's built on S/4HANA, and it's on the SAP Cloud Platform, and there's the open API environment, we can develop applications that will either connect it to some other SaaS system or some other on-premise system.

They can also build custom apps for customers to help them differentiate beyond the S/4HANA's configuration options:

We can also develop custom apps, maybe to handle something that's not within the core of S/4HANA. Like you said, the whole benefit is quick time to value. That, by default, means you're going to fit to standard. However, businesses have differentiators.

Dickinson referred to an S/4HANA cloud customer in the restaurant retail business:

They don't differentiate their business based on how they run internal financials. They differentiate their business based on how they operate at the store level... There were unique issues there that could become possible, especially with SAP's extensibility concept, around the core common processes that are S/4HANA Cloud.

What about building an app? Dickson used the example of a customer that used to have to manage shipping for phone orders on the fly, scrambling to look up UPS and FedEx options. They built an SCP app that takes the order info, pulls the info from SAP, gives an order status, and gives the salesperson the shipping options to help their customers decide in real-time:

It goes out and does all that through the APIs. It's all seamless, and all they know is they're logging into an app that does that. And it's all connected.

Dickinson + Associates builds these extensions and apps with an internal development team. He said it wasn't hard to keep the apps current because "everything's pretty standard because of the APIs that exist."

Hot on the heels of SAP's Google Cloud Platform partnership announcements, it was interesting to chat with Sovanta, an S/4HANA Cloud customer running on the Google Cloud Platform - certainly one of the first in the world to do so. For Sovanta, a Germany-based SAP reseller, it was about choosing a cloud offering that could support their internal growth (from 2 employees to 150 in seven years).

Sovanta moves to S/4HANA Cloud - on the Google Cloud Platform

During his studio drop-by, Sovanta's Michael Kern told us that Sovanta started with S/4HANA on-premise. However it was always their intention to be on the cloud. At Google Next, they learned of the opportunity to run S/4HANA on the Google Cloud Platform. Four weeks later, they were live - "an amazing project," says Kern.

Kern's S/4HANA results mirrored those of Dickinson's. Visibility and real-time financial management stood out:

Before we made the decision to go on SAP S/4HANA, we had been working with an external tech consultancy. Whenever we needed something, we had to ask, we had to wait before we got the information. That was one of the key benefits that we got from moving on S/4HANA. Now, we have all the information that we need available at our fingertips. For us this is really important because we need a solid operation of our core financial processes.

I asked Kern if he was seeing the same value with the SAP Cloud Platform so far:

The SAP Cloud Platform plays a big role for our customers. We help our customers using the SAP Cloud Platform to integrate on-premise and cloud systems. For example, we help them extend their systems and have had a lot of good experience with that... You can innovate much quicker than before, and therefore the SAP cloud platform is a very good foundation for this.

My take

When S/4HANA Cloud became a separate division this fall and Darren Roos took over, I wrote about my interview with Roos and his plans for the year (SAP ramps up S/4HANA public cloud division - exclusive with new chief Darren Roos). At the time, the number of S/4HANA Cloud customers and go-lives was modest.

I was hoping to get an update on those numbers and plans from Roos at Sapphire Now, but I was unable to secure an appointment (my schedule was bonkers, so I might have been part of the problem). Usually the S/4 Cloud team is easy to find at the communications reception - not the case this year. I did not see much media coverage on this team, nor any numbers reported - though I've heard a few say that "several hundred projects are underway."

This lends a bit of support to my view that S/4HANA Cloud was intentionally downplayed at this Sapphire Now. Roos was very clear that the ramp-up he envisioned would take a year, with a focus on getting processes right in 2017, in anticipation of scale. Add in SAP's need to demonstrate their IoT/AI plans with Leonardo, and it's easy to see why the keynotes had a different emphasis.

That doesn't mean SAP isn't serious about the S/4HANA Cloud. Cynics might scoff at the fact that the first customers on the couch were SAP partners, but SAP has been clear all along that the Professional Services edition of S/4 HANA Cloud would fuel early adoption.

The emphasis on extending via SCP bodes well for S/4HANA Cloud, which could wind up being one of the most flexible SaaS ERP solutions on the market. I know from talking to the few S/4HANA Cloud customers I spoke with at the show that SAP has a lot of work to do expanding S/4HANA APIs, but they also see progress with each version release.

I would expect S/4HANA Cloud to have a bigger keynote moment at SAP TechEd in the fall. During that timeframe, it will be important to get the full update and assess progress.

See our full Sapphire Now video playlist here.

End note: this analysis is not taking into account the S/4HANA private cloud deployments, which are very different animals that allow for customers to keep all their prior SAP customizations. Based on what I've been told in the past, about half the overall S/4HANA customer numbers SAP cites are private cloud deployments (SAP cited 5,800 S/4HANA customers at Sapphire Now, though I have not been able to confirm the number of go-lives). However I consider those "hosted" not SaaS for this discussion.