SAP has billed itself as a cloud company for several years. This marks the first year that cloudy talk from SAP was more convincing. That's due in no small part to the influence of SAP's acquisitions. When SAP Hybris provokes talk of "microservices" on the TechEd keynote stage, we're a long way from a monolithic ERP suite. But is that what customers on SAP ERP want to hear?
SAP user groups provide a cloud and HANA gut check
SAP has some of the most vocal user groups in enterprise software. That's a credit to SAP, though the company doesn't always relish what the user groups say in the public domain. Correction: some inside SAP welcome the transparency. But others have not let go of their inability to control external messaging. Hopefully they will let go soon; it will save them a lot of stress from the loose cannons on Twitter who mess up SAP's sentiment scores.
1. Internet of Things and indirect licensing - My colleague Derek du Preez detailed two problems vocalized by the The UK & Ireland SAP User Group, including Internet-of-Things licensing needs attention. As SAP puts billions into its IoT play, it will need to solve these questions. No customer enjoys an indirect usage/license audit. SAP should avoid these hardball tactics - if it wants customers to embrace its IoT platform. As UKISUG Chairman Philip Adams said:
I think we really do need clarity in this area. We need to understand and clearly define, what does indirect usage mean in our organisations? Understand the type of scenario where we would fall into that area, and how we could either avoid or mitigate it.
2. S/4HANA business case and migration - clarity needed - My colleague Den Howlett has been hammering SAP since the launch of S/4HANA that business cases are a weak point. As he wrote in The definitive guide to making a successful SAP S/4 HANA business case, he's finally seeing progress. But user groups still have questions.
DSAG, SAP's German-speaking user group, is never shy. At their September user group meeting, they issued a series of "demands" with a title that summarizes their view towards SAP's HANA direction: Radical thinking means more responsibility. DSAG noted S/4HANA licensing successes and a better one-time cost option as a result of dialogue with SAP.
As Derek reported in his update from the The UK & Ireland SAP User Group annual meeting, 48 percent of current SAP customers surveyed by UKISUG have no current S/4HANA plans. Some of their questions are fundamental, such as confusion over platform or licensing. S/4HANA migration questions loom large. You can't even get to business case talk without those pieces in place. Derek noted SAP's progress with migration tools. This from Adams on S/4HANA licensing:
I am pleased to say that that dialogue was healthy and constructive, and SAP clarified the position in early January. And although S/4 was being branded as a new product, it doesn’t necessarily mean a new purchase.
When SAP gets out of its "HANA is wonderful" happy bubble and into customer dialogue, good things happen.
3. On-premise customers who question SAP's cloud roadmaps -SAP user groups provide a voice for customers who are not "all-in" on cloud. SAP can get carried away in areas like HCM. where cloud is the go-forward emphasis. One example is ASUG's HR evangelist Sherryanne Meyer, who wrote a potent blog on SAP Managed Payroll, SAP's new so-called "lift and shift" hosted/cloud payroll option (Managed Payroll Vaporization to the Cloud). Jarret Pazahanick, SuccessFactors consultant, also weighed in on this hotly-debated topic. DSAG hit on this issue also, reflecting their region's priorities:
While cloud and hybrid IT landscapes are currently only planned in many organizations, ongoing support for ERP 6.0 and Business Suite 7 is high on the agenda.
Keep an eye on the S/4HANA public cloud - and ByDesign?
As I've reported, S/4HANA public cloud customer numbers are modest. In my piece with new S/4HANA cloud chief Darren Roos, he explained why the S/4HANA cloud is now its own business division, no longer under SuccessFactors.
Some are skeptical about SAP moving the S/4HANA cloud away from those who already run cloud business at scale. The skepticism doesn't matter - results do. Though Roos was cautious about committing to a customer count for 2017, SAP is determined to have a much higher adoption level of the S/4HANA cloud by next year at this time.
SAP hasn't made any secret that Workday's aggressive moves into financials, as well as the Oracle-Netsuite acquisition, are motivating factors in standing up a competitive financials/cloud ERP solution. For SAP to be taken seriously in this space, we'll need to see major progress in 2017. But that also creates openings for ByDesign.
S/4HANA and ByDesign ultimately seem destined for a Darwinian clash in the midmarket. The much-dismissed but very-much-still-alive ByDesign gained relevance for SAP after Oracle/NetSuite. ByDesign is already positioned as an SAP subsidiary play. That's a head-on answer to Oracle and NetSuite; don't be surprised to see SAP push ByDesign more openly in 2017. SAP will worry later about how ByD and S/4HANA might co-exist long haul. For now, it's all hands/products on deck.
HCP is center stage, but platforms need ecosystems
SAP's HANA Cloud Platform (HCP) now has a central role in SAP's digital future. Pretty much everything is envisioned as a service that will eventually run on HCP. HCP is how SAP's cloud offerings will be extended and integrated, rather than the the custom code on-premise customers are saddled with. SAP's API Business Hub runs on HCP also. That goes for SAP's big data and IoT moves as well. Don't take my word for it; see Matthias Steiner's "future direction" slide for HCP:
That small "buy" cloud apps icon on the top? That would be SAP's application portfolio, but also SAP's competitors. However, if you're intent on building a viable platform, you need a developer ecosystem. In his platform review of Microsoft, SAP, and Salesforce, Joshua Greenbaum wrote:
But SAP also suffers from a paucity of the right kind of developers, and, more importantly, a limited quantity of internal DNA that understands what it takes to reach this new generation of developers. I was recently at SAP’s TechEd conference in Barcelona, and it was a classic case of a vendor pitching tomorrow’s message to last year’s audience – a problem endemic to all vendors transitioning a new platform/ecosystem paradigm.
Greembaum sells SAP's internal developer audience a bit short; some of these folks are open source and DevOps savvy. But his point stands - external developers aren't engaged the way they need to be yet. I wouldn't be surprised if this provokes a radical rethink of SAP TechEd going forward. SAP's pending HCP-on-Cloud Foundry GA is another key step, but I was unable to nail SAP down on a timeframe, other than sometime in 2017. That's not enough urgency.
My blog noting the progress SAP has made with developers with HANA Express was met with some cynical reader comments. The developer ecosystem is unfinished, as is the apps marketplace. Bernd Leukert's response to my question about SAP's confusing proliferation of apps stores revealed that HCP - along with the rest of SAP's solutions - is now organized into business units:
Leukert is confident strides will be made getting HCP apps in front of customers, now that SAP's solutions are divided into business units. That means products and go-to-market are under one lead for each unit. In HCP’s case, that lucky man is Björn Goerke.
SAP's leadership in "business without bias"
I tend to see "diversity" as corporate PR polish but SAP's been doing the work. Their 2012 video featuring gay employees for the "It Gets Better" project is a stunning piece of corporate media. As Cath Everett wrote in diginomica, SAP's been out in front on recruiting the "untapped tech talent" of autistic workers.
SAP added context to their Business Without Bias program at SuccessConnect Las Vegas by announcing software that uses machine learning to help eliminate bias in job order creation. They also showed a freaking brilliant/deeply moving Business Without Bias video.
Our own Phil Wainewright offers a deeper look at these issues - and SAP's progress since August - in SAP takes a stand on diversity to beat the talent shortage. SAP's goal to overcome bias at the algorithmic level is a worthy one. If I'm an SAP employee, I'm proud of how boldly SAP tackles these issues. That's a morale and recruiting advantage.
The wrap - S/4HANA as digital core is problematic
For years, SAP's cloud talk seemed to have a Walldorfian spin: a we-do-cloud-our-way vibe. That's changing. During our blogger meeting with SAP's Sven Denecken in Barcelona, he clearly articulated the "cloud characteristics" SAP is committed to. Denecken also emphasized multi-tenancy, something SAP has hedged on in years past. (Roos previously told me that S/4HANA cloud will be multi-tenant at the application-level by end of 2017 - another step forward).
SAP Hybris brings a microservice mentality through its YaaS platform. Diginomica contributor and long-time SAP cloud watcher Dick Hirsch sees a change in how SAP talks cloud as a result. Given Hirsch's hands-on work with ServiceNow, he would know. Hirsch has a lot to say about SAP and microservices - check our SAP TechEd Barcelona podcast wrap for more.
SAP must be careful about positioning "S/4HANA as the digital core." Managing "customer-facing, end-to-end digital processes with SAP" might be appealing to long-time customers, but cloud-savvy companies want to buy based on line-of-business components (HCM, CRM, and, increasingly, analytics and financials).
They may even want to buy via a la carte microservices. Someday, those purchases might happen through digital marketplaces, via either the YaaS microservices market or Chief Digital Officer Jonathan Becher's digital products team, which has quietly sold 20,000 software orders so far this year – all without any human sales facilitation.
Cloud integration makes it possible for customers to finally think best-of-breed without invoking on-prem middleware nightmares (look for a piece on how my attitude about cloud integration has changed next week). Prospects might not want the S/4HANA "Enterprise Management" solution. They might just want to compare S/4HANA Finance with other cloud financials offerings.
Calling S/4HANA "the digital core' could put off customers that just want to evaluate one component and not get sucked into a suite pitch. Every cloud company will push for its product to be the core - Salesforce does this also. Customers should - and will - push back in favor of assembling their components of choice, on the platform of their choice.
I peppered SAP with this question in Barcelona, which I'm sure they enjoyed just as much as Leukert looks forward to my apps-store-confusion question. Denecken, who is responsible for Co-Innovation and Packaging S/4HANA at SAP SE, assured me SAP is thinking about cloud competition in a best-of-breed market. That means plugging into competitors' products as well. I get why SAP positions S/4HANA as a digital core, but I prefer "SAP HCP as the digital hub", connecting whatever apps or services you bloody well feel like. Now that's a different SAP. Time will tell.