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SAP Sapphire 2024 - amidst RISE and Copilots, the S/4HANA public cloud almost stole the show

Jon Reed Profile picture for user jreed June 13, 2024
Summary:
SAP Sapphire brought the expected Business AI and RISE fanfare. But something happened I wasn't expecting: S/4HANA Cloud Public Edition customers made their case, and did so loudly. Here's the rundown - but would I take back my opening question to SAP?

PureTech Scientific at SAP Sapphire
(PureTech Scientific at SAP Sapphire)

During the SAP Sapphire 2024 keynotes, Copilots and RISE competed for top billing, spiced with the WalkMe news - but don't sleep on the S/4HANA public cloud. 

After years of documenting customer projects, I'm biased towards what so-called public cloud SaaS can do. Technology doesn't do magic, but: when you can reduce integration burdens, consume new functionality, and quickly deploy to new users/subsidiaries/acquired businesses, public cloud SaaS stories just have a different ring to them. (Granted, large enterprises have been slow to adopt some areas of SaaS, including ERP and manufacturing, for many good reasons, and some questionable ones). 

For SAP, this brings the debate: why not focus on the S/4HANA Cloud Public Edition? What's the drawback to doing so? SAP has been resolute about providing customer choice for public and private cloud options (we could debate the options for on-premise customers, but that's for another time: see my Jan Gilg piece and my recent DSAG interview for more on all this). But has SAP gone overboard with the customer choice aspects - and not emphasized the public cloud enough? 

There is a difference between customer satisfaction - and product devotion

At past Sapphire events, I would have said yes. But this year, there were surprises in store - and they started on the pre-conference day, via the ASUG Annual Conference. On that day, I moderated an ASUG customer panel on cloud migrations. There was an S/4HANA public cloud customer on the panel - the first of several I ran into at Sapphire; they got my attention. Why? 

I've heard S/4HANA public cloud stories before. But this year was different. This year, I heard some genuine passion for the product - and that is rare, not just for SAP, but for most software vendors. This is different than: "We trust this vendor with our transformation, and it's working well," which you hear quite often at shows like Sapphire. I'm talking about an unforced, unsolicited passion for the software. That's harder to find.

ASUG panel gets jugular: why are you afraid of the S/4 public cloud?

Ironically, I used to hear some of that passion from Business ByDesign customers back in the day (for some customers, ByD just fit like a glove). When I hear that, it's a light bulb moment. The rarest area for enterprise vendors is product devotion. Not community culture - the leading vendors usually have at least some of that - but flat-out product devotion

Think I'm smoking the good stuff? Consider what one of the ASUG panelists said to attendees. Keep in mind, these attendees had not decided on a cloud migration plan yet. The following are paraphrased quotes, but the spirit of the message is true: why are you afraid of the public cloud? 

I would love to ask the audience: Why are you still on ECC 6? Why don't you make this move? Because on the public cloud, the cost of IT goes down. The maintenance costs went down. Our inventory has better management, and our reporting with the general ledger, that's awesome. We get so much information that we're never had before, and you're just able to manage your business much better.

The customer hit on the shift to BTP and extension thinking: 

Customers are just afraid to make this huge step from on-premise to public cloud. Maybe they are afraid that you lose control - but you don't lose control. Yes, we had some challenges. Custom fields, custom logic - yes, we had some coding in there. Even if you don't have custom fields and custom logic on the public cloud, you can solve mission critical processes that only applies to your industry with BTP. You may be afraid when you upgrade that the BTP [extensions] won't work, but for us, it always works. We developed an approval process on the BTP,  and it never fails. 

Change your mindset - and choose the right partner:

It's always a fear to do something new. I tell my team in finance: you have to change every year! I do not want to do the same job every year, again and again. Guess how difficult it is in accounting - you have so many regulations, so many changes. Bring in the technology to change your process - choose an excellent partner. Now with SAP public cloud, using the new reporting tool - SAP is already going to the next level to with GROW and RISE, which is even better than the code that we put in two years ago.

 Tech Mahindra CIO Pallavi Katiyar at SAP Sapphire
( Tech Mahindra at SAP Sapphire)

But it didn't end there. Later, via a GROW customer panel, press/analysts heard from Tech Mahindra, which is running a RISE and GROW/S/4 public cloud subsidiary play. Tech Mahindra CIO Pallavi Katiyar shared this: 

The biggest benefit that we are seeing is that lot of the mundane and the repetitive tasks, and the so-called BAU [Business as Usual] activities for which I used to have a set of people in-house to take care of all those activities. Now all those have been offloaded to SAP. We don't have to really worry about it; we don't have to worry about security patching; we don't have to worry about upgrades; we don't have to worry about compliance. So a lot of operational overhead. 

If you want to get on with business transformation, you simply can't be bogged down in ERP landscape management. Katiyar added: 

These are not value-adding activities, but still they are an absolute must for an enterprise.  So those have got really offloaded now, to the SAP product team, or whatever you want to call it. Now, we are able to focus on something which is more value-adding for the business. So we are actually working on digital transformation, which is really looking at our processes, bringing in additional processes, bringing in additional automation. And we don't have to really get distracted by some of these BAU activities, which often used to take a lot of effort. If there was a given issue, then all hands used to be on the deck trying to solve that. But now we all those things are not there. So. So I would say that that is for me the biggest gain that we are seeing. 

Tech Mahindra is still early in their S/4HANA public cloud rollout, with two portfolio companies live, and 23 to go. But the benefits already cited by Katiyar are not trivial. On day one of SAP Sapphire, I was expecting SAP to downplay the S/4HANA public cloud - so I pressed the issue with CEO Christian Klein and Julia White, Chief Marketing and Solutions Officer and a member of the Executive Board, during their post-keynote Q/A.  

A brief/necessary semantic sidebar: The S/4HANA Cloud Public Edition pre-dates the launch of GROW with SAP by some years (GROW was announced in March 2023). Historically, GROW was positioned for midsized cloud ERP customers, which bugged me a bit, as I felt SAP should ultimately position the S/4HANA public cloud for any size customer. Not doing so raised questions of whether SAP could scale against its large enterprise public cloud competitors. Perhaps it's cleaner to present RISE and GROW as appealing to different audiences, but I'm more interested in how SAP presses the issue with two viable choices, depending on customer need, not size of customer. Now, that positioning is changing somewhat - on the GROW with SAP home page, SAP defines GROW as "a complete offering of solutions, adoption acceleration services, community, and learning so any size company can successfully adopt cloud ERP." I've talked to many more S/4HANA public cloud customers than GROW customers, so I'm not directly assessing the GROW offering in this piece, though packaging GROW with SAP Sales Cloud and Concur Expense subscriptions is an appealing development. SAP is not publicly sharing the number of GROW or S/4HANA Cloud Public Edition customers, but SAP did share the RISE numbers (6,000+; 1000+ are live on RISE).

Asking SAP leadership: "Why isn't S/4HANA public cloud the future?"

After Klein and Julia White's day one keynote kickoff, I pursued the issue. During the press Q/A with SAP's leadership team, I asked: 

On the pre-conference day, I went looking for what customers love about SAP, so I went to a bunch of ASUG sessions. One thing really jumped out: I just saw a lot of passion for the S/4HANA public cloud. I was very struck by that because it's not a new product, but it feels like something is turning a corner there. It's just hard to describe exactly, but it's got to do with ease of use, ease of consumption. Watching customers challenge other customers and saying, 'Why aren't you on the public cloud like me?' That woke me up. And so I wanted to ask you, I understand RISE and why you need RISE, and why customers want that type of environment for the foreseeable in a lot of cases. But why isn't the public cloud the future?

Klein responded: 

When you look at our RISE landscape right now, many of those over-6000 customers have switched off a lot of legacy in the meantime [note: during the keynotes, SAP cited that 1,000 of those customers are now live on RISE]. By legacy I mean, private cloud, like you're running in an ECC-type type cloud environment, because we are helping them to simplify this business, or to standardize -  which you need in a true SaaS public cloud environment.

Klein considers moves to SuccessFactors, Ariba, etc. as part of the public cloud adoption curve: 

So we see a lot of switch over from HCM on-prem to SuccessFactors Employee Central. Ariba - Muhammad (Alam) did a great job already, before he became a member of the Executive Board, he did a great job on really bringing together our "one procurement." So no matter if it's direct or indirect, a lot of customers are now shutting down SRM and switching over to our one procurement platform, to public cloud. So that's very important.

As Klein points out, not all customers are ready for the public cloud. They have complex SAP environments that can't be standardized overnight: 

Will an Apple now run 100% public cloud? There is a lot of complexity per se in the business, but they will retire some of this legacy - and they will run in a hybrid landscape, highly agile. And then there are all this net-new customers, which we are super proud about. We have a huge install base, but 60% of our customers are net-new. And for them, it's super-important to your point, go greenfield - go live in three, four weeks. We help you to go into the standard; we have flexibility in the configurator we give you. But on the other hand, you can really go live in weeks. And that's GROW with SAP, and that goes right away into the cloud ERP. 

Klein also touched on what Constellation's Holger Mueller and I debated in our SAP Sapphire Scorecard video: are we talking about suite, platforms, or modular ERP? As I see it, the ideal is modular components, onto a platform that has proven its merits. Klein: 

And then I guess one last piece, the commercial strategy, what also Julia was alluding to - it's a modular stack now. So you start with finance often, then you actually go over to HR - you want core HR - then you want travel; then you want spend, so you are actually switching on one module after another, and you can expand and scale with SAP.

Alam, Member of the Executive Board of SAP SE, Product Engineering, weighed in:  

The thing that's unique about SAP, if you think about both RISE and GROW, is the choice that we offer to our customers based on the complexity and the starting point that they have. And that choice I think is unique in the market, to run what arguably is probably the most mission critical applications that the customers have now. A customer making that choice has to be intentional. We want them both to actually benefit from being in the cloud. So even if they're in RISE, we want them to be clean core, so they can consume the updates and the value that we're shipping on a very regular basis. 

Alam added: 

So I think from an SAP perspective, it's a choice that we offer - an Apple, as Christian pointed out, or a Microsoft, or you heard Amazon as well. Those are hard to say, hey, 'They're going to be from a core ERP perspective, operating public cloud. But for other businesses, it may make sense to go do that.'

GROW customers earned keynote time 

Later that afternoon, during the innovation keynote with Alam and Juergen Mueller, Alam highlighted PwC, running S/4HANA public cloud at enterprise scale: 

As I said before, the solution works for customers both large and small. And a great example of this is PwC, our largest s for HANA public cloud customer, they use S for HANA public cloud, precisely because of the depth of capability and update safe extensibility, allowing them to develop truly market differentiating capabilities.

GROW customers also factored into the "Being the best" keynote on Wednesday, where SAP's Scott Russell - who also mentioned PwC - interviewed Brian Hardee, CIO of PureTech Scientific LLC. One of the ways I judge modern ERP? How quickly can you deploy to acquired companies or spinoffs? In the case of PureTech Scientific, they were bought by private equity, 'carved off' from their parent company - all with limited time to get their operational act together. Hardee told Russell about the role of S/4HANA Cloud Public Edition: 

It was an easy choice, because first, we have no IT team, we have no internal training team. And we also had a very tight timeline with respect to the exit. So I needed a solution that would enable us to move forward with speed, efficiency, scalability. I could be confident that the infrastructure was being managed and secure - that left us with an awesome choice for GROW as well. As you know, private equity, they insist on growth. So it was a great model, a great fit. It gave us a platform for scalability for future bolt-ons, future acquisitions, and so forth. So that's the main reason. SAP has an awesome suite of tools that enable that rapid implementation. There was no other way we were going to do it without an internal IT team, and without the access to the training material and the testing and so forth.

Later, on the GROW customer panel for press/analysts, Hardee cited more benefits: 

For us, real-time analytics has been a huge game changer, especially for the private equity firm, because they weren't able to see what was happening in the company before, operating off of the parent system. But once we were on our own [S/4HANA] system, now they can see what they got the real-time cash flow, the overall supply chain inventory, everything else.

Ironically, while the implementation time was short, overcoming the perceptions of inaccurate media about the S/4HANA public cloud factored into the change story. As Hardee told us: 


The implementation was 15 weeks. It was not six months - in six months, it took me half the time to convince people that the message from the media was not correct. It took me two and a half months to convince the PE firm that SAP was the right direction, mainly because of the message from the media with respect to cost. So that's a misnomer from the media. From that perspective, it's not as costly as what people think - it's actually more value-add than any other solution out there.  

See what I mean about S/4HANA public cloud talk? 

My take - do I want a do-over on my S/4HANA public cloud question? 

It's my job to call attention to where vendors are falling short. But it's also my job to revise my own positions. Looking back, do I regret the provocative question I asked Klein and company? No, because their answers were worth hearing. But SAP backed up the GROW talk during the rest of the show - and, for the first time I can recall, SAP made clear on the keynote stage that S/4HANA Cloud Public Edition isn't just for a certain type of company (e.g. midsize or subsidiaries). When S/4 public cloud customers took the stage, their stories were vivid, and the results tangible. In retrospect, that makes my opening question look a bit off the mark.

RISE is another matter, but I've already covered key RISE topics in my on-site Sapphire Review podcast, as well as my prior RISE and AI innovation debate podcast with ASUG CEO Geoff Scott and analyst Josh Greenbaum. I have big concerns about some aspects of RISE, though I do like SAP's adamant firmness on a clean core mindset. I view "clean core" in a broader context than SAP-centric. I am down on over-customization of on-premise systems period, and I'm down on the type of technical debt those customizations incur. Therefore, give me a clean core. I believe extensibility with public cloud SaaS is generally superior, though SAP customers have other choices than BTP for at least some of this. It's up to SAP to make the strong BTP case.  How SAP Business AI fits into this is a story for another time; I'll get back to that one. You may also want to check Madeline Bennett's Sapphire Barcelona update, SAP customers share challenges with rolling out AI with older platforms and siloed data.

I don't want to idealize GROW either. During the ASUG panel, a discussion broke out with another public cloud customer that is having issues with too many BTP extensions where SAP, ideally, should have more industry functionality ready. How Industry Cloud ties into S/4HANA Public Cloud is a crucially important story - and one I intend to follow up on before the fall conference season. When to extend on BTP (and when not to) is also a very hot topic, and requires a deeper treatment than I can muster today.

My issue is not whether some customers choose RISE over GROW. Some will choose RISE, or other private cloud scenarios. I give SAP credit for blurring the category lines,  making clear that GROW is not limited to a certain size company. What I don't like is seeing customers turning down public cloud for the wrong reasons. Wrong reasons include that memorable ASUG member rant: fear of change. Another reason I don't want to hear is: how public cloud's industry functionality is falling short of the private cloud version of S/4. (note: I intentionally avoided the semantics of how RISE also runs on public cloud providers like AWS, Google and Azure... Let's leave that aside for now; we have enough to sort). 

SAP should have the ambition to make sure that the S/4HANA Cloud Public Edition's industry options are competitive - even for large enterprise. In some cases, this will require the support/build of partners. No, SAP will not be rewriting all its on-prem industry functionality to the cloud - nor should it. This is a good time to take stock, and even, if you don't mind the cheesy catchphrase, 're-imagine' some industries that are moving in new directions, e.g. servitization, subscriptions over ownership, and the addition of customer-facing functionality (this is where SAP's Intelligent CX for industries push could pay off also).

SAP is adamant about preserving customer choice between public and private cloud S/4. Fine by me - but SAP should strive to make that choice as difficult as possible. That's why this year's Sapphire felt like a turning point. When customers are that passionate about a product, we'd best listen - and find out why.

Author's note: for more on these topics from another pre-Sapphire angle, check out Josh Greenbaum's post, Does SAP have a “Pickup Truck Problem" regarding S/4HANA Upgrades?  

Updated, 1pm US PT on June 13, with a few small tweaks for reading clarity. Audio version also added. 

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