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SAP Sapphire 2024 hot topic preview - getting real about RISE, cloud, and innovation with SAP's Jan Gilg

Jon Reed Profile picture for user jreed June 1, 2024
Summary:
SAP Sapphire is about to kick off - and AI is surely on the keynote menu. But for many SAP ERP customers, the know-how (and business case) for S/4HANA migrations is a huge topic; welcome to the RISE and cloud innovation debate. In this diginomica exclusive, SAP's Jan Gilg shares candid views on SAP's cloud evolution - and where we go from here.

Jan Gilg of SAP
(Jan Gilg of SAP gives his S/4 take)

I've made my positions on RISE with SAP clear (the latest example: Where do SAP customers stand on AI, RISE, and the transformations ahead? DSAG shares its position on the SAP innovation debate). 

SAP watchers may expect SAP Business AI to dominate the keynote headlines at SAP Sapphire Orlando this week, and that may hold true (you can watch the keynotes virtually).

But behind the scenes, with a 2027 end of maintenance deadline looming for SAP ERP customers on older releases, you can bet there will be plenty on the hot topics of RISE, cloud, and SAP migrations. ASUG has a whole pre-conference day dedicated to this theme; I'll be moderating a panel with GROW and RISE customers. We will discuss the change issues involved. 

Last time I talked with Jan Gilg, President and Chief Product Officer, Cloud ERP at SAP, he provided a candid view of the dual code line debate: Public cloud ERP versus private cloud ERP - more than a deployment option. SAP's Jan Gilg weighs in on the S/4HANA dual code line debate. I have strong views on RISE, but it must also be acknowledged: RISE is evolving. Analyst Josh Greenbaum has made a point of articulating how cALM (Cloud ALM), Signavio, LeanIX and DataSphere could make RISE a more robust offering (check my podcast with Greenbaum and ASUG CEO Geoff Scott, What does SAP’s AI push mean for customers?). SAP has also offered up new RISE incentives with its RISE Modernization and Migration Initiative.

S/4HANA and RISE messaging - how did customers respond?

But on the verge of SAP Sapphire, the time is right to tee up this topic again. What we hear from SAP next week may have evolved from what Gilg said to me earlier this spring. Still, Gilg's comments frame the issues we'll be hashing out shortly. 

Let's start with the big picture - how are customers responding to SAP's RISE message? Could SAP have articulated this differently - because it seemed like RISE was portrayed as the only way to access innovations? Gilg: 

I think it's it's been a little bit of an emotional discussion in the last couple of months and it has maybe to do with the way we have communicated initially. But if we take the emotions out, I feel we are having very good discussions with customers. Many times it is really more than a question of timing. At the end, I think the majority of customers really sees the benefit of a cloud model. And they say, 'Why should I run my ERP estate, so to speak, in my own data center, or even on a hyperscaler, myself, if SAP can do that, and I actually want to outsource more and more of this to the vendor. I want easier upgrades, eventually less to do with custom code, and so on.' 

And then, of course, the timing comes into the picture. I think there's a certain population of early movers that moved to S/4 on-premise that said, 'Well, that's what you told us to do. And now you tell us, you've got to move to RISE.' Also, did you lead us kind of in a dead end? 

And? 

That's why we said no -  especially for this very loyal group of customers, we want to help them, and that's why we have now launched this migration fund to refund some of the costs that you will have with this rather technical migration to RISE, so that it's easier for you, and many of those customers see the benefit. Of course, in the first place, I think many felt we are pushing and forcing them. And that created a little bit of a reaction...  But I feel we've done quite a bit to take this out. And then, in my mind, the majority really feels this is the right step for them to do eventually. It's more of a timing question. 

Is there a case for cloud-only ERP innovation? 

Gilg says the data indicates when customers choose on-premise ERP options, they tend to get stuck, even with the best of intentions: 

Keep in mind - and we looked into the data quite a bit - we do see in the [S/4HANA] on-premise world, the same phenomenon that we observed in ECC. Customers do fall behind quite significantly on the revisions. And many of the kinds of innovation that we announce now in the cloud only, they couldn't consume them anywhere - because you have to be at least on the latest S/4.

Gilg has come to believe that to deliver innovation to the most SAP customers possible, a cloud-only model is the only way forward: 

I think many saw that and understood where we are coming from. Speaking a little bit more, from my personal perspective, I also need to see that we get those older on-premise releases off the market, because it ties up a lot of development capacity to maintain them. And I would rather have this capacity to deliver innovation, where I get enough requests and requirements from customers across the world. So therefore, also for us, we need to switch to a cloud-only model. An idea of what that means is: you have an evergreen code line in the private cloud. My ideal world would be maximum two releases and minus one, to give customers enough flexibility.

But of course, cost control only takes you so far: it's what you invest in that counts. 

In my experience, customers understand our motivation (cost of maintaining many on-prem releases in the market) but obviously they don’t care so much about it as they are looking at what’s in it for them – and that in my mind is the possibility to receive more innovation – that is the key point.

So is this the end of the line for on-premise SAP? It's a complicated question that, I suspect, will be the source of much discussion between user groups and SAP going forward: 

To your point, does it take away value from our on-prem customers? Not necessarily. Even those customers who want to stay on-premise, they will still receive the innovation that we ship as part of the on-premise ship, which is similar to private cloud, and then there are certain things, of course, that will be private cloud or RISE-only. Many of those innovations will come on BTP anyway (which are SaaS components then). 

And again, the question was: can those customers consume it, even if they only upgrade every seven years, I think on average? Then we gave also the maintenance commitment to 2040 for on-premise [S/4HANA]. So I think there is at least enough of a transition period for those customers to eventually then switch the model over to cloud. And for us, I feel it's necessary. And of course, we want to continue to give customers choice. But that's why we also add more and more things to RISE to make this a more attractive and differentiated offering.  [Author's note: the end of maintenance timeframes are nuanced by release; this ASUG update on SAP ERP maintenance is a good place to start].

RISE and the transformation context - this applies to SAP (and its partners) as well

Gilg says this isn't just a change of mindset for customers - it's also a transformation for SAP. In that context, RISE evolves also.

One aspect that could be added at the end, which in my mind is the most important topic in this entire transformation - also for SAP as a company: We move from being a software provider to being a service provider, i.e. we deliver everything as a service and that includes the private cloud (with some tradeoffs). So where we want to evolve RISE to, is to be that ERP as a service offering, because we believe we can operate and integrate our solutions best, and we can optimize performance best and deliver support best etc (by the way, a big portion of our support tickets are consulting tickets – which means issues in the implementation – which again shows that we need to have more skin in the game here because it kills the perception and overall experience otherwise). 

That is why we don’t want customers to use the new AI cases and Green Ledger and so on, and connect them to their old on-premise instance in a custom project – because it is unpredictable how well that works, and at the end we are always liable in the eyes of a customer – so we would like to take more control.

Finally, Gilg points out this is a big shift for SAP's partners also: 

This includes how we steer our SI ecosystem – we will take a more prescriptive position here – we cannot repeat again under RISE what we have seen in on-premise for the last decades: expensive, long running customer projects that leave customers in a position that they can barely upgrade anymore, and are cut off from our software innovation – that is why RISE is not another product offering but a transformational approach to bring customers to a model where we serve them their ERP as a service as much as possible.

Note: for more on this topic, check my recent podcast with Greenbaum and ASUG CEO Geoff Scott: What is the role of partners in the SAP innovation debate?

My (quick) take

I've sworn to keep my opinions out of this piece, and I almost made it. But if SAP had phrased its earlier 2023 RISE messaging more like Gilg just did, things might have been less controversial - including the way that BTP makes cloud services available, with or without RISE.

I'm not a fan of issuing a strong take on a vendor right before their big event, so let's see what happens on the ground this week. Then I'm sure I'll have plenty to say. If you want my unvarnished views now, the previous AI innovation debate with Scott and Greenbaum brought things to a head. At any rate, what matters now is where customers should go from here. Those decisions are greatly helped by clear stances from SAP, even while knowing there may be wiggle room on some issues.

Much of what you've  just read are Gilg's own takes and personal views. Needless to say, customers should not make firm plans based on this. But I think Gilg's candid views offer a good sense of where SAP is headed with ERP, and why - at least in the private cloud (the public cloud edition of S/4HANA was covered in my last piece). Looks like it's going to be a memorable week, and I haven't even touched on SAP Business AI yet.

For more on these topics from another angle, check out Josh Greenbaum's new post, Does SAP have a “Pickup Truck Problem" regarding S/4HANA Upgrades? 

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