Is SAP serious about CX? A closer look at SAP's pivot to CX for industries

"Is SAP really serious about CX?"

While documenting SAP's CX moves the last couple of years, it's a question I've heard often.

Obviously, this is a question only SAP can answer. How?

• By making SAP CX an important component of the SAP Sapphire keynotes in May (something that didn't happen last year).
• By including mention of SAP CX in quarterly market updates and earnings reports. Otherwise, it doesn't come off as a top line priority.
• By making sure that SAP CX customer stories are heard. Then, the related point: get those stories amplified, by:
• Engaging CX experts, analysts, and media around the strategy. This hasn't happened nearly to the extent I believe it should. (Example: last year's Sapphire CX customer and analyst gathering was highly effective, but only a small group experienced it. There was a (mostly) missed opportunity to do this at the CX Live events this fall as well).
• Overcome any market perception that the recent round of layoffs were about a retreat from CX.
• By sharing a compelling strategy on how SAP can truly differentiate in CX, rather than trail market leaders.

However, on this strategy point, we need to debunk an analyst misconception: I don't believe SAP needs to conquer the CX market to differentiate.

I could care less where SAP CX appears on quadrants, waves, or trapezoids  What is needed, then? A strong CX value proposition for SAP's own customer base. There are thousands of SAP customers that haven't formally committed to a CX vendor for the future - that's the audience SAP's CX play should be concerned with.

SAP's CX strategy? CX for industries

One thing isn't negotiable: if SAP is to truly be a "CX" vendor, and not just a seller of CRM assets, SAP's CX assets must be greater than the sum of the parts. Proper CX, if we can accept this buzzword, is fluid enough to serve customers who move between channels at will. That means an integrated data platform, made up of modern software components. Here, Ritu Bhargava and her team have made notable progress (more on that shortly).

As for the strategy part, those who think SAP doesn't have a clearly-articulated CX strategy are wrong. No, SAP hasn't made much noise about it, but the approach is pretty clear. I've been documenting the evolution of that strategy for a while now (see the SAP CX review for the update from SAP Sapphire 2022).

Since that time, that messaging has sharpened, around a "one office" vision of connecting the so-called front office (CRM) to the back office (ERP), with a clear industry focus, or what SAP calls "industry tailored." Industry-focused CRM is clearly overdue - but what does that look like? There is one more intriguing aspect: Bhargava has been talking up the potential of consumption-based pricing, something SAP has employed with aspects of SAP BTP (Business Technology Platform) but not so much elsewhere.

If you attended one of SAP's CX Live regional events this fall, or caught Bhargava's portion of the SAP TechEd 2022 day two keynote, you probably heard some of those ideas. In this interview, Bhargava summed it up:

That's where SAP CX sets itself apart; we offer a personalized "one-office" experience by enabling native integration of CX to ERP, digital supply chain and procurement, and take it further by offering industry-tailored solutions.

But hold up - SAP serves 25+ industries, so where do you begin? It's an important question, but we need to start with this whole back office/front office thing. I personally rejected those terms a long time ago; I'm much more interested in how processes flow end-to-end to serve customers - or any stakeholder group. Bhargava seems to feel the same. As she told me last week, consider the example of an agent fielding a call about a service order:

Do I need to go and have 15 clicks before I can even have visibility into: 'What can I tell the person who's on the phone - when will this item be delivered?' And that's where I realized that I can go best-of-breed, and I can keep on going head-to-head over some of the competitors that are doing that, who, by the way, are also questioning should they be doing that - because that's not where the world is anymore. And they're living on some of those monolithic code bases that they can't just suddenly change.

Sometimes, argues Bhargava, you can make up market ground by choosing a whole new path. How? By seizing the opportunity to modernize - in this case, around industries.

Sometimes your weaknesses can be your strengths. The fact that we did not perhaps invest in some of that modularization and modernization, when we should have, now gives us that opportunity to do it in a way that just natively integrates. And so what does that mean? We have the back office connected to the front office for a one office experience.

We own all of those pieces. We have the data; we have the back office; we have the front office, and we have the industry presence.

"Can we be the best CX for retail? Can we be the best CX for CPG?"

If you think SAP isn't ambitious about CX, Bhargava intends to prove you wrong. But that ambition is now centered around industries:

Can we be the best CX for retail? Can we be the best CX for CPG? We have the industry cloud; we have the products there; we have the back office. Think of the journey of a customer in a retail space, or an automotive space or a utility space. Let's say there are fifteen touch points that a user would have with the software, or their customers will have with the software.

For each of those touch points, there could be about ten products that could power that experience. And as I looked at it, SAP has most of those products already in our ecosystem. Either we natively own it, or we have partnerships that we can build on. That's the big pivot for us there. We're not just going to become someone else; we are going to be SAP. And SAP has a lot of swagger in what we build - we just need to tell that story more.

What industries will Bhargava's team prioritize? The last quote provides some pretty big clues.

If you look at the top 50 consumer product industries, I think 1/3 are customers, right? In the automotive sector, it's upwards of 1/3 to half of them... So just by sheer numbers, the presence is there. We just need to enable them.

Bhargava refers to "clusters" of industries her team will focus on first - and expand from there.

In this install base, we have presence in almost all the predefined industries that you're talking about. The key is that no customer gets left behind - I want to take our customers on this journey with me. And so as we think about the strategy going forward, you think of clusters of industries that for the most part, can benefit from, let's say, a shared service that augments and complements that set of industries.

And: we build foundational, not on a monolithic code base, but a microservices-based architecture where it becomes very composable, and becomes headless. And we can think about taking those capabilities across industries, and trying to be very specific about the way that we scale up.

SAP CX modernization - a status report

As for that platform modernization, there is progress to report. Since last May, Sales Cloud and Service Cloud have been replatformed, into a microservices-based architecture (which Bhargava's team demoed at SAP TechEd). Bhargava was already confident in the Marketing Cloud architecture, via the Emarsys acquisition, so that leaves Commerce. The goal? Modernize the SAP Commerce Cloud, and make a cloud-native version of SAP Commerce available, while giving customers options via more "continuous releases." Bhargava says the November 2022 SAP Commerce Cloud release was a milestone towards those goals, with lots more to come in 2023:

This year, you will also start to see more migration tools coming in, [to help] bring all of our customer base onto the new Sales and Service Clouds. Next year will be even more so - bringing more intelligence into it.

This includes the new "composable storefront",  available on GitHub, which SAP bills as:

Composable storefront is based off the Spartacus open source code, and is included in the SAP Commerce Cloud license at no extra cost.  Spartacus is a lean, Angular-based JavaScript storefront for SAP Commerce Cloud that communicates exclusively through the Commerce REST API.

A key part of SAP's CX platform unification effort is via its Gigya acquisition, which has evolved into a range of SAP CX solutions, from a CDP to Identity and Access Management. If SAP intends to have a so-called "intelligent" CX, this will be a crucial piece. Bhargava:

If you were to build a CX or a CRM today, I fundamentally believe it would be intelligent, and natively Insight-driven.

My take

On February 1, 2023, SAP announced 3,000 layoffs. Though one media outlet asserted that all of those layoffs were from SAP CRM, I have no verification of that at this time (Update: in the last 72 hours since I published, The Register changed their report to indicate that while CX was one area impacted by these layoffs, the layoffs did not solely impact SAP CRM but included other SAP business units as well). My understanding was always that a range of business units (and geographies) were impacted. Nevertheless, despite this revised report, this does add to SAP's challenges on being taken seriously in CX.

I'll point out that Oracle faced a very similar situation in the fall, where CX/solution marketing teams were definitely impacted by restructuring and layoffs. However, Oracle leadership was also vocal - and articulate - about their CX intentions, even announcing new functionality.

In my view, this isn't too hard to reconcile. Both vendors are refocusing their CX pursuits on their own customer base, and doing so in a way that plays to their ERP/business application strengths. The proving ground, of course, will be in delivering on it. How do you overcome perceptions of a market retreat? By shipping desirable features to delighted customers.

I would never give vendors credit for something they haven't done - not anymore. I've been burned on that too many times. Years ago, I made a vow not to do that again. However, I can certainly make the case for which vendors are being overlooked or underestimated. I can also get a sense of leadership teams, and what they have to offer. On those fronts, SAP CX has more going on that most outsiders think. It's SAP's job to make the narrative stick - by addressing the bullet points I raised at the top of this article. As I always say, when you play the long game with happy customers, eventually, the outside perception will shift also.

In my last article, Bhargava said some very interesting things about the need for consumption-based pricing in CX. From our chat last week, I know that is still something she is looking into closely. I expect we'll hear more on this in 2023. I don't think consumption-based pricing is a cure-all, but: it can do wonders for onboarding casual users, versus the constraints of seat-based licenses. More vendors should pursue this - will SAP CX be one of them?

In recent months, I've had SAP board members express their confidence in SAP CX to me personally. I'm starting to get the sense of a "light bulb" moment inside SAP - in terms of how CX can give SAP an edge, at a time when ERP systems must show their ability to help customers serve their own customers better. Bhargava talked about converging roadmaps - and making sure that CX and industry roadmaps are aligned. This is no small project, but it's the exactly the kind of cross-team collaboration that SAP needs to make "industry-tailored CX" a customer reality.

There have been some changes in the SAP CX leadership team operating under Bhargava. From the outside, I didn't necessarily agree with all those changes. But here, I must recuse myself, because some of the affected parties were friends I've known in this industry for decades. However, I believe that Bhargava has internal momentum right now. She seems to have the internal alliances, and the external openness to engage. As such, I expect there will be more chances for media and analysts to press SAP on these questions in 2023 - have a good dialogue, and decide for themselves. Last year, ASUG CEO Geoff Scott said to me:

I've been yearning for deeper conversations about how we can put this portfolio of customer solutions together. I think that can't be any more important... I'm looking forward to hearing more about where SAP wants to go, how customers can take advantage of it and how we help the entire customer base learn and succeed with it.

With ASUG Annual Conference taking on a bigger role again this year at SAP Sapphire, now is the year to make that happen. I should see Bhargava (and some SAP board members) in New York City next week - and then again at SAP Sapphire. I plan to get more specifics on how these CX roadmaps are fleshing out, and how customers view these CX innovation efforts, particularly around the Commerce Cloud and data platform offerings. If customers are excited about the new functionality they are receiving, that will speak volumes. We'll see.

Updated, February 27, 2023, to address a revised article from The Register as per above.