SAPPHIRENow 2019 - COO Klein's dogfood message

Den Howlett Profile picture for user gonzodaddy May 9, 2019
During the investor panel session, COO Christian Klein explained how SAP plans to improve margins and growth from its own technical work. His presentation contains vitally important customer messages.

Christian Klein - COO SAP

An investor panel is not likely to be of interest to buyers but it should. As regular readers know, we routinely comment on SAP's quarterly results and, from time to time, speak with executive board members on topics we believe are of interest to customers.

No interest

On the ground at SAPPHIRENow 2019, Jon Reed tells me that customers and user groups are not particularly interested or knowledgable about investor issues except to the extent that whatever SAP does, they believe SAP should be customer first and not Wall Street first. That is a very difficult tightrope walk for any public company and especially at a time when there are high levels of activist interest

So when SAP fielded Christian Klein, COO SAP ahead of CFO Luka Mucic, I was interested in what he had to say. There were plenty of nuggets in there and in the interests of brevity, I've consolidated most of what I think customers should be paying attention to because they serve as proxies for what SAP is/will be doing and how it impacts customer acquisition, retention, and delivery. If you'd prefer to hear for yourself, then here is the presentation.

Cloud shift

Before doing so I think it is important to say that what I heard represents an incredibly important shift in how SAP sees the world. In Hasso Plattner's keynote for example, I got the distinct sense that after many years of debate, Plattner finally got the 'cloud-first' (but not the only) deployment message and that as the 'father' of SAP's technical underpinnings, he accepts that his 'children' have moved on in a purposeful way. This saves a lot of debating time which, in my view, has hindered SAP and left it as a cloud laggard. No more. I think we can confidently consider SAP as a fast follower but then it has to deliver. Onto Klein's messaging and the key points:

Key points from Klein's presentation

  • HANA as a service is now a pay as you go service
  • SAP wants to automate SMB buying in the cloud
  • SAP is working on customer success such that systems alert customers about forthcoming releases etc
  • SAP has identified 80 situations where Qualtrics can help SAP improve services
  • Deloitte says their S4/HANA issue is not demand but lack of skilled resource.
  • SAP closed 18 datacenters in 2018 with plans to close 7 more in 2019, that will leave 36 around the world

Each of these statements which have been lifted from my Tweetstream quotage from Klein's presentation represents data points against which to think about how SAP will grow (through improved retention and service), while squeezing margins. At the same time though, this should also serve to signpost customers in their thinking about analyzing and pricing for cloud migration. 

Over and above that though, there were other important statements where Kelin said, for example:

Finally, we got the memo at SAP, we consolidated all of our infrastructure under one we are in a project where we are focusing on shifting our infrastructure to one of our hyperscalers.

The big question is which one because that will set the argument for recommendations going forward. It also explains why SAP is spending oodles of development dollars on AWS, Google and Microsoft Azure. Customers will benefit from the outcome of that project and I strongly recommend that customers keep a close watch on how this works out. 


Klein expressly acknowledged that an S4 migration is not easy but pointed up that the business transformation element is often more important (and costly) than the technology shift. Again, we think this is an important statement because it plays directly to the manner in which these projects must proceed. The days when an SAP implementation was sold to the CEO on a golf course somewhere and thrown over the wall to IT may not be entirely over but it is now clear that an SAP decision has to include both business and IT leaders. 

Not an easy migration path

Finally in the big picture 'stuff' Klein laid out where SAP is at, noting that although the company now serves 15 industries in the cloud with S4, the solution is not as functionally complete as the 40-year-old ERP backbone. And that's why SAP  provides choice but at the same time, it means there are implications. 

Choices in SAP

My take

SAP customers should note that SAP is finally getting its product and development messaging ducks into a coherent row. It has an extraordinarily complex and diverse landscape to navigate - some 300 SKUS. But in Klein's presentation, I saw a company that knows if it is to achieve the growth and margin targets it has set itself then it has to show how it is moving from one state of play to another. 

Klein's plans are incredibly ambitious for a company with north of 20,000 developers around the world and with a culture that he and the executive board know has to change. That last part is the hardest of all because as I have observed in the past, others have tried and failed at SAP. This time, it has to be different. 

The good news is that if most of what is in Klein's presentation is delivered in the timelines he outlined then SAP customers can look forward to a much better way of engaging with the company and consuming its products. 

As always in these things there are caveats. For example, on SMB, SAP must have a channel in place that can act as distributors and aggregators of mashed up solutions that include third-party products. That's not the same as an SAP marketplace. Microsoft understands this and SAP can take lessons from what they've achieved with SMBs using these forms of distribution for Office365 and other products that integrate elegantly to that solution. In addition, SAP needs to explain more about what it means by SMB and for what products. ByDesign and BusinessOne are in the marketplace with more than 64,000 combined customers - are they included?

The degree of compromise necessary in moving from on-premises to the cloud will not be easy to parse. Klein talked in general terms about the degree of complexity SAP itself has faced while migrating its customized landscape. Sharing those lessons will help customers determine what can be vanilla and what has to stay as custom code. 

Finally, Klein's statement around pay-as-you-go is important to the extent that he alluded to the fact that more services will follow this model. That leads us into a consumption model discussion - the essence of where SAP has promised that topics around indirect access go. Customers should press SAP to provide more detail and set expectations because again, this has a budgetary implication. 

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