The future of the SAP S/4HANA public cloud - a talk with SAP's Ross Wainwright

You might think that SuccessConnect, the SuccessFactors user conference, would be an odd place to get updates on the SAP S/4HANA public cloud. But now that SuccessFactors President Mike Ettling's team owns the S/4 HANA public cloud, SuccessFactors shows are a good place to get a gut check.

I did just that with SAP's Ross Wainwright, EVP & Global Head of S/4HANA Cloud at SAP America Inc. Ross was joined by SAP's Nicole Kealey. Our Q/A shed light on customer projects to date, and why SAP sees a big year for the S/4HANA Cloud in 2017.

S/4HANA public cloud - numbers and competitive ambitions

It's no secret that SAP's biggest cloud HR competitors are Workday and Oracle. But I noticed a difference between this year's SuccessConnect and 2015: this year, several SAP executives alluded to the imperative for SAP to offer a combined HR-financials SaaS offering, including several veiled and direct references to a competitor (Workday) that has been aggressive with their integrated Financials/HR offering.

Even if most SAP customers that move to S/4HANA might be content with the on-premises or private cloud options - at least for now - the cloud FI/HR competition keeps the flame hot underneath SAP's S/4HANA public cloud ambitions. Granted, S/4HANA is broader in scope than HR and finance, but the imperative is clear.

At SuccessConnect, Ettling updated the S/4HANA customer numbers: 3,800  have bought S/4HANA, with about 1/2 choosing the private cloud. (S/4HANA public cloud numbers are very modest, less than twenty, with two go-lives - as of August 31). Ettling isn't concerned about the modest S/4HANA public cloud numbers to date. During his post-keynote press conference, Ettling told media members that 2017 is the year where S/4HANA public cloud adoption should scale:

We’ve been kind of building a startup within a business around the S/4HANA public cloud… What we don’t want to do is get ahead of our schemes; we want everything to be working perfectly. It’s not just about software; it’s about support models, implementations models – it’s about the whole SuccessFactors end-to-end value chain which we want to emulate for the S/4HANA cloud. The whole plan is to build it out in 2016, get the model working, and scale it in 2017. Private cloud has the model in place – the public cloud model isn’t there [yet].

S/4HANA - quarterly releases and public roadmaps

Jon Reed: Tell us about the latest release.

Ross Wainwright: We launched release 1608, that's probably a good place to start... We're launching new releases every quarter. We're driving all of our innovation for S/4HANA specifically through the cloud offering. 1608 is our most robust release to date. I would say it's between 80 and 90 percent of the functional requirements, but for some clients it's a 100 percent fit. For some we may have to do some extensibility. We do that extensibility by leveraging the HANA Cloud Platform.

Reed: So, sticking with the quarterly release schedule, the next edition will be in November.

Wainwright: Correct - Our next release will be 1611 in November. 1611 and 1702 are largely focused on integration, and the appropriate APIs to drive the integration strategy and story. One footnote that I think is relevant, Jon: in the on-premises world, you can't publish road maps like these. If you're selling futures to a customer, it "rev recs" your deal. In the cloud, it's a very high speed, high velocity innovation schedule. So we can publish four quarter roadmaps [Editor: see blog post on S/4HANA 1608 by SAP's Sven Denecken, which includes an "extended four quarter roodmap in the cloud" graphic].

Reed: But those aren't set in stone, right?

Wainwright: We reserve the discretion to change our mind. That's my legalese. We are leveraging the road map to help customers have a higher comfort level, but let's say there is a gap. Maybe you're missing integration - for example, with Concur for travel and expense management. Hang in there, we're going to have the APIs published by November, and the full integration will be done by February -our targeted date.

Updates on S/4HANA functionality

Reed: What is the rationale behind putting the S/4HANA public cloud under Ettling's team?

Wainwright:  I've been with SAP for 14 years. In February, Rob Enslin and Mike Ettling asked me to basically take on a start up. New product, new code base, new sales organization.  Mike's organization is 5,000 employees, and a billion in revenue. They know how to run a public cloud business. The strategy is: let's incubate this startup, and leverage the expertise and talent within Mike's leadership team.

Reed: I get tons of questions about S/4HANA cloud functionality. Obviously this all started with finance - where do we stand now?

Wainwright: The core product is enterprise management. The official name is S/4 HANA Enterprise Management Cloud. This encompasses all of ERP. We've got forty years of heritage in ERP, so we've got a lot of work to do. That's the foundational umbrella product.

Reed: One industry focus has been professional services - what's the update there?

Wainwright: Within that umbrella, we have a professional services product - the S/4HANA Professional Services Cloud. We've think we've got a very good fit in professional services. We now have 8 "lighthouse" partners - this program is for strategic boutique partners to take on the product, to use the product, to help drive the product with us - and at the same time build a practice.

S/4HANA's enterprise focus

Reed: I've noticed in the early going, you're pretty flexible on who can buy S/4HANA.

Wainwright: Right now, we'll sell the product to anyone who wants to buy the product.

Reed: Are you ultimately hoping that S/4HANA public cloud is a large enterprise focus product, or is it really a product that's going to fit on a range of company sizes?

Wainwright: Without question, it will evolve to an enterprise based product. We have two segments we've kind of fallen into: one is the $500 million to a billion range, mostly net new projects competing against Workday and NetSuite, now Oracle. Then we have 330,000 customers with subsidiaries and divisions all over the world. So those subsidiaries with M&A activity and divestitures  - we see huge opportunity with smaller divisions that would be interested in partnering with us.

S/4HANA live customers - an inside look

Reed: I know you have two live customers as of SuccessConnect, but you intend to bring more live in the fourth quarter?

Wainwright: It's a bit of a hockey stick. We launched the go to market in March 2016, so our first full quarter was Q2. We anticipate we'll probably do 40 to 50 percent of our 2016 business in Q4. But our goal is probably less relevant on the contractual side, on the revenue side, or what we call bookings. Utlimately, we're more interested ultimately in live references.  We hope we'll have between four and five additional customers live by the end of the year.

Reed: Can you give a bit more detail on the go-lives to date?

Wainwright: One of them is a 1,200 person European based consulting firm. Wall to wall SAP. They're up and running on the product. They're live in one of their divisions. The other one is a $10 billion discrete manufacturing company in the fiber optics space. They had a goal of reducing their TCO costs by really streamlining their supply chain. They had 26 supply chain processes across their subsidiary and divisions.

They were really interested in: how do they harmonize the release schedule of their on-prem S/4HANA system with the S/4 cloud offering. With quarterly updates on the cloud and annual updates on-prem, how do they manage and harmonize that together? It's an important value proposition, because the product is based on the same code base. Which means we can provide to our customers the ability to rationalize code releases and product between your on-prem and cloud S/4, or between your subsidiaries and your headquarters.

Reed: So the discrete manufacturing company in the U.S., there is enough functionality in there for them?

Wainwright: Yes. They are an Enterprise Management Cloud customer.  We actually chose them as a co-innovation client. They approached us and said, "Listen, we want ERP for our subsidiaries." We said, "Great, we've got on-prem solution." They said, "No no no, we don't want on-prem." We said, "Great, we've got HEC on the private cloud." They said, "No no no, we want a public cloud."

Reed:  They were willing to step up a little bit on the co-innovation of functionality to make it happen then.

Wainwright:    You got it. Today, they have over 100 users. They're live in Shanghai, Switzerland, and Singapore. Their plan is to roll out the solution over all other subsidiaries globally.

Final thoughts on part one

Wainwright and I got into an important discussion on S/4HANA, multi-tenancy, and the "private cloud" edition of S/4HANA. I don't want to truncate that, so I'll share that in part two early next week, along with Wainwright's view on S/4HANA integration with SuccessFactors, and the API approach in general. Teaser: I also asked him the "can ByDesign co-exist with S/4HANA" question. I'll offer more analysis once I get that up - watch this space.

End note: for more on S/4HANA, check my colleague Den Howlett's SAP S/4 HANA – the numbers and the business case. This piece was informed by several briefings with Sven Denecken and his team. I'd also like to thank Mark Chalfen of Bluefin Solutions, an S/4HANA lighthouse partner, for helping to make the interview with Ross Wainwright and Nicole Kealey happen.