Will GROW with SAP mark the turning point in S/4HANA public cloud adoption?
- GROW with SAP has arrived - but will it help SAP claim midmarket cloud ERP adoption? We're about to find out. Here's my initial review - including my research on how S/4HANA Cloud fits in with SAP Industry Cloud and SAP's other SMB products.
Readers know I'm not what you'd call a RISE with SAP fanboy. Yes, RISE has its place, and its use cases. To its credit, SAP has done a good job of putting credible RISE with SAP customers in front of people like me (and continues to do so).
My biggest issue with RISE? When a customer decides to modernize their SAP apps or infrastructure, sometimes RISE comes across as the only tool in SAP's toolbox.
I'd like to see more open-ended conversations on transformation, with SAP's partners putting a diverse set of solutions/cloud options in front of customers.
So does this week's GROW with SAP launch announcement change things? Perhaps. Granted, the use cases are different. But I must be fair: I've criticized SAP for downplaying the public cloud version of S/4 (officially called S/4HANA Cloud, public edition). In my December 2022 interview with SAP Executive Board Member Thomas Saueressig, who leads the Board area for Product Engineering, I noted my surprise at seeing such a public acknowledgement from an SAP Board member that public cloud ERP is really where ERP is headed. As Saueressig said to me:
What we would love to see is that our end users see that change, and that we really can drive the consumption of new innovations, like our new Horizons, which we now have for S/4 public cloud in GA. That speed of innovation is something which is just unmatched in the SaaS world. That's the reason why I truly believe that the public cloud is such an important, dominant way forward in this regard for what we want to do. [Author's note: Horizon is SAP Fiori's "personalized software experiences" visual UI theme].
GROW with SAP puts a different level of visibility on the adoption of S/4HANA Cloud public edition, with SAP Sapphire events around the corner. So what are we talking about here? Like RISE with SAP, GROW is not technically a new product, or new software. It's a bundled set of solutions, intended to speed the move onto the S/4HANA Cloud public edition.
GROW with SAP includes embedded AI/automation, BTP platform integration, and pre-configured "best practices" for GROW's target market: midsize companies. From a solutions delivery angle, SAP explains that:
The GROW with SAP offering also brings together SAP S/4HANA Cloud, public edition, with accelerated adoption services, a global community of experts and free learning resources, helping customers go live in as little as four weeks.
One thing that really took me by surprise: SAP also issued a press release with partner commentary on GROW with SAP. This is not your usual short list of the same big SIs we always see. Instead, we have quotes from specialty firms that play well in the midmarket. Take this view from Beyond Technologies:
“SAP combined three of its strongest assets into a powerhouse program to help customers move to the cloud,” said Alain Dubois, partner, chief marketing & business development officer, Beyond Technologies. “Our customers can scale their business with SAP S/4HANA Cloud. They can innovate with SAP Business Technology Platform. And the preconfigured best practice content – that’s 50 years of industry knowledge! – speeds up implementation and will give them a leg up on their competition. Well done, SAP.”
When I spoke with Julia White this week about the GROW with SAP announcement, she emphasized the SAP Build (low-code) part of the offering, which ties into BTP as well. White, who is Chief Marketing and Solutions Officer and member of the Executive Board at SAP SE, believes this will make a difference for midsize companies, where tech talent can be hard to come by:
Specifically, we've included our SAP Build technologies, because you're midsize companies don't have big IT organizations. They don't have an army of programmers sitting around; they can't afford that. But they have business expertise; they have business users who can build that last mile capability, or that unique solution they need for that 20% of their business processes that are truly differentiated.
One misconception about SaaS ERP is that customers on public cloud software are forced to 'go vanilla' with standardized configurations. Yes, some process discipline is imposed by SaaS, but in SAP's case, the ability to extend on BTP is a big part of how customers can shift from the tech debt of a custom code approach - into an industry apps/extensions mentality. On the industry side of GROW with SAP, White says:
Listening to the clients who've got this 'aha moment' of our preconfigured industry, business practices are so useful. Again, 80% of business processes are completely commodity, as far as the company is concerned. It's not differentiating for them; they just want to run at the best possible way. We've done all that work. We've worked with customers across the globe in all these different industries to say, 'What is best-in-class for manufacturing; what is best-in-class for retail.' And that's preconfigured; they just deploy it, and they're off to the races.
My take - how do ByDesign, B1, and industry clouds factor in?
Whenever SAP shows signs of moving S/4HANA down into the midmarket, there is media hand-wringing: 'How does this fit into SAP's SMB ERP offerings?' Let's face it, I've done my share of that hand-wringing myself. In years past, SAP provided confusing/overlapping definitions of how their SMB products fit together.
Last week, I put that to the test by talking to Rainer Zinow. Zinow, who is SVP in SAP's Business One & SAP Business ByDesign group, is the perfect foil. Not only does he run the Business ByDesign and Business One product lines, he's been involved with ByDesign for more than two decades. Rumors that "ByDesign-is-dead" crop up every few years. This time around, Zinow had a very different take. He is clearly excited about the potential for S/4HANA Cloud, public edition. He intends to apply what he's learned on ERP for SMBs into S/4HANA Cloud:
If we're successful, then we will win more and more market. S/4HANA Cloud is targeted towards the upper midmarket. In the upper midmarket, there's so much business to go after there. We need to see how the whole thing evolves... There's a little bit of Microsoft and a little bit of NetSuite, a little bit of ByDesign here and there. But there's not any dominating player in that market. And if we can take that market with S/4HANA public, then we have a hell of a story.
For those who want to pit one of these products against the other and predict their demise, Zinow has a response. The major new functionality his team builds is now built on BTP. Thus B1, ByDesign and S/4HANA Cloud public edition all have access to it. One of several examples Zinow cited? A CO2 management solution, available for ByDesign since the May 2022 release, to B1 since August 2022, and now to be available for S/4HANA Cloud, public edition in a few weeks (the midmarket version is called Product Footprint Management for Clean Operations).
This deploy-to-all strategy changes things. As I see it, this reduces the challenge Zinow's team would have keeping B1 and ByDesign modern, while also supporting S/4HANA Cloud. Instead, Zinow can focus on new apps that bolster all three products. How it shakes out between these offerings will therefore be dictated by customer demand, moreso than by development burden. For Zinow to advocate for all three products works much better than the mixed messages I used to get from SAP, as different SMB and S/4 product owners jockeyed for position.
This also allows Zinow to issue new features that bolster what S/4HANA Cloud has to offer. As Zinow explained, ByDesign has a very controlled, mature set of processes. Whereas higher up in the midmarket, companies want to plug in best-of-breed components to their chosen ERP platform. The S/4HANA public cloud architecture is much more accommodating for that type of customer.
Another relevant SAP story I am tracking is SAP's Industry Cloud play. While GROW with SAP does include industry pre-configurations, some enterprises need deeper industry enhancements; they might not be open to public cloud ERP without it. Some midmarket cloud ERP players have addressed this by releasing industry-specific versions. SAP's approach is different, with one version of public cloud ERP that can integrate via industry cloud functionality on BTP.
I see market advantages to having industry-specific versions, but if SAP goes the way it appears to be headed, SAP can also provide these industry cloud applications as services, even to SAP ECC customers on older releases. Offering these cloud apps on the SAP Store also opens it up for industry-partners to build also - moving beyond the limitations of one vendor building out verticals. As the SAP Industry Cloud team told me:
If you talk to our development teams, they will tell you that they can deliver everything. What we said is, 'We're going to focus.' We are really creating a map and an opportunity. Where does SAP has some special expertise that we want to move into the cloud?
So think about utilities regulation; think about agribusiness,. These are topics where we said 'Hey, we want to extend our core ERP, but not glue it in, but really have modular cloud solutions.' So this is the strategy. And we always decide whether we really need to do something on our own, or do we better engage a partner? Since then, we now have more than 50 SAP-based solutions, and more than 250 partner-based solutions. [Author's note: the Agribusiness Industry Cloud is an interesting model, with ten agribusiness apps from SAP and its partners bundled together].
GROW with SAP provides a welcome addition to the emphasis on the 'private cloud' version of S/4HANA (aka S/4HANA Cloud). Whether GROW will be a successful driver of S/4HANA public cloud edition remains to be seen. As it's a new offering, we don't have the customer proof points yet, but I look forward to hearing those - hopefully in the spring timeframe. I still believe SAP should have someone whose sole role internally (and externally) is to own public cloud ERP adoption, but SAP has a different view of that. The proof as always, will be in the results.
I still need to comment on SAP's data fabric announcement, and to share the views on the state of SAP from my recent talk with DSAG, the German SAP users group. Those topics will be in my next SAP story.