Will partners and SIs buy into customer success KPIs, or not? SAP Executive Board member Scott Russell weighs in

I carry a small debt to SAP CEO Christian Klein - today I'm repaying it. Back in April, Klein answered some difficult questions in my piece, SAP RISE in review - CEO Christian Klein responds to the "one handshake" issue, and SAP user groups air out their top questions.

Once Klein confirmed that SAP's SIs and partners are on separate RISE with SAP contracts, that raised a fundamental question:

How do we ensure customer success, when partners are not contractually signing on to SAP's KPIs - and accountable to them?

This monster question is hardly unique to SAP - nor is it limited to a RISE context. To follow my piece challenging vendors on their customer success hype, I'm now doing a video event on the role of partners and SIs in customer success. It's an overlooked issue, but one that all software vendors must take on..

RISE with SAP and customer success - getting customers to a "clean" digital core

If RISE with SAP doesn't address this problem contractually, then how will SAP face it? That's where Klein's challenge came in. He believes this issue is being addressed via SAP's Customer Success initiatives, under the purview of SAP Executive Board member Scott Russell. He challenged me to dig in - and so I did. Via two frank video discussions, Russell shared the state of customer success at SAP, and his take on the role of partners. At the time of our last call, SAP was gearing up for earnings announcements. Russell started there:

We continue to see both new and existing customers of small, medium and large [organizations], really focused on three things in their growth and scale with SAP. First is the move to the cloud in mission-critical workloads.

Russell hit on a key RISE with SAP talking point  - one that has big implications for SAP's SI community as well: moving away from code customizations, and into a platform mentality:

They buy into the outcome of a neat and compact digital core, one that doesn't have all of the customizations  and things like that. So really being able to transform, and be able to do that in the core, having a platform they can scale on. and innovate on - not always on SAP technology, but associated to, orchestrated by, and extended by our platform and our capabilities. Then the third is to do it in the cloud.

So how does that impact Russell's lead of the Customer Success organization?

We've had a number of customer forums. We've got a RISE customer advisory forum; I have my broader Executive Advisory Board of some of our biggest customers... They continue to zero in on this, on the value that they're seeing in the move. But they're also clear about what needs to come in addition.

What else do customers need? Russell:

We've now been driving further in, with more capabilities, tools, services, engagement enablement, to give more value embedded in the service. So it's not enough just to move the workload; they need to be able to either accelerate time to value, or maximize the benefit out of the solutions that they've got.

The changing role of SIs - an SAP progress report

Russell believes the impact of Signavio BPI is being felt, in RISE with SAP and beyond - a topic I examined in Why BPI, and why now? SAP Signavio's CEO on how process intelligence changes the enterprise - and how it reveals the true agenda of RISE with SAP. Then Russell hit on the systems integrator issues. He says that SAP's SIs are making the necessary shifts in their services models:

We've seen a lot more progress with our systems integrators, both the large ones and smaller ones - about transitioning their businesses with RISE, and what it means.

Russell acknowledged: at first, the SIs did not fully adjust. He says that is happening now:

They were pivoting with what we were doing, and what customers were asking for, but they still had business models that didn't always line up 100%. [Now] we see a real shift.

What does that shift look like?

You might have seen it with a lot of the systems integrators - they're now offering pro-active branding, marketing, and launching a set of services and offerings that surround RISE. It's all about embedding this idea of a clean core, and then innovating and expanding beyond from that.

Russell believes past SaaS experience is helping SIs make this change, but not with a focus on the enterprise core:

I guess they're using their templates that they've done with all their other SaaS businesses, then taking the same business model now with RISE, but there is obviously a size and scale in mission-critical workloads... They're looking at that journey,  and they're doing it in a way that is very collaborative.

Beyond customizations - changing the SAP services model

Why the change? Russell says his team has been able to put more attention into the partner enablement side of RISE the second half of 2021, having spent the first part of this year on "getting the offering right, and refining it." How about a customer example? Russell:

I was on a call with the CEO of a large European consumer product company. They are a long-term SAP customer. Part of their business went onto with RISE. We had a mandate around that clean core, and they're in the late stages of their rollout of this. And he basically said, 'Look, you'll be pleased to know, we've got a partner on this, and we've got less than ten customizations.'

He said, 'Scott, I know you told us to start with zero and maintain zero and be accountable to zero. But you know, less than ten is pretty good.'

How did they get to that "clean digital core"? Russell:

Number one, they focused on it, which is always the right thing, but the partner also said, 'We will work to that outcome.' And [the customer] is excited, because then it forms the basis of something that he can scale. He wants to innovate; he just doesn't want to do it inside the old code base.

Russell believes the SAP partner wake-up call has happened:

They recognize that the value they can derive will not be on implementation anymore. It's very hard to differentiate on the implementation service, especially when you're trying to make it as standard as possible. Where you're differentiating is how you maximize the use, the adoption, the value that gets derived.

If the old way is a revenue dead-end for partners, then what's the way forward? Russell:

What's been interesting is a lot of the SIs have been building out value services, where they've got an offering that is about transformation and extension. They've built an industry accelerator on top of the platform, that automatically plugs in - things that could help them accelerate that value, and then allow them to be a part of that journey.

Russell believes SI innovation will go further, into outcome-based scenarios:

This has pushed us on new creative business models, where our partners are now saying, 'Look, can we work with you in a different way?' Not so much on a combined commercial offering but on an outcome basis. In Q3, we've launched more models with our partners, whether it be a pay-per-use and other type models, so they don't have upfront costs - they can build and then deploy. Then, once the customers are using, we jointly benefit, but it's on the basis that the customer gets value.

But there is work to do:

It does pose the ongoing challenges to do that with scale. We've got 25,000 partners. At the global end, at the top end, we see really fast movement.

Where we've got more work to do is to help those partners in the geographies that need the local skills, local language, local understanding, and to be able to support them where they don't necessarily have the large scale presence of the big systems integrators. We're working on it.

My take - customers need usage and licensing dashboards

You probably noticed we didn't get into the specifics of RISE with SAP KPIs, and how to get partners at the same table - agreeing to the same metrics. Frankly, when it comes to some of SAP's big SI partners, I have a hard time imagining any type of shared KPI agreements happening. This is a discussion point I'd like to take further with Russell's team, if he is willing.

However, this goal of a "clean digital core," with limited customizations, is a form of a KPI, and an important one. "Our partner brought us down to ten customizations" is a good metric. If your customers all have massive deviations and code base variations, you really can't talk about the benefits of modern cloud applications. And you can forget about effective AI and workflow automation.

I give SAP credit for pushing this customization point heavily. Some partners are more on board with this than others. I've heard partners talk about the virtues of customizations in a RISE context, but SAP is clearly bearing down on this. I'd urge customers to take a hard look. Ask partners probing questions on their customization philosophy.

As I told Russell, I'd prefer to hear SAP emphasize the multi-tenant ERP cloud. I hear SAP talk more about the "hybrid cloud" than any of its cloud ERP peers. Sorry, but the hybrid cloud is a haven for customizations. However, despite the potshots from competitors, the hybrid discussions at SAP are more than "lift and shift" these days.

In my customer success challenge to vendors, I asked: why aren't we providing customers with transparent consumption and licensing metrics? Why don't ERP customers have licensing and auditing dashboards? Isn't any type of license audit completely antithetical to customer success?

And yet, when you read the UpperEdge blog, you are struck by how many vendors are still playing these games. As I told Russell: "If you're auditing me right now, I'm not really in the mood to talk with you about your vision of customer success." Russell responded:

I can't agree with you more. If you think about customer lifetime value, for my utilities, or my phone, I know my current usage. Now, in an enterprise scale, it's obviously more breadth.

Yes, the enterprise consumption dashboard is tougher nut to crack. And Russell is right - there is more to this than audits. Consumption/usage metrics are important too, as well as provisioning. But I keep coming back to the auditing thing, because that has such a chilling effect. If I'm  running on modern ERP software, a license audit should never come as a surprise to me. Some of what Russell shared with me is still in the works, but I can say this much: SAP is looking hard at this topic.

I 100% agree with you. If you do get a surprise, we've haven't proactively engaged... You want to know what you're using and why you're using it as a client. As SAP, you've got to be pro-actively giving advice. So part of that is the tooling.

Russell says more partners are building industry IP on the Business Technology Platform (BTP). I haven't run into many, but I'd love to hear about more. Example: what Sodales Solutions has done extending SuccessFactors is exceptional.

When it comes to ERP, I make no secret: I favor the smaller niche partners. I believe smaller players are forced to specialize in ways that add value to customers. So I asked Russell: does he see these changes going down to the smaller partners? Short answer: yes. "Some of them are using it to differentiate," says Russell. But in other cases, he says, guidance to new business models is still needed. I say it every year, but I'd like to see smaller partners on the Sapphire Now stage, demonstrating what they can do. The talk of outcome-based models is promising.

This discussion goes far beyond RISE, or even SAP for that matter. But I welcome the engagement with Russell's team. Hopefully it will continue, and I can provide notable updates here. Talk of "customer success" holds up a mirror. How vendors respond to what they see will tell us a lot about their future prospects.

Updated November 6, 2021 with a number of small tweaks for reading clarity.