SAPPHIRENow 2019 in review – Dick Hirsch on SAP’s big change in cloud strategy and more

SapphireNow 2019 may have been short on blockbuster news, but it wasn’t short on drama and subplots of deep importance to customers. Diginomica’s team coverage hit on many issues, including:

Qualtrics analysis and use cases – Phil
Bias and workplace diversity – Madeline
Indirect access news, and S/4HANA adoption – Jon
Keynote/press reviews and analysis – Den

That’s just a sampling, so check the full archive, as well as Den’s pre-Sapphire Elliott Management activist investor analysis with Brian Sommer.

On the last day of the conference, I did my traditional podcast debrief with diginomica contributor, cloud expert, and long time SAP Mentor Dick Hirsch ( Sapphire Now in Review 2019 podcast – Dick Hirsch on a changing SAP).

We don’t do any scripting so I never know where Dick Hirsch is going to begin, or what we’ll get into. But he quickly cut to the chase:

Everything is about experience and getting the customer experience. For me, I like to call this SAP Post Snap. I’m talking about the Thanos snap in the Avenger movies. Something has changed. I can’t quite put my finger on it, but there has been some fundamental change. I’m not talking about the one restructuring effort which went on, but something is different. I don’t quite know what it is. I got a feeling of it when I was watching the Board Members in a Q and A. I started realizing, they’re really young. It’s a whole different feeling and when you hear that Board Members use the Slack on a daily basis, that’s something fundamentally different.

Here are six takeaways Hirsch zeroed in on during our talk.

1. SAP nods to/collaborates with the hyperscalers.

I think how SAP is looking at cloud is now … They’ve always looked at cloud in an SAP-specific fashion. Now they’re becoming much more aware, in terms of what the market is, in terms of the hyperscalers (AWS, Google Cloud, Azure). They are very aware that customers want to go to the hyperscalers. Then, how do you deal with that? Not only in terms of their Cloud Platform, but also in terms of their support. (see SAP’s official announcement, SAP & Partners Guide Customers to Cloud).

2. Can these hyperscale alliances help get more customers live on S/4?

As I got into in my pre-Sapphire Now earnings analysis, SAP users groups ASUG and DSAG have both documented customer challenges moving to S/4HANA. We can talk about SAP’s acquired SaaS products all day, but SAP’s future prosperity is closely linked to S/4. Dick wonders if SAP’s increased ties with the hyperscalers will fuel S/4HANA adoption:

Everything in the end revolves around S/4, in getting people to move to the new platform. I think [that could change] with the focus now, with the agreement that came out today, with all three major hyperscalers trying to bring people to S/4HANA in a more rapid fashion.

3. SAP fully embraces the public cloud.

In past keynotes, SAP Co-Founder and Chairman Hasso Plattner seemed to less than all-in on the public cloud, or implying that SAP had a better cloud approach. As Den Howlett noted in his day two keynote review, that all changed this year. That was a top theme for Hirsch as well:

That’s definitely a big change for him and me as well. You’ve got to make a distinction between things such as S/4HANA running on a hyperscaler and a SaaS application. They’re not equivalent. A SaaS application is usually a multi-tenant. With S/4, how they’re setting it up, that’s not S/4HANA on the cloud, this is basically a customer, usually a customer-specific instance, which is running on a hyperscaler.

But: doing a “lift and shift” of a heavily-customized, on-premise instance of S/4HANA to one of the hyperscaler is just an intermediate step. To achieve SaaS-like benefits for customers and streamlined SaaS cloud operating costs to SAP, they have to eventually get customers on S/4HANA’s public cloud (SaaS) edition. But that means cleaning out the customizations to standard SaaS configurations:

For me, the end goal really, is moving people to the S/4HANA Cloud. Because what Hasso was talking about in the second keynote, the speed of upgrades – you really get that only when you are using a SaaS application. Because that’s when the provider is doing all the upgrades in the background. That, I think, is really the speed of innovation that SAP wants to achieve. If you have S/4HANA on a hyperscaler and you still have lots of customizations, then the question is, of course, are you going to be able to move to the cloud version of S/4, at some point?

That also means a different kind of partner, one that doesn’t load up on customization requests to line wallets, but advises customers on a path back to standard configuration.

4. How should SAP developers respond to this cloud shift?

With SAP TechEd season coming in the fall, Hirsch wants to know how SAP will address the developer evolution:

Once you move people to the S/4HANA Cloud version, then I think you have to be up to speed. For a developer, how do you respond to that? If my company was in the S/4HANA Cloud, what is my role? What tools do I need? Do I need ABAP? Do I need something else? If you’re looking at it from a developer’s perspective, how do I want to position myself for that journey?

5. How will developers and partners fill the industry functionality gaps in S/4?

At SapphireNow, executives like Peter Maier, General Manager SAP Industries, re-iterated that they are not going to turn S/4HANA Cloud into a “monster” by moving all industry functionality to the cloud. Industry partners will play a vital role, extending S/4HANA Cloud via the SAP Cloud Platform and the SAP App Center. Late in the show, I talked with a few SAP app partners and am pleased to see the progress SAP has (finally) made with both the online purchasing process and supporting partner apps via SAP’s own sales teams. But Hirsch raises the question:

I had an interesting conversation with individuals from the digital team about having the ability to have their apps in the App Center. The idea would be, for example, if you are a partner, you would develop an industry solution. Not a huge one, but a small add-on that would be able to be bought in context via the commercial process, which is supported by SAP’s digital team. But just the fact that you have an add-on, the question is how accessible is it, how easily is it that a customer will find it?

I think what they’re doing there is important because it’s not only the store itself but it’s contextual within an application. So you could be doing some analytics app and then it comes up, “You need more data. We recommend this data.” If you want this data or you want this extension, then it would be bought in that fashion.

6. SAP’s experience and operations vision (X/O) won’t add up to anything without integration.

During my yet-to-be-published talk with the DSAG Board at Sapphire Now (SAP’s German-speaking user group), they emphasized repeatedly that SAP’s top issue is integration, particularly with their master data and Master Data as a Service initiatives. Hirsch agrees that this is a critical issue. We also raised the question of whether some master-data-as-a-service momentum has been lost, perhaps due to restructuring and job roles changes. Hirsch:

The master data is critical not only for the integration between S/4HANA and SuccessFactors, it’s the heart of basically anything that they’re going to do for the Intelligent Enterprise. We talked about this last year as well. The thing which is always interesting is to try and figure out: “Okay, if you have a business partner, or you have a user, then the data has to be the same, basically.” Otherwise, you will have issues in terms of data quality, in terms of processes. It might not work as you expect. So that’s something that they’re going to have to deal with ASAP, basically.

The wrap – miles to go before SAP TechEd, with SAP Cloud Platform futures on deck

Another crucial issue heading into SAP TechEd season is the changing role of the SAP Cloud Platform. Many developers perceive that SAP is de-emphasizing the SCP due to the restructuring and team member reductions in that area. SAP re-iterated many times at Sapphire Now that this is not the case. Rather, it’s a shift where open source tools will be leveraged as much as possible (Cloud Foundry, etc), and SCP will focus on differentiating business services rather than building a complete proprietary PaaS on their own. But heading into TechEd, SAP will need to get this message out to developers, as well as improving trial SCP access and addressing licensing questions, which I wrote about in What SAP needs to accomplish at SAPPHIRENow 2019 and beyond – SAP community leaders air it out.

We got into many more issues in the 34 minute podcast, including:

• Why partners need to change, and not just “lift and shift” customers to the cloud (8:00)
• SAP’s industry’s vertical cloud strategy (12:00)
• Indirect access licensing news and update from ASUG, DSAG and SAP (16:00)
• The backdrop of SAP’s profit margin push and Elliott Management (17:00)
• Clarifying COO Christian Klein’s unified data model announcements and why he’s focusing on S/4HANA Finance and SuccessFactors (31:00)

There’s no simple way to wrap all of that. I thought SAP had an overall successful show, but there are big issues to tackle if SAP wants to keep that momentum going at SAP TechEd. And, perhaps, the most important Capital Markets Day in SAP history in November.

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