Earlier this year, a few days after attending SAP Sapphire reimagined, I asked Quo Vadis, SAP. At that time industry legend Bob Stutz led the CX group already for 8 months, with Esteban Kolsky being his chief of strategy. At this event there was hardly any mention of SAP CX. This is in spite of the CRM market being the fastest growing enterprise software market and in contrast to then CEO Bill McDermott’s bold statements that SAP will take Salesforce heads on. Esteban meanwhile changed his role and has become Head of Product, Customer Service and Sales for the SAP CX unit, which indicates that there is an emphasis on execution. And then, there was the announcement that Qualtrics, the company that basically defined the experience management market and that SAP acquired barely two years ago, will be brought public. So, something is happening. But still, there is no word about a strategy or a vision besides a few hints that Bob and Esteban gave during various webcasts or a blog post, in which Esteban gave a glimpse at what he sees as the next generation CRM. It should not surprise you that his thoughts have to do with platform, as the overall market for business applications, and especially the market for customer experience, has morphed into a platform market. This void of communicated strategy was supposed to be filled in early May. This communication was cancelled in the wake of Jennifer Morgan leaving SAP and Christian Klein becoming the sole CEO. This void shall be closed soon, after it lasted far too long. This indicates some alignment challenges about how CX fits into the story of the intelligent enterprise, which actually is a story about intelligent enterprise networks, and likely the wish to be able to show some results of the new strategy. October 14, 2020 and October 15, 2020 are two big days for the SAP CX community. On these dates the SAP Customer Experience LIVE will take place. This is the event that shall be used to showcase the latest SAP Customer Experience solutions as well as information about SAP’s CX strategy and roadmap, plus some “exciting innovations”. Not unexpectedly, the event covers all five pillars of SAP’s CX portfolio, namely Commerce, Customer Data Solutions, Marketing, Sales and Service. But hold on: ‘Customer Data Solutions’. This is a new term, indicating that SAP has something up the sleeve, as this pillar was formerly known as the Customer Data Cloud, which was the new name of the (enhanced) Gigya solution. This alone is reason enough to look into what we can observe and what we can derive from this.

What we know and can observe

The most obvious thing to see is that Bob Stutz is still with SAP. And he has made Esteban Kolsky his Head of Product for Customer Service and Sales. Why is this important? These two are very high profile in the CX industry, and very driven by getting things done. The thing to get done here is making SAP a significant player in the industry again. If those two wouldn’t see a chance doing that … they would be gone. Especially Bob doesn’t need to do this anymore. He does this because he wants to, simple as. What does this in turn tell us? It tells us that SAP is serious about its CX line of business, even though analysts, consultants, and customers might not readily see this for a lack of communicated strategy. So, besides this, let us gather some facts and observations in random order, so that we can derive some conclusions out of this.

• SAP is strong with B2B customers. Manufacturing, but also CPG companies are some of the biggest customers.
• In the CX area, SAP is not particularly strong in with its Marketing Cloud (although the software is underrated in my eyes)
• With SAP Commerce, SAP owns one of the leading E-Commerce solutions.
• The Sales- and Service Clouds are pretty strong and do not need to hide.
• Growth in the Sales Cloud seems to be declining.
• The Sales- and Service Clouds are functionally adjacent to SAP’s core business, which is the ERP aka Digital Core. Marketing is not.
• SAP is investing in the service area, especially in S/4. The customer service module in S/4 is also essentially the former CRM Service.
• One of the four core processes that SAP has defined is lead to cash, which includes a lot of Commerce Cloud and Sales Cloud, augmented by quite some ex Callidus (CPQ, Commissions) and some Marketing Cloud.
• SAP CPQ, the former Callidus CPQ has been moved organizationally towards the ERP group.
• A good part of the on premise SAP CRM Sales and Service have been made part of S/4HANA.
• SAP has invested a lot into integrating the acquired solutions into the own software; this to an extent that made customers worried about the further roadmap.
• SAP has created a number of microservices on the SAP Cloud Platform that resemble business objects, in particular the business partner and with SAP Graph has introduced a business object orientated access model for its solutions, which abstracts away from the actual data layer.
• The Commerce Cloud is undergoing some modularization and the storefront is getting disjoint with Spartacus; this essentially creates a headless commerce solution, which goes beyond E-Commerce but makes commerce channel agnostic.
• In a recent investor interview (to which I wasn’t invited, so I took the quotes from a cloudwars post by Bob Evans), SAP CFO Luka Mucic made a few interesting statements about the SAP CX stance:
  • So, first of all, customer experience is absolutely a key market in which we want to be a significant player but with a focus on those categories where we clearly see that there is potential for SAP to be a strong #1 or #2 player.
  • There is a very obvious one in which we are leading the market and that’s the whole area of experience management, where we have Qualtrics, which is the category leader and that we are truly excited about and we are obviously looking at a partial IPO of Qualtrics to even further exemplify and magnify our growth opportunities.
  • The other area as I mentioned before is e-commerce, where we have with Hybris a very strong cloud fit that is growing in the high double-digits and that is in huge demand these days in particular with the challenges introduced by COVID. We think this is one of the core investment priorities for many companies around the globe.
  • And then also areas like customer data cloud, for example, where we also have a leading solution that can help customers manage the GDPR and triggers a digital sales motion in a way that is conducive to consumer preferences.
  • In others that from our perspective more translate into commodity markets where the growth rates are coming down and admittedly there is clear market leadership by others, we might look also at one or the other partnership opportunities. And in the meantime of course we see that the rising tide lifts many boats in many of those areas and so we will continue to look practically at an opportunity to participate in this growth.
  • But we don’t necessarily see it as an area in which we would dramatically double down on our investments. But clearly, CX remains a critical pillar of our cloud strategy, just in a little bit more of a focused sense.

Then there are a few things that I learned talking with various people.

• Not surprisingly, the CX team is incredibly busy.
• There seems to be considerable effort spent into re-platforming the CX suite, moving it away from the underlying Netweaver, making it cloud native software.
• The team is building something that they are calling a Customer Data Platform ++. This CDP seems to be built around the Customer Data Cloud as part of its core.
• SAP has moved a few of its main business objects and engines into the SAP Cloud Platform and/or is breaking them down into micro services.
• A strategic partnership with Thunderhead seems to be evolving, which is not overly surprising after Thunderhead’s partnership with Salesforce cooled down sudden- and rapidly and with Bob Stutz being the one who initiated the partnership at Salesforce
• There is some B2B marketing functionality that currently makes its way into the Sales Cloud.

And now you surely ask yourself where all this does lead to?

This is a good question, that at this time only SAP folks can answer. But let me take a stab at it. These are my predictions that I of course will have to validate with what I will learn attending SAP Customer Experience LIVE. As a precursor: Knowing Bob Stutz, he does not keep people busy for sake of being busy. This means that the team follows a clear plan. This is also evidenced by Esteban Kolsky moving from a strategy role into an execution role. Just to be clear, this is an opportunity that one doesn’t get too often! Both know that they need to change the game in order to be successful against Salesforce. As indicated by Mr. Mucic, SAP will just charge the CX market all guns blazing. Instead the company will focus own efforts on areas where it can be a number one or two. This is clear by Mr. Music’s statements. It is also smart because it allows SAP to establish and strengthen footholds that it can use as beachheads to enable further growth. Looking at the Sales- and Service Clouds, I believe that these will stay part of the SAP’s investment portfolio, with the core SFA market clearly not being a main part of the investment as it is not a major growth market anymore. This is also confirmed by the Salesforce quarterly statements. That means, especially for the Sales Cloud, that the focus will lie on intelligent add-ons that make life easier for sales organizations, and everyone who is part of them. The basis for this will be the already announced refined and much sleeker user interface. Additionally, it is interesting to look at what Mr. Mucic did not mention. He mentioned three parts of the CX portofolio: Commerce, Qualtrics, and the Customer Data Cloud. In addition to not mentioning the Sales Cloud, the Service Cloud, there is a notable lack of the Marketing Cloud. Customer service is actually an investment topic for SAP, especially in the S/4HANA area. So, it will be interesting to look at what is happening there, and how this extends into the customer facing front end, where Salesforce is attacking. Looking at the Marketing Cloud, and combined with what I observe and hear, the Marketing Cloud will not make it into a top two solution anytime soon. It is also at the fringes of the Lead to Cash process, which is one of SAP’s four core processes. Which is a shame. Powerful as it is – and it really is – the reasons for this lie back in 2016 or even before when there wasn’t enough focus on marketeers’ immediate needs. Now, thinking about a budding partnership with Thunderhead, some of the weaknesses of the Marketing Cloud could be resolved, given that the integration will be out-of-the-box and at low cost. The Marketing Cloud is already strong in first data management and with adding Thunderhead into the mix, it can become leading in customer journey orchestration. One remaining missing piece then would be out-of-the-box integrations into leading content management systems. Looking into Mr. Mucic’s statements about the Customer Data Cloud and at the high level agenda of the SAP Customer Experience LIVE, SAP has built something that can be considered the central customer master data hub for all SAP solutions, which is something that is sorely missing for quite some time now. If what I hear is right, SAP finally put the $ 2.4 bn investment into Gigya to good use.

And finally, some suggestions

SAP migrates a good deal of SAP CRM into S/4HANA while Salesforce is digging into SAP’s CX lunch. It could be interesting to be more aggressive about informing especially new, but also migrating customers that S/4HANA has quite some of the CRM functionality that customers need. And that it comes for free. Playing this card would potentially help swinging some Salesforce vs. SAP Sales Cloud deals into the SAP direction. Not all of them, but some. And this would nicely tie into the story of the intelligent enterprise and strengthen it. Industry solutions is something that SAP lately focuses on again. Good. This should be continued as it was one of SAP’s strengths and as the current CX main competitor – Salesforce – invested into industry solutions. Thinking this a little further, removing the artificial boundaries between front office and back office by offering all business objects and processes as services would be a real game changer. Many of the necessary pieces are available. It would let the applications vanish and build upon SAP’s strengths. Properly done, it would also remove the need for a (visible) middleware to connect SAP to SAP. This may be a long shot, but SAP Graph points into this direction. And finally, as a partner, I would wish for more integrated, configurable, and affordable demo systems. Frankly, it feels like pricing for these is at least as high as it is for customers. List price, to be sure. Partners are helping SAP to make a lot of business. They are using demo systems for generating business for SAP, so it would be great to have a closer look at how partner solutions are offered and priced. A page or two out of the competition’s book might be helpful here.