In this episode Ralf Korb, Marshall Lager and I had two very special guests: Bob Stutz, president of SAP's CX group, who shapes the CRM industry for more than 20 years now and Esteban Kolsky, former analyst, both independently and at Gartner. Esteban has deep roots and a passion for customer service processes and now leads the sales and service products at SAP CX. 

And then there was a special star, perhaps the youngest guest who we will ever have.

Again, and as usual for our CRMKonvos, we did not stick to one hour. Bob and Esteban actually shared their insights for a full 90 minutes, which is something for which we are deeply grateful.

We covered a lot of ground starting with how 22 years of experience in the military services can help in the software industry - and not ending with why it took him and his team that long to publish an SAP CX strategy. 

You are interested in the state of AI and machine learning? Ask Esteban - or listen to his statements in this episode. Same for what we are doing wrong in customer service for five decades now. And he needs to know, having a service centre background and having covered the service arena for 20 years now in various roles.

Did the acquisitions that SAP did in the past years make sense? Why did it take SAP that long to figure out some of the gems in their portfolio? 
How should pricing look like and why would make this pricing vendors build better software? 

Why Emarsys? Where does it fit into the stack - and why?
Ever wondered what the real purpose of a CDP is? Well, let Bob explain it. 
Will SAP go with Thunderhead? 

And why does Esteban think that SAP is actually the only(!) company around that can create CX the right way?

All this made up for a more than fascinating CRMKonvo with two of the most outstanding brains in the industry.

A little spoiler: Not surprisingly, the key success factors that matter in both environments - military as well as software industry - are "focus and execution".

The episode is in English, barring some introductory words in German - and after Esteban switched to his headset his sound quality went up considerably - so do not get disturbed by his first few statements.

It has been an intense 2 weeks. The CX or CRM or however you want to call it market got a serious makeover. After a long time without a tangible strategy, SAP announced a lot of things, starting with the intended acquisition of Emarsys, followed by an announcement about the release of a customer data platform as part of its SAPCXLIVE event, and then it also conducted its SAPCXLIVE online event in an impressive manner. I wouldn’t proclaim it ‘cineastic’, which is the current mot du jour, but still, it felt very much like a trade show, just virtual.

And the week before, SAP president of CX Bob Stutz shook the players during an executive roundtable (very good discussion, intense 2:40 hrs) with representatives of the big 5 held by the CRMPlayaz Brent Leary and Paul Greenberg. He openly questioned the enterprise software vendors pricing policies by asking why the industry does not go for a utility bases billing approach – or should I say utilization based billing approach.

Maybe it was just a challenge, as SAP applies usage based pricing with the indirect pricing model for its ERP software and intends to offer it for (at least parts of) its CX software.

Pre event some pundits, e.g. Bob Evans of Cloudwars and myself, dared a look into the glass ball, interpreting the SAP world differently.

What can be said is that any allegations of SAP withdrawing from the CX market, succumbing to the 800-pound gorilla that Salesforce is, should have been wiped out latest after the first few words of SAP CEO Christian Klein’s keynote of SAPCXLIVE.

The opening video to the keynote directly sets the scene by stating “you don’t own your customers’ decisions – you enable them” (around 10:50).

Klein makes things pretty clear by saying that “SAP CX customers are growing twenty percent faster than their competition” and that this is no different for SAP, as “CX is the fastest growing category in our portfolio”.

This is followed by the commitment that CX is “an integral part of the Intelligent Enterprise”, which is even stronger as it is combined with his face, and later naming CX a “key element of SAP’s holistic strategy”.

Figure 1: SAP commits to CX; source SAPCXLIVE

Klein supported this by quoting many conversations and with an example of a retailer who needed to react to the Covid-19 crisis, and didn’t ask for technology but for end-to-end solutions that revamped the whole customer journey while accelerating the digital transformation of the company. “A fancy online store is worth nothing, if you are running out of stock, have long delivery times or cannot offer flexible payment terms”.

Net, net, he says, only a harmonized data model and a connected customer journey can deliver the seamless experience that is expected by today’s customers.

Because of this, one “cannot think of CX as a separate entity; it needs to be considered as an integral part of an intelligent enterprise”.

Combining this with the already published information about the four core enterprise processes that SAP sees – one of which is lead to cash – this means that they are pretty much all in to the CX battle, albeit likely with some focus.

In a subsequent tweet that is not less clear he said that SAP regards customer experience as a cornerstone of digital transformation and as an integral part of an intelligent enterprise across every industry.

During an executives’ Q and A, Thomas Saueressig also emphasized that “customer experience is super strategic for SAP, as it is center of stage for the end-to-end intelligent enterprise”.

Boom. Broadside delivered. The glove has been thrown, and the sound of it hitting the floor resounded.

One thing is for sure, the void about the CX strategy has been filled.

This was a statement that was long waited for, but one that at least for me did not come totally unexpected. After all, industry leaders like Bob Stutz or Esteban Kolsky would not have stayed without knowing that SAP is serious about this market.

Klein combined this commitment to CX with the narration of SAP helping to make businesses sustainable, profitable, and resilient at the same time; a story line that we already heard in his keynote of the annual SAPPHIRE event in June this year.

Which begs the question: What is SAP CX?

The answer to which is: Personalized, seamless, everywhere.

What?

Well, these are the three words that SAP uses to describe how it distinguishes itself from the competition.

Figure 2: SAP CX according to SAP; source SAPCXLIVE

According to SAP “truly meaningful customer experiences have three key characteristics: They are hyper personalized, they are seamless, and they are delivered across all channels your customers opt for at the center of these experiences is one key ingredient: data. ”.

SAP CX, with the existing solutions, plus the newly announced SAP Customer Data Platform, plus the planned acquisition of Emarsys, is supposed to be exactly what delivers to this “truly meaningful customer experience”, with the CDP at its core – and Emarsys providing the ability to engage a person using the right channel and the right messaging.

A reality check

Now, the question is, in how far all this changes the view that my glass ball provided me with.

Another, perhaps more interesting one is, in how far do the news about SAP CDP and the Emarsys acquisition set SAP apart from Adobe, Microsoft, and Oracle, which have a similar market share – and bring the company closer to Salesforce.

As I already said and wrote before, the intended Emarsys acquisition came unexpected for me. My assumption was that SAP rather partnered, therefore strengthening the ecosystem, than purchased. According to Bob Stutz Emarsys delivered the missing piece, namely the omni channel engagement platform.

Still, it makes sense and I will certainly observe what is going on.

The CDP makes even more sense. For one, this is a market segment that currently cannot be ignored, and secondly especially not if there are a bunch of solutions in the portfolio that can assume this role, given a little TLC (tender, love, and care for the inaugurated amongst us).

SAP decided to implement its new CDP on the Gigya platform, which I think is a very good move. This gets proven by the claim that it took only a bit more than half a year to implement it far enough to be releasable.

Which makes the question why it took SAP that long to realize what they had at their hand interesting. Bob Stutz’s reply to that question, when I asked him in a recent CRMKonvo, was “ focus and execution”. But then I, myself, was admittedly a bit short in my initial analysis of the Gigya acquisition; still, both Gigya and the then emerging SAP Marketing have been great candidates for morphing into a CDP. Just that only the Gigya platform had the elements identity and consent management that are crucial for a CDP. This is something that I only discussed about 9 months later… well, in part; sometimes I am really slow. Given that I find some time I will write an analysis of SAP’s CDP approach in the next few weeks.

So, in summary I (luckily) was wrong about marketing and at least partially right about the customer data platform, CDP. The good news about CDP is that SAP even took it considerably further than its original definition by the CDP Institute, which claimed ownership of a CDP for marketing (which is a notion that it luckily changed). SAP still goes further than the current definition of a CDP by making it actionable, and by explicitly opening it up for supporting customer service.

The CX strategy in a nutshell

Which brings me to the strategy behind SAP CX that supports the intelligent enterprise, which consists of 6 elements that build upon and extend each other.

Figure 3: Elements of SAP CX strategy; source SAP

It is clearly visible that this is already being executed upon, e.g. by pushing Spartacus or the CDP and by making Esteban Kolsky responsible for both, Sales and Service capabilities of SAP’s CX stack. Although Qualtrics will have its IPO it gets ingrained into the stack deeper and deeper.

Marketing we already covered.

My Take

In Germany we have a word that, literally translates to “What takes long, finally gets good.”

During our CRMKonvo on October 20, Bob told us, when he was asked about why it took so long to vocalize a strategy to the market that there was “no hurry to rush it out”. He wanted to be absolutely sure that he and the team were able to execute on the commitment and be able to deliver. And with the introduction of the CDP and the Emarsys acquisition, the timing turned out to be perfect.

I cannot but agree.

I think that, with the story that SAP told as part of the SAPCXLIVE event, the company has shown that it is serious about the market. It puts a holistic view on businesses that makes CX part of a bigger whole by emphasizing CX being part of the complete value chain of a business. SAP is deliberately blurring the lines between front- and back-office. This is in contrast to Salesforce, who by design focuses on the front-office.

If SAP manages to get rid of visible middleware between its solutions, if enhancements to business objects in one subsystem are transparently carried over to other subsystems and if the new CDP becomes the golden customer record not only for front-office solutions, SAP has a very strong and compelling story line.

The remaining topics then are creating the trust and rectifying the image that SAP is hard to work with, which is an effort that has already started.

My prediction is that with this integrated CX strategy SAP has a good chance to set itself apart from the immediate competition and can start to close the gap to Salesforce.

May the games continue.

What we know and can observe

• 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.

• 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?

And finally, some suggestions

The News

The Bigger Picture

My Analysis and PoV

• The story around customer (and user) experience extending the intelligent enterprise that needs to be told is available, but it isn’t really told yet, at least not consistently. SAP has strong analyst relations and an even stronger partner network, which could – and would love to – help around this topic.
• As a result of its acquisitions, SAP now has a number of solutions that need to be integrated. This is very hard work, especially in the light of a multi-cloud strategy that works across hyper scaling IaaS vendors.
• Although most CX solutions are good, there needs to be a lot of attention to detail. And taking the marketing cloud as an example, it has quite some strengths, but could do better with a closer look at what marketeers are doing day by day. Combine this with a more reliable roadmap communication brings a winner
• Related to the intelligent enterprise story there is the actual uncertainty about how S/4 and C/4 (here we are with naming) actually complement each other or where the boundary between the two really is.