Much has happened in the SAP world in the past few months that were covered by the requisite number of announcements – and a good deal of analysis, including mine. SAP has

• Released its first release of S/4HANA for Customer Management
• Acquired CallidusCloud, a software company that focuses on sales enablement
• Announced a new ERP licensing model ‚for the Digital Age‘

While these three topics seem to be very different, combined they give a good insight into SAP’s strategy, and how the ERP world – sorry, the S/4 world, and the customer facing world are going to shape up. So, let’s have a brief look at these three announcements separately, and then connect a few dots.

S/4HANA for Customer Management

I have covered the migration of SAP CRM into S/4HANA a couple of times. S/4HANA for Customer Management  is the ‘customer orientated’ part of S/4HANA and shall offer the core service- and sales functionalities of SAP CRM, using a unified data model. It  is supposed to focus on what SAP calls the ‘heavy lifting customer processes’ and to support comprehensive core processes, thereby providing one central customer database. In other words this means that S/4HANA for Customer Management as part of S/4HANA will have a strong focus on (business) transaction processing and enabling the logistics that comes with fulfilment. One could say that it becomes a transaction engine. Keep that thought in mind.

CallidusCloud Acquisition

CallidusCloud provides leading solutions for sales performance management, CPQ, Contract Lifecycle Management, and more. This portfolio nicely plugs a few holes in the SAP Hybris portfolio and offers SAP options or at least another view on how to address issues tackled by existing products in another way. I am especially looking at the CPQ side here. SAP is traditionally strong on the variant configuration side but lacked a strong cloud based CPQ engine. The current SAP Hybris CPQ is, after all, an on premise solution and highly geared towards complex solution configuration. As such, and in particular with its deep ERP integration it surely covers some bases that CallidusCloud’s CPQ does not reach – yet. But then SAP moves into the cloud – and successfully so, as the Q1/2018 financial results announcement proves. On top of this, CallidusCloud CPQ comes with an integrated Contract Lifecycle Management system that helps facilitating the sales process of products with complex contract negotiations.

New ERP Licensing Model

With this new licensing model SAP reacted to the years long controversy about the indirect access topic. I haven’t covered this significant announcement before; hence I will write a bit more about it here, as it is also a crucial part for the connecting of dots that I talked about above. The underlying problem was – strongly simplified – that an increasing number of SAP ERP customers did not opt for SAP software when it came to choosing CRM solutions, e-commerce packages, or other pieces of enterprise software that surround their ERP backbone and exchange data with it. Of course, these packages needed to be, and were, integrated into the ERP back end in order to enable seamless processes across the value chain. So far, so good. Unluckily the users of the third party applications do regularly not have users in the ERP system. SAP argued that they are still using the ERP system, even if the data flows via a technical user. Customers do not want to license additional ERP users for the users of the third party applications, as they apparently do not use the ERP system, but just send data back and forth. Problem. Big problem. And one that was ruled in SAP’s favour in the Diageo lawsuit in early 2017. Still not a ruling that SAP could really use to play hardball. So, something needed to change. SAP elegantly solved, or rather mitigated, this issue by putting it into a bigger context: Outcome based pricing. Instead of users, the new pricing model is built around pricing the creation of business documents and there, in particular the line items. The interesting aspect here is that not the mere possibility to create value is priced (users) but the actual value creation (business documents are orders, service requests, opportunities, etc.). Add the thought that not all business documents are created equal and that there needs to be some scale pricing, one reaches a matrix that can be adapted easily enough to be future proof. Lastly, an outcome based pricing model fits neatly into SAP’s narrative of delivering outcomes and, in a broader sense, the SaaS story which after all has a usage and results based promise at its core.

My PoV and Advice

Putting these three topics together, SAP’s story about the digital core becomes more clear. The digital core is S/4HANA that takes care of business transactions and delivers intelligent insights to power (more) transactions. Everything else, workforce engagement, spend management, supply chain, IoT, and customer engagement/experience surrounds it. The new licensing model is actually the glue that connects the dots. So, what does this mean? Several things:

1. One can look at S/4HANA as mutating into a transaction engine. The SAP Hybris Revenue Cloud is well geared towards creating correct invoices, based on created ‘documents’.
2. SAP Hybris CPQ is on its way to retirement. It is an engine and not really cloud enabled. For variant configuration it bolts on the digital core. And configuration is not a business document in my books. The order, that holds the BOM that is generated by configuration, is.
3. Callidus is not yet strong in variant configuration but can be bolted on the digital core, too, in order to support variant configuration. SAP needs only one engine. Callidus is intended to be this engine. In case there is a continued need to have a separate variant configuration capability there is still In Mind.
4. There will be continued efforts to put all engagement functionalities – customer, supplier, employee – into cloud based applications that surround the digital core.
5. As a side effect, life might become easier for ISV partners, as there is no indirect access risk anymore.

I think that this pricing model is a very smart move by SAP. It will now be crucial to deliver a calculation tool that helps customers identify whether it is better to adopt this model or to stay on their existing pricing for a little longer. Customers most certainly will want to know what this new model means for them, specifically. Regarding indirect access, which is a topic that affects other vendors as much as it did affect SAP, well, the ball is now squarely in their court. It will be interesting to see how they react. Last, but not least, it is on SAP to refine the narrative in a way that less grey areas remain and that strategy and its execution is clear to customers. Of course I might be wrong with my view on SAP’s strategy – but I doubt it. Happy to get corrected, though. Any opinion?     https://aheadcrm.blogspot.de/2018/04/sap-calliduscloud-acquisition-take-two.htmlhttps://aheadcrm.blogspot.de/2018/02/sap-acquires-calliduscloud-snap.htmlhttps://aheadcrm.blogspot.de/2018/01/sap-crm-for-s4hana-news-from-customer.htmlhttps://aheadcrm.blogspot.de/2017/06/sap-crm-into-s4hana-did-sap-hit-bulls.htmlhttps://aheadcrm.blogspot.de/2017/04/sap-crm-and-sap-jam-news-from-crm.html  

The News

SAP has recently announced the completion of the acquisition of Callidus Software, Inc. Unsurprisingly, CallidusCloud’s assets shall get consolidated under the umbrella of SAP Hybris leveraging the customer relationships that the existing leadership team, which shall continue to lead their team, has built. CallidusCloud is a leader in sales performance management and in the CPQ area and also has some more interesting assets, notably their contract lifecycle management offering, which ties nicely into the CPQ piece. The CPQ software has a (first) working integration into SAP’s Cloud for Sales, which got announced in September 2017 and that gets continuously improved. One seemingly simple, yet powerful feature of the CPQ software is the indicator for margin health that gets updated as a sales representative works upon a quote. The software’s ability to generate multi-level workflows based upon changes of prices or contract clauses creates an efficient workflow, which includes the customer when using the portal based delivery of documents during negotiations. All in all the software is geared towards making the sales process efficient. CallidusCloud’s solutions shall be sold standalone as well as integrated into SAP solutions and a roadmap shall get announced at SAPPHIRENOW in June 2018. I have done a brief initial analysis of this acquisition right after the plan got announced and followed up with some musings about how CPQ can be delivered in a customer experience fashion.

The Bigger Picture

With CallidusCloud’s CPQ SAP now has at minimum three configuration engines that can get used by customers:

• ERP Variant Configurator
• SAP Hybris CPQ
• CallidusCloud CPQ

A fourth one comes into the picture if I add the Internet Pricing Configurator, IPC, a Java engine which runs embedded in SAP CRM and that is, using ‘condition technique’, mostly compatible to the configuration engine within ERP. For tech aficionados: The user exits that are available to manipulate how the access sequences are used, are working differently, and require Java skills, as opposed to ABAP skills. SAP Hybris CPQ can be seen as an advanced version of IPC, which got moved under the Hybris umbrella as SAP correctly sees CPQ as an important part of the glue between frontoffice and backoffice. Still, although being a Java engine, it is deployed on premise only – as far as I know, while CallidusCloud is, of course, a web based system. To my best knowledge SAP has about 3,000 customers that are using the ERP Variant Configurator and/or SAP Hybris CPQ and/or IPC. I am more than happy to get corrected on both of these two pieces of information. On top of SAP’s own configuration engines there are partner engines, for me most notably, In Mind. In Mind is a cloud based CPQ engine  with a focus on the manufacturing industry. It is built on top of the SAP Cloud Platform. The company got founded by former SAP people with significant experience in the manufacturing industry and configuration. One could say that one of their objectives is to close the gaps in the configuration area that SAP did not address. I had the pleasure of working with some members of their team and am still impressed about their knowledge and dedication. Then there are of course more third parties. In summary, customers have choice. But, they have choice. Which means a challenge: Which software to look at in which situations? Of course the different products have different strengths and weaknesses. The usual conundrum of software selection. And right now there is little advice on what to do, at least up to and until SAPPHIRE NOW.

My PoV and Advice

One thing is for sure: Going forward, CallidusCloud will be strategic for SAP; maybe not to the extent as Hybris E-Commerce was back when it was acquired, but CallidusCloud will make up an important pillar in SAP’s strategy. SAP Hybris CPQ and the Variant Configurator are on premise products. They are particularly strong when it comes to heavy duty configuration and to Solution Configuration. They also work well within the SAP ERP (and supposedly S/4HANA) ecosystem. With graphical user interfaces that can get bolted on top of them, companies that have complex configuration requirements and that do not need or want a cloud based engine get one of the more powerful tools that are around. Being a Java engine, SAP Hybris CPQ can also be integrated into a Hybris Commerce environment. If CPQ shall be used web based and out of offices by salespersons then the first choice for an SAP customer is CallidusCloud. Doing the whole process, including the initial contract generation piece and keeping an overview on the state of negotiations, is a huge benefit. CallidusCloud also may continue to be a good choice for non-SAP customers. Being a long standing Salesforce partner the integration into Salesforce at this point is rather better than the integration into SAP Hybris – although this is likely to change. Additionally, I have heard mixed accounts about Steelbrick, Salesforce’s own CPQ solution. However, CallidusCloud CPQ is far less about solution configuration as SAP Hybris CPQ, although I have seen some prototype functionality that suggests a move into this direction. If a cloud solution with stronger configuration capabilities than CallidusCloud currently offers is needed, then there is In Mind. With or without CallidusCloud CPQ it is worthwhile for customers to have a look at their CLM solution, which can be implemented standalone.

Advice for Customers

This leads me to the following recommendations for SAP customers:

• If you already run SAP Hybris CPQ, continue using it until you realized a meaningful ROI, as it will stay around. There are too many customers for SAP to abandon it.
• If you do not yet have a CPQ and are at least initially not too heavy on the configuration then CallidusCloud is the first option to look at – unless you are cloud averse, in which case it is SAP Hybris CPQ. But be aware that the setup of CallidusCloud is, and will likely continue to be, easier than the setup of SAP Hybris CPQ.
• If you are heavy on configuration and solution configuration, want a cloud based CPQ solution, and ideally are in the manufacturing industry, then have a good look at In Mind. The caveat that I, sadly, need to make here is that the position of In Mind as a company got somewhat weakened although they are still on SAP’s price list.

Advice for SAP

It is good that SAP intends to provide a roadmap already at SAPPHIRE NOW. In order to alleviate fears and mitigate the FUD that the competition doubtless creates, it should be pretty precise, aggressive, yet credible. The roadmap should especially consider guidance to customers on when to choose which of the existing solutions. It is almost inevitable that there is an overlap of use cases that cannot get resolved; still this is a much needed piece of advice. The second important part is, of course, detailing how especially the integrations into SAP Hybris Cloud for Sales and SAP Hybris Commerce will develop. Tight integration is a key asset. Third, I’d hope to hear about an easy-to-implement license conversion program for those customers who have just bought in to SAP Hybris CPQ, knowing that they will not need its full powers, and wish to migrate. While this might not be a great number of clients, it would show an immense customer orientation, help against the still existing image of SAP being hard to deal with, and be a quick and easy way into reference implementations. Lastly, and knowing that this is a difficult proposition, the announcement of an easy migration path from SAP Hybris CPQ to CallidusCloud would be the icing on the cake.

The News

On January 30, 2018 SAP announced that its subsidiary SAP America, Inc. has entered into an agreement to acquire Callidus Software Inc., a leader in sales performance management and CPQ software. With a price tag of around $2.4 bn this is the most expensive acquisition SAP has announced in quite a time. With this acquisition SAP gets closer to the target of assembling the “most complete and differentiated portfolio to manage today’s customer experience” and claims that the combination of the CallidusCloud Lead to Money suite in combination with its own (Hybris) customer engagement suite creates a “leading solution portfolio”. SAP intends to consolidate the CallidusCloud solution set into its Hybris portfolio, with the sales cloud being the technical integration point of the software. As usual, the existing management team will stay on board.

The Bigger Picture

According to the most recent Gartner Magic Quadrants for Sales Performance Management (dated 15 January, 2018) and Configure, Price, and Quote Application Suites (dated 29 January, 2018) SAP catapulted itself into the leadership position of Sales Performance Management and into a visionary position in the CPQ market. Forrester Research already in their Forrester Wave: Configure-Price-Quote Solutions, Q1 2017 placed CallidusCloud into the leader section of their wave. With SAP’s Hybris solutions, including Gigya, SAP already has a powerful customer engagement suite, albeit with some gaps, a significant of which got plugged with this acquisition. While SAP CPQ is fairly capable on the C and P there is some deficiency on the Q. And it bases on grandfather IPC – not a bad engine, but one that is getting tired. Friend Paul Greenberg’s reaction to this acquisition is:   https://twitter.com/pgreenbe/status/958668991182057472 According to Paul, CallidusCloud would have been a good acquisition for Oracle, Salesforce, or Microsoft, too. Definitely for Microsoft, which does not have a significant CPQ that I know of. For Oracle and Salesforce this in my opinion is more of a perhaps, which then would have been more around making life difficult for the competition. Both already have a strong CPQ, and both are doing well in the Sales Performance Management area. The onus was on Microsoft and SAP in this case. Now Microsoft, as in the case of e-commerce, is the last one without owning a solution. It also should not be forgotten about the good Contract Lifecycle Management (CLM) capabilities of CallidusCloud. CLM is an important addition to CPQ, as contracts are negotiated as well as prices for product configurations, especially in large enterprise B2B environments. Just look at a contract as a configurable product. While CLM does not sound anywhere near as sexy as CPQ, I know of cases where the CLM is as important as the CPQ itself. And it is one of the portions of a deal that takes considerable time, where speed and convenience, combined in a powerful tool, are crucial. CallidusCloud has been a long-time partner of Salesforce, which in 2016 acquired Steelbrick. Likely as a reaction to this, CallidusCloudCloud entered into a strategic agreement with SAP to integrate into SAP Hybris Cloud for Sales in January, 2017. This agreement had its first real tangible result in September 2017 when CallidusCloud announced the first version of an integration into SAP Hybris Cloud for Sales. Last, but not least, while I do not buy the “reinvention of the front office”, this acquisition shows the importance of end-to-end processes. Integrating CallidusCloud sales enablement and CPQ into the front office software (SAP Hybris) facilitates efficient integration into the more transactional oriented back end. It is part of the back office of the front office, so to say. We are closing a circle here: There is no clear cut differentiation between systems of engagement and systems of record. This is especially true in times of channel agnostic commerce.

My PoV and Advice

This was an important, even a necessary, move for SAP. SAP, for quite a while, had a gaping hole in the cloud based CPQ area, which could be filled in a reasonably short area only by an acquisition. Possible targets for this have been companies like CallidusCloud, FPX, or companies dedicated to the SAP Cloud Platform, SCP, like Inmind Cloud, which is a CPQ solution built on SCP with a focus on manufacturing industries. As said above, this acquisition plugs some gaping hole in SAP’s solution portfolio. Remaining holes include a more manageable standalone ‘experience platform’ to augment Hybris Marketing, a competitive standalone CMS and DAM, better functionality around sales contracts (e.g. renewals), a story around the conversion of web sites and e-commerce, to name but a few. Regarding the ‘experience platform’ CallidusCloud might have a thing or two that can help augmenting it. Being integrated into SAP Cloud for Customer CallidusCloud’s CPQ very nicely augments SAP Cloud for Customer by enabling a set of important processes to an extent that probably only Oracle is able to deliver: With a seamless integration into the ERP back end. Further, this acquisition rounds off sorely missing functionality in the SAP Revenue Cloud. Revenue Cloud is strong where it comes to (repeatedly) bill for electronic products. It lacks in the ability to configure products, other than fairly simple subscription products. In other words, it is weak where CallidusCloud is strong. The combination of CallidusCloud CPQ & CLM and SAP Cloud for Sales is a good value proposition already now. While it may appear less as one piece than Salesforce with Steelbrick the round story delivered by this combination is able to convince customers not going the Salesforce route. With Salesforce currently being the perceived gold plated standard of all things CRM, this is quite a feat. CallidusCloud’s ability to directly include incentives and commissions as well as give a margin health indicator for a quote may sound like a small thing but in fact is a powerful tool. The integration of CallidusCloud into SAP is a priority for CallidusCloud for quite a while now, as is the integration of its own solutions into a coherent one. While back in October 2017 it was still visible that this integration is early stage, it also showed a huge potential. Businesses that chose CallidusCloud as the CPQ working alongside SAP Cloud for Sales now have a validation for their choice. CallidusCloud has some The bottom line is that for SAP customers the topic of CPQ is no reason anymore, whatsoever, to look outside the SAP ecosystem. Also, with this acquisition SAP also bought itself a good number of net new customers, especially in the Salesforce world. The combination of the facts above should throw some wrench into Salesforce’s gear and somewhat limit its growth options. And growth is essential for Salesforce, which delivers good solutions, at a high price point, and with low profitability. Salesforce is not an Amazon that can sustain a low profitability situation eternally. In closing, there is an interesting kink. CallidusCloud is built on .Net. While this supports the openness story it somewhat weakens the SCP story until there is a .Net runtime and development environment available for it. It will be interesting to observe what happens here. Reprogramming CallidusCloud on SCP is hardly an option.  

It has been a little more than half a year now that I didn’t update on what is going on with SAP CRM and S/4HANA (which I will refer to as S/4 from now on; SAP it is time for you to change the unwieldy name to something more manageable).

What Happened – So Far

As you are well aware SAP is working on integrating a simplified version of SAP CRM into S4. The original roadmap offered a first customer release of an integrated product in early 2018, based on the September 2017 release of S4. The integration was planned as an add-on to S4. The initial scope of this CRM add on for S/4 was supposed to cover what is referred to as ‘core service’ functionality. This initial release shall be followed by ‘core sales’ functionality later in 2018. 2019 then is supposed to be dedicated to another round-off release covering further sales and service functionality, including loyalty management and migration tools. Roadmap and statements also so far have been fairly fuzzy about the strategic distinction between CRM as a part of S4 and the SAP Hybris line of CRM- and CEM systems.

What does the Future have in its Basket?

As it seems now, the release is not going to happen as fast as planned, nor in the originally planned way. Instead, in a webinar recently held for partners, SAP ‘announced’ two very interesting changes, with the second one likely also being a consequence of the first one. SAP CRM will no more be referred to as an add-on to S/4 but, at least for the service functionality, as ‘SAP S/4HANA for Customer Management’. Given this, first the Service portion of SAP CRM, then its Sales portion, will formally become a part of S/4. CRM Marketing will be phased out and be replaced by SAP Hybris Marketing. This is nothing new, though. Regarding the first release, SAP now talks about H2, 2018. It appears that the difficulties of integrating two complex (and different) pieces of software into something consistent are higher than originally anticipated. Merging them, instead of merely delivering an add-on, surely has added to this complexity. The ‘Sales Core’ that is to follow the Service Core is still scheduled for 2018. Service Simplification; source SAP This sequence still makes a lot of sense, as S4 is very light on customer service functionality. This can also be seen in the sources of the business object models that make up the joint solution. Also, the addition of the CRM Interaction Center is a good choice, although this will have other implications when thinking of the SAP Hybris Engagement Center. More about this a little later. SAP essentially chose to use the transactional objects out of CRM and to ‘marry’ them with the S4 varieties of the master type of objects – with the prominent exception of the business partner, which will have its origins in CRM. This exception is hardly surprising as the CRM Business Partner is far superior to the original ERP Business Partner. This is referred to as ‘using the best of two worlds’, something I would not contradict to. Sales Simplification; source SAP This theme continues in the sales world, where also the ERP based S4 functionality is stronger than in the service portion. Additionally, it can be argued that order fulfillment is a core ERP job. There, in any case, is no need for having two different object models in the same system. The two interesting aspects here are the choice of a CRM based org model and the addition of a loyalty component into S/4, especially since Loyalty Management is a classic candidate for an engine and as there is a competing, though with lower capabilities, loyalty management engine in YaaS. The majority of other CRM engines and frameworks, like pricing, configuration, extensibility, reporting, etc. will be replaced by their respective S/4 / ERP counterparts or be made part of external engines. All in all the CRM for S/4 picture is rounding off. However, there are a number of remaining questions that SAP needs to be able to answer in order to give customers further confidence. These questions include:

• How reliable is the roadmap? This is an eternal and difficult question. However, the quiet shift of the release of S/4 for Customer Management from ‘based on 1709’ to H2, 2018 raises some additional doubts. On the other hand the timeline is not yet critical, as there is ongoing support for CRM 7 until the end of 2025.
• How to deal with multiple ERP or S/4 backend systems? There is a good number of customers that for legal and other reasons do run different ERP systems in different countries or for different subsidiaries. The original plan for a CRM add-on did not cover this common scenario. There still is no statement about it other than CRM Middleware still being part of the system.
• How are engines and industry solutions dealt with? The most prominent example right now would be CPQ and the upcoming SAP Revenue Cloud.
• How is the differentiation between S/4 for Customer Management and the different SAP Hybris solutions?

S/4 Customer Service vs. SAP Hybris

The last question is actually the 800-pound gorilla of questions. And the answer to it is only emerging, based upon the idea that there are three tiers of systems: Systems of record, operational systems, and systems of engagement, with the system of record does the ‘heavy transactional lifting’. The cloud based operational system and system of engagement offers the flexibility and nimbleness required by fast-changing customer engagement requirements. Consequently the transactional system is S/4 based while the operational- and engagement systems are based upon the SAP Cloud Platform, which basically means that everything can be in the cloud but the transactional system can also stay on premise. This seems reasonably straightforward and consistent especially on the S/4 vs. SAP Hybris side, but still is very high level.

A Customer Service Example

In the case of Customer Service SAP’s conceptual implementation of this vision looks like the diagram below. Personally, I think that this distinction of three tiers is unnecessary as both, omni-channel service engagement and field service have customer engagement and operations facets, but let’s go with it for time being. three tier framework customer service; source SAP 3-tiered framework for SAP & SAP Hybris Customer Service; source SAP This differentiation seems to make quite some sense on the outset and is a refinement of an older diagram. However, the devil is in the details. low touch 2 high touch; source SAP Conact Center remodeling with SAP Hybris; source SAP An important part of this devil is that this vision falsely suggests that the system of engagement is actually on top of the operational system, therefore mixing high volume low-touch service and low volume high-touch service. It also suggests that service tickets require a Cloud for Service implementation in addition to the (omni-channel) Customer Engagement Center. Which is plain wrong. For example, both systems offer a service ticket, albeit the service ticket in Cloud for Customer needs – and offers – more functionality. Instead the Cloud for Service will concentrate on being a “market-leading field service management solution including superior mobile experience & advanced scheduling (w/ ClickService)”, while the engagement center will focus on automated and agent based customer service. Both solutions are supported by SAP Leonardo-based machine learning. And here comes the catch again. SAP offers a Service Ticket Intelligence solution to “automatically categorize incoming service tickets and to provide resolution recommendations for the agents. This allows contact centers to expedite problem resolution and scale with the increase of digital service requests”. This leads to faster ticket resolution by routing the tickets to the right agents and additionally, by providing solution suggestions, reduces the resolution times. On top of this it frees up the agents to spend more time with customers instead of doing admin or system management tasks. The net effect of this should be better customer service and increased customer satisfaction as business outcomes. However, SAP Service Ticket Intelligence comes pre-integrated into SAP Service Cloud, the alleged reason being the number of tickets required for the learning process. I don’t buy this argument, actually don’t even get it. Running the ticket intelligence against Cloud for Customer with the agents working in the Service Engagement Center – or the S/4-based Interaction Center – the ticket intelligence does not connect to the system that serves for ticket creation and therefore does not really help the agents. It also does not effectively work with self-service systems. This is at best inconsistent and should be changed fast as it also forces SAP Customers to implement an additional and potentially unnecessary system.

All in All

The picture is getting clearer. The differentiation between the old world transactional systems and the systems of engagement is more and more being sorted out. Looking at how SAP proceeds what was CRM becomes part of ERP (S/4) and CEM becomes the new world – Customer Engagement and Commerce and driven by SAP Hybris. Current questions are more and more on detail level and increasingly on how to combine cloud platform products (SAP Leonardo) and different SAP Hybris solutions efficiently to come to a consistent and customer specific solution. The current problem for customers with this is the functional overlap of the different ‘clouds’ combined with insufficient modularization. This is where the rework of YaaS could come into the picture. Modularization of the various clouds into ‘Micro’-Services would allow for a seamless recombination of systems that allow for the definition of functional scope according to customer needs as opposed to only offering pre-packaged systems. In between revisiting the integration strategy of the various components with the goal of minimizing the number of required systems should be of additional help for customers. SAP-internal one item that the new SAP Hybris chiefAlex Atzberger needs to look at is an avoidance of an us vs. them situation between SAP and SAP Hybris. Both parts of the company need to work as seamlessly as the solutions they build. Departmental rivalry will be on customers cost and ultimately harm SAP.   https://aheadcrm.blogspot.de/2017/06/sap-crm-into-s4hana-did-sap-hit-bulls.htmlhttps://aheadcrm.blogspot.de/2017/04/sap-crm-and-sap-jam-news-from-crm.htmlhttps://aheadcrm.blogspot.de/2016/04/sap-crm-light-at-end-of-tunnel.htmlhttps://aheadcrm.blogspot.de/2016/02/sap-state-of-nation.html  

This year’s SAP Hybris Summit in Barcelona was attended by almost 3,000 paying participants, which is likely to make it the biggest ever, in spite of the recent unrest in Catalonia. It was packed with partners and presentations. The message all around was about subscription economy, how companies will need to transform themselves from product- to service companies, and how SAP supports this by delivering YaaS, networked solutions, IoT and machine learning, based upon the SAP Cloud platform. Owing not only to the topic of subscription economy GDPR was, of course, a topic, too. The key message here was: Our software helps you being compliant. With SAP Hybris standing not only for ecommerce but also for SAP’s new brand of CRM (oops, engagement) solutions, there was astonishingly little information about the Sales- and Service Clouds and only a few bits about the Marketing Cloud. The pending acquisition of Gigya was naturally out of scope, although Gigya as a partner featured in the show with a booth and presentations in the theaters.

Day One

Having said this, the first keynote, held by SAP Hybris president Carsten Thomas, was slightly underwhelming. It set the stage for the topic, but was essentially last year’s content. The narrative was all about how companies like Uber and Airbnb change the game for traditional companies, the impact of machine learning, and the importance of focusing on experiences (not even outcomes). In brief: nothing new, and only a fuzzy view on SAP Hybris’ strategy. It, however, was presented very well. The Q&A’s offered on day one added some more flesh to the topics, also on the delineation between SAP Hybris and SAP. Carsten Thoma: “We want to focus on all the products that are enablement products” and “if you talk about experience, this is actually what we are focused on”. In other words, the ‘traditional SAP’ concentrates on the transactional part of the software – the heavy lifting – whereas SAP Hybris focuses on customer- and employee facing software. However, being challenged about SAP Hybris Marketing both, Thoma and Marcus Ruebsam, SVP Global Head of Solution Management, SAP Hybris, admit that in spite of having a sizeable number of developers on the product, there is a need to balance new innovations for the ‘next wave’ with what “you have to do today”, but first priority remains the creation of a complete view on the customer. According to Macus Ruebsam the Marketing Data Management piece is crucial, including the combination of online and offline data. Optimization using Abakus drives results and the first party data abilities of Gigya will add further value. SAP sees the keys for being successful tomorrow as data management and enablement. The day’s second Q&A was about the Revenue Cloud, featuring Adobe as a customer. The message to be conveyed was that SAP’s revenue cloud helps a customer with a complex, heterogeneous systems architecture turning their products into services while having the ability to measure and monitor to offer the “best matching contract”. Quizzed here the Adobe representative more or less admitted that “best” means best for Adobe, not necessarily for the customer, which depicts how far companies still need to go in terms of customer centricity.

Day Two

Rob Enslin’s keynote on day two brought the audience closer to how SAP intends to address the challenges facing businesses. This keynote, substantiated by a demo that led the audience through the process of acquiring a drone through a service incident, and upselling showed in how far SAP sees IoT and Machine Learning permeating applications. The storyline showed the audience everything from intelligent recommendations through an IoT data driven service call with resolution and a profile driven upsell process. The bold statement made by Moritz Zimmerman was that SAP is the only company that can deliver this breadth of services, stretching from (customer) acquisition through sales, and service, to billing, and being powered on one platform – supported by IoT and Machine Learning (phew, what a monster of a sentence …). The keynote got closed with an appearance of fast speaking futurist Sophie Hackford who animatedly told the audience that “Minority Report” with all its continuous surveillance and advertising is already an exciting reality. To be honest, I found that more than slightly dystopian.

My PoV and Analysis

Overall I think that this was a good event for SAP Hybris, although in my eyes too much centered around ecommerce. The event could have benefited from more messaging around engagement and enablement. Also the number of press releases was surprisingly low. Still, a good event that gave a view on strategy. With a storyline that stretches from (customer) acquisition through service and revenue (Revenue Cloud) and that supports the vision of a networked and subscription based economy, SAP Hybris has a compelling and consistent vision of the future. I, however, would suspect that other companies will contradict the bold statement that SAP is the only player that can deliver on this functional breadth. Microsoft, Oracle, and even Salesforce do make the same claim. Where SAP is right, though, is that the vast majority of transactional data – 76 per cent – at one time or the other touches an SAP system. This in all likelihood is due to the Ariba network. This is a very good basis for machine learning, however one should not forget that SAP’s customers own this data, not SAP. Still, combining this data with the profiling possibilities that Gigya promises, there is a tremendous potential, even if it is on the leash of privacy regulations. It will be interesting to see how the repositioning of YaaS to become an enterprise repository of (not so) micro services pans out. The short term vision seems to be establishing it as the new basis for delivering added services to SAP solutions, which is not dramatically different from now. However, being based on and integrated into the SAP Cloud platform it has the potential to re-architect the way SAP builds and delivers software, as well as customers and partners. Integrated with the Revenue Cloud the new YaaS is a showcase of how the subscription economy could look like. On the downside, although SAP’s vision is compelling, I know some customers that complain about missing functionality, e.g. in the subscription area (Revenue Cloud) or (e-mail) campaign execution. They regard these functionalities as basic and essential. There consequently is a gap between narrative and reality or perception that needs to get closed. This either requires a different balancing between going for the ‘next thing’ and fulfilling current needs or more education. Regardless what it is, this gap needs to be closed.

Famous Last Words

One more word on the topic of subscription economy. SAP execs times and again used ‘sharing economy’ as synonymic to it, naming Uber and Airbnb as prime examples. There is nothing like a sharing economy! The term ‘sharing’ implies altruism. These companies, at best, are using peoples’ altruism to their benefit. These companies, as well as SAP’s vision are about a platform economy, and dominating markets (plural!) by scaling to become the strongest platform around. Part of it is using the data that customers willingly or reluctantly give. There is no altruism whatsoever involved. Acknowledging this more openly would be good for all involved parties. That builds trust. After all, lacking trust was cited as the number one reason for customers (consumers) to abandon a brand.

During CRM Evolution 2017 I had the chance of talking with Volker Hildebrand and Anthony Leaper from SAP. Volker is SAP’s Global Vice President SAP Hybris and Anthony is Senior Vice President and Sales GM - Enterprise Social Software at SAP. Topics that we covered were things CRM and collaboration, how and where SAP’s solutions are moving and, of course, the impact that the recent reshuffling in the executive board has. Starting with the latter, there is common agreement, that if at all it is positive as likely to streamline reporting lines and hence decision processes.

First Things First – After All I Am A CRM Guy

Having the distinct impression that the SAP Hybris set of solutions is going a good way I was most interested in learning from Volker about how there is going to be a CRM for S4/HANA. SAP’s new generation ERP system is growing at a good clip, and according to the Q1/2017 earnings call, now has 5,800 customers with 400 new customers in the last quarter alone. Many of these customers are net new customers. The challenge is that S4/HANA doesn’t have a CRM (yet). I have earlier already suggested two ways how this could change – marrying up the SAP Hybris family of modern CRM solutions or modernizing SAP CRM and integrating it into S4/HANA based upon HANA technology and therefore avoiding the costly CRM Middleware and data duplication. Both approaches have their merits: The cloud based SAP Hybris set of solutions is far more modern and already bases on the new SAP standard Fiori user interface. SAP CRM, on the other hand and despite only minor investments into it in the past years, is still far more powerful in many areas, and has a good installed base. It turns out that SAP decided to merge SAP CRM into S4/HANA. This is not really a surprise for me, rather a confirmation of what I earlier heard through the grapevine. SAP is working on it for a while now as this is no minor piece of work. It includes replacing the CRM Web UI with a Fiori-based UI, adapting the main business objects, especially the customer and the business transaction, on both sides, removing CRM Middleware and replacing it with a combination of merged data models and HANA views. The latter means that there still is a kind of middleware, albeit a much simplified one, which hopefully over time can vanish altogether, following the 15 year old vision of Hasso Plattner to be able to create business applications by recombining business objects. I do expect the first release of a (renamed?) S4/HANA that includes CRM capabilities in early 2018. There is no real rush for it, if SAP provides a migration path. It is more important to get it right in order to not antagonize already nervous customers. On the other hand I do not expect a full CRM being migrated in the first instance. For example marketing: With Hybris Marketing (formerly known as Customer Engagement Intelligence) SAP In the past years has built a fairly strong solution and continues to invest into it. Hybris Marketing, furthermore, is capable of running on-premise and in the cloud. It can be used in combination with both, an S4-based CRM and SAP Hybris. The main advantages of merging SAP CRM into S4/HANA are that this approach

2025. Opens a future roadmap for current SAP CRM customers that stretches beyond 2025. These customers else are at risk of defecting.
2026. Provides the continued chance for customers to run their SAP instance on-premise. According to Volker there are still a good number of customers that do not want to run their instance in the cloud. The key word here is choice.

Now What About SAP JAM?

SAP Jam has been a success story for SAP. Guided by Sameer Patel, SAP early on discovered that collaboration is key to successful business and to being able to engage customers in a way that results in good experiences. In order to achieve this, Jam is deeply integrated into both, SAP CRM, and the SAP Hybris set of solutions (and others, which I do not look at here). It, for example, drives the review- and community-functionalities in Hybris e-commerce. And it is exactly here, where we can expect further exciting things. Think about combining this with a bit of AI, a bot, and a knowledge base. This way a customer’s search query can first hit the KB and present a relevant result to the customer. Or, failing that, it can route the request to an agent for further processing, who is already informed about the failed search and can initiate an ad-hoc collaboration with potential experts who helps answering the customer’s inquiry. Human-machine collaboration is certainly a topic that is high on SAP’s priority list.

My Take

The CRM Part of the Equation

I think that it is a wise decision to merge SAP CRM into S4/HANA. SAP CRM has an installed base and customers that are at risk of defecting, lacking a roadmap. It also has a lot of very valuable industry-specific functionality that simply does not exist in SAP Hybris – and probably will never be there. Modernizing SAP CRM, putting it on HANA, merging it into S4, while making it ‘cloud-ready’ therefore seems to be a very good way. However there are some cautions that need to get considered! For SAP this means that there will be two different code lines – “S4CRM” and the SAP Hybris set of CRM solutions – that need to get maintained. This is a pretty costly adventure. In order to minimize the redundant efforts as much functionality as possible needs to get modularized in a way that it can get used with both core solutions, S4/HANA, and SAP Hybris. This does not only affect Hybris Marketing but also solutions like Retail Execution or Trade Promotion Management, to count only two. Proper positioning is also an issue. Having two different solutions always has the inherent risk of confusing customers; and SAP does not have a real good track record in properly positioning solutions in a way that minimizes this confusion. And here we have the added layer of on-premise versus cloud.

Jam and Collaboration

Human-Machine collaboration is a ‘thing’, especially in times like these where structured knowledge, unstructured data sets come together in very huge amounts that can no more be handled by humans. SAP seems to have understood this and bases further improvements on the groundwork that has been done in the past years. SAP probably just needs to spread the word of what they are doing a bit more actively. I certainly would love to hear more.

Overall

Looking into customer facing functionalities SAP is back on a good road for a while now. On-demand CRM seems to be competitive sine around the second half of 2016 and the strategy becomes more clear as well. Giving on-premise customers an outlook beyond 2025 was the thing to do. Next items on my wish list for SAP to do are getting more into detail on how the CRM road goes. While the target sector is clear now there are bunches of open questions, as mentioned above. Secondly – and although it is somewhat refreshing that SAP does not jump onto the “I am so AI” bandwagon – SAP needs to do something here to not appear as a laggard, which the company certainly is not. I am sure that SAP can manage to make their mastership of AI and machine learning more clear than they are doing now while continuing to make clear that both are means to an end: More intelligent business applications that help businesses optimizing and automating their processes, while personalizing employee and customer interaction and engagement. A good first step into this direction could be getting rid of CLEA as a name. ‘Einstein’ and ‘Leonardo’ paved the way – how about Marvin?

After my SAP CRM State of the Nation and Light at the End of the Tunnel articles of earlier this year it is time again to have a look at what and how SAP is doing in the wider CRM arena. After all SAP also recently released its 1608 Hybris version, which in my eyes makes SAP very competitive again. Let’s start with some facts, which I’d like to put into a bigger context:

• SAP CRM 7.0 is in mainstream maintenance until end of 2025. This should give some relief to the existing customer base
• SAP CRM (the on premise product) continues to receive only little investment; on the positive side this investment is very customer driven
• At the same time CRM 7.0 is the only version that is not in customer specific maintenance; means it is the only version that still gets legal/regulatory and other updates
• SAP’s CRM strategy ‘Beyond CRM’ has a strong focus on the Hybris line of products, which, I think, meanwhile is highly competitive
• As an aside to the above points this situation makes the maintenance fee of 22 per cent for SAP CRM in combination with the suboptimal support appear very high
• The user interface of the Hybris line of products is a lot sleeker than the UI of CRM 7.0
• From a functionality point of view, especially looking into industry specific functionalities, CRM 7.0 still has an edge over the Hybris portfolio, with the possible exceptions of Retail as an industry and Hybris Marketing.
• S/4HANA is getting pretty successful – this may be taken as conjecture, but people I trust confirm this;
• S/4HANA, however does not have a discernible CRM foot print that I am aware of – let us hold this thought for a while
• SAP has a good number of on premise customers and I do think, cloud or not, this will continue to be the case – not only for SAP; let’s talk about that again in 2025 ;-)

What does all this mean for customers?

Well, that depends … Let’s consider some scenarios.

You do not run CRM but want to change this

Do not forget to have a look at the Hybris line of products, especially if you are already an SAP customer. Ruling it out right from the beginning meanwhile is a mistake in any case. The Hybris line of products can compete with both Salesforce and Microsoft and, in the case of e-commerce also has a clear edge over both. Microsoft does not offer a strong e-commerce solution itself and Salesforce is likely to be busy integrating Demandware better into the suite of products.

You still use SAP CRM pre 7.0

This can only mean one of three things. Customer is happy with the solution and self-sustainable – or not using it at all. In these situations, one just needs to be sure that no maintenance fee is paid anymore. Check your contract and accounts. If there happens to be a contract on customer specific maintenance because ongoing support is needed, my strong recommendation is to consider an upgrade or change of system. In any case one should get out of customer specific maintenance; e.g. go third party maintenance, or contract experts in, if support is required. Any of these scenarios is less expensive than customer specific maintenance and offers a few, but differing, advantages. Better go for an upgrade to CRM 7.0 or migrate to the Hybris line of products, if you cannot see yourself positioned in a self-sustained scenario! After an upgrade to CRM 7.0 you still could go third party maintenance, on an improved platform … but that is another story. Of course, the decision for Hybris or CRM 7.0 needs to be carefully evaluated. SAP has a focus on Hybris, system integrators one on billable days. After all the decision boils down to what you need now and in 3 – 5 years. Preparation pays off.

You use CRM 7.0

Now this is where the fun starts. This scenario is where SAP gives least guidance. It is also the reason for this post … Because there is no other way than considering the Hybris products if additional, modern functionality is required to improve the customer facing operations. On the other hand, this is pretty costly and may result in redundantly licensing/subscribing to overlapping functionality. This certainly needs to get checked and corresponding negotiations are likely to be easier if SAP is chosen as opposed to . The good news is that the integration between CRM 7.0 and the Hybris line of products is improving a lot. The bad news, of course, is that integration is needed … So, basically SAP is in the hot chair to provide vision and guidance for customers.

Two Scenarios for SAP to improve the Customer Situation

Let’s take up the thought I put on hold above. The ongoing need for integration between different SAP products and solutions is hard on customers as well as SAP. And it is not really necessary. A micro services architecture on HANA can take care of that. Personally I would treat Hybris Commerce as a separate entity here but that may be up to debate. Both approaches essentially boil down to fulfiling Hasso Plattner’s original vision of Business by Design. The technology is all there.

Scenario 1 – “S/4HANACRM”

CRM 7.0 already runs on HANA. S/4HANA is missing a CRM. So one could get the idea to modularize CRM’s object model more and to make it a part of S/4HANA. This also involves adopting the S/4HANA UI. Maybe strip out some of the marketing functionality and replace it with SAP Hybris Marketing. Over time do the same with other functionality, probably starting with merging the Hybris Service Engagement Center and Hybris into “S/4HANACRM” replacing the existing CIC. Continue with the balance of service sales functionality. This could give a nearly immediate boost to S/4HANA, cover on premise, private- and public cloud scenarios, and, most importantly, provide existing on premise customers with a clear migration path, which is currently missing. There is also a richness of industry specific functionalities immediately available. On the flip side there still is the existence of different products that address the same potential customers. This needs to get managed. Technically I can imagine that the configuration initially is somewhat of a challenge due to different concepts.

Scenario 2 – “S/4HANAHYBRIS”

This approach basically works the other way round. Take the Hybris portfolio of CRM applications and merge them into S/4HANA. This emphasizes on the current strategy (although an overall rebranding might be in order) and should be less work as the Hybris suite should also be very close to a micro services architecture. Following this approach would also help SAP to start from a cleaner code base with less legacy. The implementation of customer facing functionality would also follow an ‘important things first’ approach. Industry specific integrated processes will come later, along with clearly defined migration paths, e.g. leveraging the Data Hub. On the down side this approach might initially cause some not overly excited customers, if they do not get access to the good new functionality they need via the Hybris solution stack – at reasonable conditions. Of course SAP might have a totally different view – but these are the most promising ways for SAP to approach ‘Beyond CRM’ that I see. I actually would opt for the “S/4HANAHYBRIS” scenario.