SAP Sapphire 2026 was a major platform announcement, a competitive shot at ServiceNow, a coherent acquisition story across Reltio, Dremio and Prior Labs. It featured an Anthropic partnership that puts Claude at the center of the SAP Business AI Platform. For anyone who cares about customer experience, it was also a missed opportunity dressed up as ambition.

If you watched only the keynote, you concluded SAP barely talks about CX. Klein did finance with JP Morgan. Herzig demoed pharma pricing. Industry AI showcased RWE wind turbines. The named flagship was the Autonomous Close Assistant. CX got line items.

That reading is incomplete. Here is what actually happened for CX at Sapphire 2026, what it means competitively, and what SAP and SAP CX customers should do about it.

What SAP actually shipped for CX

On the same day as the keynote, Balaji Balasubramanian, SAP's CX President and Chief Product Officer, published a substantive announcement listing ten named Joule Assistants for CX. Marketing gets Content and Campaign Assistants. Commerce gets Merchandising, Shopping and Order Management Assistants. Sales gets Sales, Deal Qualification and Deal Closing Assistants. Service gets Case Management and Service Management Assistants.

The supporting announcements are the part most analyst coverage missed. A Google partnership brings Gemini into SAP CX, plus adoption of the open Universal Commerce Protocol. Vercel handles storefront development. SAP Unified Payment runs on Adyen, with Checkout.com and PayPal configurable. Expanded Parloa and Amazon partnerships cover voice and digital service. A new SAP Commerce Cloud, cloud ERP edition targets mid-market. Two Industry AI scenarios for CX: Autonomous Revenue Growth Management and Unified Commerce.

All of it planned for general availability in Q3 2026.

For a category the keynote treated as a sub-bullet, that is a substantial product agenda. SAP Commerce Cloud has been a Gartner Magic Quadrant Leader for Digital Commerce for eleven consecutive years and the customer base is real. Adidas, Coca-Cola, Allianz, large utilities and banks all run on it.

The Cinderella problem

Despite all this, the keynote did not put CX in the same tier as Finance, Supply Chain or Industry AI. No flagship CX customer on stage opposite JP Morgan. No Autonomous Service Resolution Assistant matched to the Autonomous Close. No CX product head with mainstage time. The CX story subsists in a blog post by the CX CPO. The Autonomous Close gets prime time in the Sapphire keynote.

This is the Cinderella problem. SAP CX has the product. SAP CX has the customers. What SAP CX lacks is executive air cover. The product team shipped. The C-suite did not promote.

The signal is clear. Adobe Summit features Anil Chakravarthy championing CX Enterprise Coworker. Marc Benioff personally champions Agentforce Service at Dreamforce. The market – and analysts, too – reads those vendors as doubling down on CX. When Klein does finance and supply chain and CX gets a blog post, they read SAP as deprioritizing CX. The signaling problem makes the purchasing budget harder to defend, even where SAP CX has the better product.

The E2E story breaks at the customer interface

The bigger structural problem is what this does to SAP's own Autonomous Enterprise pitch. SAP says the autonomous enterprise runs on Joule across finance, supply chain, procurement, HR and customer experience. That is the E2E argument. It is a strong argument. It claims SAP can orchestrate cross-application, cross-department processes because SAP owns the system of record and the agentic platform on top of it.

Like each chain, it breaks at the weakest link. CX is this weakest agentic; the pitch breaks right there. And it breaks where it hurts most. Customers do not experience companies through CFO close cycles. They experience companies through service tickets, sales conversations, commerce checkout flows and marketing engagement. An enterprise that can compress financial close from weeks to days but still routes every service case to a human is not autonomous. It is back-office automation with a CX problem.

The Cinderella treatment of CX hurts SAP more than SAP appears to recognize. The cost is not just lost CX deals. It is the credibility of the Autonomous Enterprise narrative itself.

Where SAP CX sits competitively

Adobe is the most credible CX competitor in the marketing and commerce arenas. CX Enterprise Coworker launched at Summit on the same NVIDIA OpenShell runtime SAP uses, with multi-model interoperability across Anthropic, AWS, Google, Microsoft and OpenAI. AEP Agent Orchestrator, Brand Concierge, Real-Time CDP and the Magento commerce stack form a consistent CX agentic story. Adobe does not compete in ERP, so the two only collide in marketing, commerce and customer data. Adobe is winning the visibility fight there easily.

Salesforce with Agentforce 360 plus Operations is at $540M ARR with Service Agent, Personal Shopper and Buyer Agent shipping is the 800-pound-gorilla. Headless 360 makes Salesforce CX accessible through any MCP front end. Salesforce wins front-office. SAP wins back-office. They collide in customer-to-cash.

Microsoft Dynamics 365 Copilot for Service and Sales are generally available. Microsoft Agent 365 hit GA on May 1 at $15 per user per month. SAP wins ERP depth. Microsoft wins productivity surfaces and developer mindshare.

ServiceNow Autonomous CRM processes 100M+ customer cases monthly. AI Control Tower with 30 enterprise connectors positions ServiceNow above the application layer. This constitutes a real threat to SAP Service Cloud in enterprise customer service, particularly where ServiceNow ITSM already runs.

Mid-market matters more than enterprise watchers want to admit. HubSpot Breeze has shipped Customer, Prospecting, Content and Data Agents for years. Zoho Zia ships 100+ pre-built agents at $40 per user per month. SugarAI rebranded around precision selling and ERP signals last month. Creatio went seat-free with Unlimited on May 1. Freshworks Freddy and Zendesk AI Agents are GA. The new SAP Commerce Cloud, cloud ERP edition signals SAP wants to compete here. The pricing model will be the test.

What the platform actually does for CX

The platform announcements help SAP CX in tangible ways. Reltio gives Service Cloud a customer golden record across SAP and non-SAP systems with MCP support. Dremio lets agents reason on commerce and customer data without moving it. Prior Labs brings frontier tabular foundation models for the propensity scoring, churn prediction and lifetime value modeling LLMs are bad at. Free Joule Studio through 2026 lets SAP CX customers build custom agents without the per-seat AI surcharges Salesforce stacks on top. AI Agent Hub on LeanIX governs SAP and non-SAP CX agents at no charge.

No doubt, these are useful pieces. But they are not enough to offset the signaling problem.

Three recommendations for CX buyers

Audit the ten Joule Assistants for your modules with GA dates, not roadmap dates. All ten are planned for Q3 2026. Plan is not GA. Push SAP for module-specific commitment dates before signing renewal or expansion contracts. The free Joule Studio through 2026 is a real negotiating lever and a good opportunity to evaluate SAP as a credible CX alternative.

Run a real CX agent bake-off across the relevant vendors. SAP Service Management Assistant against Salesforce Service Agent. Adobe Brand Concierge against SAP Content Assistant. Test agent quality on your actual customer data, using your actual intent. The winner is the one whose agents resolve your cases or convert your shoppers, not the one with the best slide deck.

Take the CX orchestration plane decision deliberately, and not by accident. If your non-SAP CX estate is substantial (Salesforce Sales Cloud, Adobe Experience Manager, ServiceNow Customer Service Management, Zendesk, Freshworks, HubSpot), the question of where CX agent governance lives is now architectural. SAP AI Agent Hub, ServiceNow AI Control Tower, Salesforce Agent Fabric and Microsoft Agent 365 are not interchangeable. Test which one actually governs your non-SAP CX agents in production today. Loyalty is not a strategy.

Three recommendations for SAP

Ship an Autonomous Service Resolution Assistant or another relevant CX agent with the same visibility as the Autonomous Close. These agents exist. The flagship treatment does not. The Autonomous Close got JP Morgan, a named customer arc and Klein keynote time. CX deserves a named flagship agent with a named customer reference. Adidas, Coca-Cola, Allianz are sitting right there. Use them. The cost of doing this is a quarter of marketing investment. The cost of not doing it is another lost year as Cinderella does not get found by her prince, aka the customer.

Put the CX CPO on the next Sapphire mainstage with a named customer, or two. Balaji Balasubramanian wrote a substantive blog post. This is good, necessary – but insufficient. The mainstage signals priority. Service Cloud, Commerce Cloud, Emarsys and Customer Data Cloud are competitive products with reference customers and Magic Quadrant placement. They need keynote time, not blog time. SAP's bench can match Adobe's Chakravarthy and Salesforce's Benioff. The question is whether the C-suite decides to.

Decide whether CX is core or peripheral to the autonomous enterprise pitch, and commit visibly. Either invest with budget, headcount, roadmap parity and executive time equal to Finance and Supply Chain, or stop including CX in the E2E story. The Cinderella position helps no one. As said before, an autonomous enterprise that can close books in days but routes every service case to a human is not autonomous. It is back-office automation with a CX problem. Either fix the CX side of the story or shrink the story to fit what is real.

My PoV

SAP Sapphire 2026 shipped more for CX than the keynote let on. Ten named Joule Assistants. Partnerships with Google, Vercel, Adyen, Parloa and Amazon. A mid-market commerce edition. Two Industry AI scenarios. The product is more substantive than the press and analyst coverage suggests.

What is missing is the executive championing. The product team did its part. The C-suite did not do theirs. That asymmetry is the structural problem Sapphire 2026 did not fix, after I had some hope last year.

Let’s see when Cinderella finally gets to dance.

Before immersing myself into SAP Connect 2025, I had a number of questions that I would like to get answered during the event. These included the ones below and naturally focused on SAP’s CX and AI sides of the house. Some of them I got answered, some of them not, at least not explicitly.

• What is the plan to make SAP CX more prominent in the CRM/CX marketplace and what are main reasons that you see for customers preferring other CX solutions over SAP’s?
• What do customers say that they are missing in the CX suite?
• Where do you see the limits of agentic technology in the near to mid-term? Apart from adoption problems …
• And where do you see most potential for agentic AI going forward?
• What are adopted (agentic) use cases that concentrate on business transformation, gaining capabilities, uplift as opposed to “increasing efficiency”?
• How does SAP deal with the dichotomy between “human augmented by machine” and mass layoffs?
• SAP Consulting as well as SIs do face a need to change their business models away from billable hours. What do you recommend SIs do? How does SAP support them in this venture? How do you foresee the overall ecosystem change with an estimated increase of use and deployment of generative and agentic AI

But more about all this in a minute.

Of course, SAP took this event to announce a flurry of new capabilities across its suite of applications, AI, and technology, as evidenced in the long innovation guide and the theme-describing press release for the event, although I’d say that the event went well beyond “AI that partners with people, data that defies boundaries and applications that turn data into action”. To be sure, SAP Connect extended on the vision that got outlined during last Sapphire.

True to its name, SAP Connect was about connecting – or breaking, to use a stronger word – the silos that are imposed by different types of business software, predominantly, but not only, SAP’s business software and in extension the silos between business departments, The approach was to co-host conferences focusing on the different lines of business while providing the connecting tissue by means of cross references, supported by customer testimonials, in the keynotes.

And I want to say that this largely succeeded. Jon Reed wrote a great piece covering this using Heartland Dental as an example. Other customers like Migros or confirmed their success that got achieved through cross departmental collaboration. “Collaboration is a very, very key for service. We promote support cross-functional collaboration, that begins from idea, of course, but all colleagues from marketing, business and also colleagues from the stores but we work also together with other legal entities in our group, for example, of a work together, very tightly with the bank. And so, we work together with our financial colleagues in the context of practical credit card format is an integrated part of our loyalty program and so it's very important to get them common understanding and the common understanding is also based on a common technology. Baseline we work on a common data Lake. We have Cloud platforms, and this is also the key for a common understanding, for a 360-Degree of our customer view”. Similarly, Wella. Both of them part of the CX keynote.

Or, looking at supply chain processes, SLB, Red Bull and HP. All of them look at cross-functional cooperation as a critical success factor.

And these have only been some examples from the keynotes.

This is powerful support for the SAP E2E story. The only way to tell this even more powerful is to actually embed deep references into other lines of business within these key notes, e.g., closing the loop between demand (CX) and supply including finance. Basically, showing how the different SAP portfolios strengthen each other in a synergistical way.

This would emphasize on the power that the integrated capabilities that SAP commands have. After all, there are at best 2 to 3 companies that can dare telling a story like this: Oracle, to some extent Microsoft on an enterprise level, and Zoho with a bit more of a mid-sized focus for now. This is a tremendous opportunity for SAP, but one that requires not only having the capabilities – which SAP has – but also a messaging that does not disregard a crucial part of any business. An end-to-end story works only if it is supported by an equally strong story for each part of the business.

Ok, Connect works, but how about CX?

Having said this, let’s dig into a topic that is dear to my heart. For a long time, I have been saying that SAP treats its CX suite as a kind of Cinderella – the unwanted stepdaughter. The story being a fairy tale, it has a positive end. Does SAP’s CX suite now get the recognition it deserves?

Since last Sapphire, my view is slowly changing. CX appeared in Christian Klein’s Sapphire keynote, albeit not very prominently and had a more significant experience in Muhammad Alam’s keynote during SAP Connect, which you can revisit in Jon’s watch party with Josh Greenbaum and Bonnie Duncan Tinder that covers it extensively including valuable commentary. As said, giving CX a more prominent place is important, as it is a key ingredient of an E2E story and functionally an indispensable part of any business. There also have been significant announcements with a new loyalty solution, an engagement cloud, a digital service agent, WalkMe being made available for the CX solutions and an interesting revenue intelligence app on the SAP Business Data Cloud. My recommendation is to build on this momentum and to also have Christian Klein put more emphasis on CX going forward. No voice gets heard better and lends more credibility than the top dog’s CEO’s (sorry, Jon, I couldn’t resist using one of your techniques here). Having talked to the CP of  SAP CX, Balaji Balasubramanian, SAP CX Head of Product Strategy Riad Hijal and the new SAP CX CMO Jessica Keehn, I see the outlines of a plan going forward. I am keen to observe it come to fruition (and perhaps help, too?). One thing is for sure, during Sapphire and also during SAP Connect, there was an emphasis on becoming category leader where SAP invests. And there surely are considerable investments into SAP CX.

What about AI?

As part of the press release for this event as well as throughout keynotes, Q and A’s and individual discussions with SAP executives, there is one consistent theme: “AI that partners with people”, or in other words humans are getting help from technology instead of being replaced. This is a very laudable messaging although it is doubtful that a vendor, even one as powerful as SAP, is able to prescribe customers what to do with its technology. It is the buyers’ choice whether they follow this philosophy … or not. Alam and other executives repeatedly emphasized that their objective for using their own AI technology is not replacement of people. Instead, they aim at increasing their organizations’ outcomes by making their team members more productive. SAP COO Sebastian Steinhäuser presented some impressive numbers during his keynote. Apparently, SAP made its flywheel of apps, data and AI work for itself. From a limitation point of view, SAP bets big on the Business Data Cloud that is to deliver clean, consistent, reliable data as the foundation for well-working and collaborating agents that “help execute complex workflows within a specific function”.

For SAP, as well as its competitors, the challenge remains to not fall into the trap of explaining major layoffs as a result of the efficiency gains through their AI. Doing so, would destroy the narrative of AI creating business results through being a helper, not replacement, of people, and thereby the credibility of the tellers of this story.

And what about partners?

SAP has always been strong about ecosystem and partnerships. Given, that AI is all about platform, it makes an ecosystem play even more important. However, the ecosystem changes. IP becomes ever more important, especially over integration services. These get increasingly supported by AI, which requires SI’s to rethink their business models. They need to change from IP that “lives” in the heads of consultants and enables billable hours to IP that is encoded into software and AI. This requires them to adapt to survive and to continue to thrive. SAP encourages them to do this change and to create their AI infused solutions. To be frank, I expect the importance of SI’s in the SAP ecosystem to reduce in favor of ISVs. In future, implementations will require less effort and will have a higher degree of automation. Consulting will be again what it was, becoming more strategic again and less about the nitty-critties about implementing the desired solution. Not having had the chance to go in depth into a detailed discussion, this is probably a topic for another article or a few LinkedIn posts.

Famous last words

I think that SAP came in strong during this conference. The flywheel tells a sound story, and SAP is uniquely positioned to make this vision a reality. Are there pitfalls along the way? For sure. Will SAP trip into some of them? Probably. Will it matter? Likely not. For SAP, as well as for other businesses the game to play is adapt and overcome. And this is something that SAP can do. The company has shown it numerous times.

The remaining proving ground remains CX. There is considerable investment, competitive, in some areas even leading functionality. What is missing is, credibility. As one colleague this week told me “As far as I am concerned, SAP doesn’t have CX solutions”. Ouch. That needs to change.

The news

SAP just held its annual Sapphire event in Orlando, FL. It is totally under the theme of uncertainty and how technology, in particular SAP’s technology, can help businesses steer through poorly charted waters, to use a nautical metaphor. Uncertainty is caused by evolving regulatory situations, tariffs and shipping delays with their impact on the supply chain, waning consumer confidence in the light of all of this, and of course, the big gorilla in the room: AI. SAP’s response to this is the “SAP Flywheel”, which consists of three components

• Applications, of which SAP commands the broadest portfolio amongst all business applications vendors
• Data, which all these applications create, which in turn gives SAP extensive access to semantically rich business data
• AI, which analyses all this data, makes it actionable and, in turn feeds it back to the applications, closing the loop to establish the flywheel.

SAP demonstrated how this works in a scenario that showed how a C-suite consisting of a CFO, CRO, COO and CHRO use the integrated SAP suite with embedded AI to rapidly respond to new tariffs, managing compliance, assessing financial impact, developing strategies, adjusting supply chain plans, and aligning people strategy, all based on unified data.

Key announcements are based on the concept that AI is changing how businesses, and therefore its business applications, operate. Supporting this, is the purpose of SAP’s business AI, which has its foundation in SAP’s Business Technology Platform, BTP. A centerpiece of this change in how businesses – and users – operate is Joule, which is embedded (or will be soon) in all SAP applications and being expanded into non-SAP applications with the help of SAP’s recent WalkMe acquisition to support tasks. On a process level, SAP announced the availability of and the fast delivery of a big number of new Joule Agents. To support businesses and users, all this is underpinned by the AI Agent Hub which is powered by LeanIX to control and govern the deployment of agents.

On the partnership side, SAP announced cooperations with

• Palantir to develop new real-time analytics use cases,
• Adobe, which builds an intelligent application to combine SAP ERP Data with Adobe Experience Cloud data to enable more accurate financial planning and marketing activities
• Not Diamond, to eliminate prompt engineering by automating it (NB: gen AI is eating its own children already)
• And most notably, Neurobotics and Nvidia to connect Joule Agents to the physical world by combining it with (humanoid) robots.
• Functionally, SAP committed to aggressive innovation in all application domains,  including Finance, Spend, Supply Chain, HCM, and Customer Experience, aiming to be best in class, “second to none”, as Muhammad Alam put it.

The bigger picture

AI, in particular agentic AI is in every vendor’s messaging, these days. This is an inevitable consequence of the hype that we are still in. AI-based technology may or may not help businesses navigate the treacherous waters that the current economic uncertainties are, but then all business action creates data, and AI is able to speed up the process of making sense out of this data and to come to informed decisions. This is the most visible reason why many vendors now change the narrative to also include a “data cloud” and/or a “data fabric” as a fundamental part of their software stack.

The other big topic, connected to the first one, is the “death of SaaS” and the degradation of ERP systems to mere data repositories with the business logic being overseen, orchestrated and executed by interacting AI agents. This is essentially the narrative of businesses that are strong on agentic and/or workflow but weak on ERP and it will be interesting how this narrative pans out in the next months.

My point of view and analysis

Let’s start with the keynote itself. I always have a challenge with artificial handovers between speakers or repeating the term “amazing” in a kind of unimpressed tone of voice, and frankly, we have seen more than our share of both in the approximately 2 hours that the keynote lasted – which in itself is pretty much on the long side. Don’t believe me? Watch the slightly edited version on YouTube for yourself (btw, why is there a need to edit it at all? This only reduces authenticity). From a delivery side, I think that Dr. Philipp Herzig performed best, showing mostly credible excitement. And delivery is a thing. Look at other keynotes of enterprise software vendors, like Salesforce or ServiceNow. I agree with Paul Greenberg and Brent Leary, when they say that the keynote is the one opportunity that a company has to excite the attendees. The other thing that struck me is the nearly total absence of topics like sustainability (mentioned in brief as part of the product name Sustainability Tower) or other non-monetary values that have been expressed by SAP in earlier years. While this is understandable to an extent, it raises the question whether these values have been merely lip service. To be sure, SAP is in good company with this – which doesn’t make it better.

Functionally, nearly everything revolved around AI and AI agents in one shape or another. Like most vendors, SAP positions the AI as a helper to employees, developers and consultants, that drives their productivity. SAP’s objective is thirty percent, which I consider low for some SAP user groups – like developers and consultants. Still, I caution about positioning of a tool as a helper and how it is going to be used by buyer organizations. This is something that is beyond any vendor’s control.

Still, I think that SAP has what it takes to help businesses become far more efficient. The innovation behind all that SAP showed during Sapphire is nothing short of mindblowing. And, it is credible, too, as it all relies on business data, which are abundantly available via the whole, often SAP driven, enterprise value chain. The data platform, given by the SAP Business Data Cloud and SAP Graph, can bring the unified data that is necessary for effective agent deployments to life.

More interestingly, SAP launched a full-fledged counterattack on the “SaaS is dead” and “the ERP is only a data repository” narratives of some vendors by demonstrating the ubiquitousness of its own agent, Joule and emphasizing on application logic being just that – logic – combined with already built-in privacy, security, integrations, compliance etc., that are on top of the data and give the necessary business context. Emphasizing on this while showing the ability to orchestrate Joule agents across platforms is quite a powerful message. Yes, orchestration is necessary in a process automation world that is increasingly dominated by agents (whether this is useful or not). With SAP demonstrating this capabilities, other vendors need to have very good arguments if they want to sell an agentic automation platform that has the same already built in.

SAP’s ambition to be best in class in all application domains is probably already achieved in many areas. One of them where it is not, is CX, although SAP put a huge investment into its new Sales- and Service Clouds, which technologically probably are the most modern apps around. And then, there is commerce, where SAP seemingly has lost its edge and marketing that was notably absent during the keynote – apart from the partnership with Adobe. Summing it up from a CX perspective – SAP has a long way to go before being recognized as a key CX player, let alone being “second to none”. And this recognition starts with C-level executives speaking more about it, which is another chance that SAP missed out on during this keynote. The CRO persona in one demo was about analytics and how management can be supported, which is not what CRM/CX is – or at least should be – about. And everything else was about finance, HR and supply chain.

Having said this, SAP’s CX solutions probably are amongst the best – but what is that worth if SAP doesn’t proudly position them? In addition, not doing this weakens the – else incredibly strong – end-to-end story that SAP justifiably tells. So, the easiest way to bolster this story is to leave the impression that CX is SAP’s Cinderella behind by incorporating more of it in the messaging.

All in all, SAP delivered quite a strong positioning a suite vendor. The moat around its ERP solution got far stronger, also considering commitments around becoming easier to deal with. The remaining piece seems to be to prove how SAP is or becomes “second to none” in the CX market or a subset of it.

Cloud Wars’ Bob Evans recently did an excellent and very interesting interview with SAP CEO Christian Klein about SAP’s priorities, which include integrating generative AI with SAP Business AI “to address complex business challenges an drive holistic transformation by optimizing processes like quote to cash”.

Klein repeatedly referred to end-to-end (E2E) and SAP’s great library of E2E processes that gives the essence of or at least a standardized framework for the value streams within a business.

Not surprisingly, and correctly so, Klein also repeatedly emphasized the value of AI and, in particular, generative AI, to create customer value. This happens via Joule’s ability to orchestrate different agents across the value chain, i.e., different E2E processes. Joule is SAP’s Ai assistant. He also emphasized on the value of the suite and on the importance to “in the core business” not run with “agents of 100s of different tech companies”. This is where “the suite is winning”.

Evans writes that SAP had “significant growth in applications, outpacing competitors. Klein attributes this to SAP’s suite approach, which provides a comprehensive solution for core business processes. He talks about the importance of integration and extensibility, allowing customers to choose the best solutions for their needs.” This is technically a correct statement. I am fairly sure that SAP will report another outstanding year on January 28, 2025. In the first three quarters of FY 2024 SAP certainly outpaced the cloud business applications competition, including Salesforce.

However, there is a caveat to it. This growth is largely attributable to S/4HANA cloud.

Don’t get me wrong, doing this is no mean feat. SAP profitably grows while transforming from an on-premises vendor to a cloud and AI vendor of business applications. This is big as it essentially means that the company cannibalizes its own cash cow on the way.

Klein also positions SAP as an enabler of holistic business processes and an E2E solution provider. Again, this is correct. Heck, I have been inside SAP for more than a decade and am observing the company even longer since then. And for the record, I have nothing than admiration for this awesome company - well, apart from a bit of sadness perhaps.

Why sadness you ask?

MyPoV

SAP has the smarts and the muscle to pull off and execute on an enterprise applications strategy that Christian Klein describes it in the interview with Bob Evans. Even more so in what I would call the dawn of AI. SAP is actually one of the very few companies on this planet that has the ability to pull off a stunt like this, especially while also finalizing its own transformation to a cloud (and AI) vendor.

However, SAP suffers from a major blind spot and that is its less than credible effort on the demand side of the E2E processes. SAP says that the suite is winning because of the AI side, yet it belittles the CRM/CX part of this suite.

Cases in point: With hybris, SAP acquired in 2013 the then leading B2B and B2C ecommerce platform. At this time and for some more years, both the B2B- and the B2C variants marked the top right end of the corresponding Gartner Magic Quadrants. Now, they are barely within the leader quadrant. I will not discuss the value of these reports here. The other one is the biannual IDC report on CRM market share. In the summer 2024 report, SAP held the 5th spot. Now, I hear you saying fifth ain’t bad, and certainly it sounds good. Until you remember that they have been second and you look at the current third place: Adobe. Why is this staggering? Well, Adobe is great in marketing and and good at e-commerce. Now, one can dispute two things here: One can say that e-commerce is not part of CRM and the value of the report. Again, no point for discussion here. 

The Emarsys acquisition with the subsequent announcement of sunsetting the SAP Marketing Cloud directly after massive investments into making its Marketing Cloud B2B ready. Well, Emarsys, as the vast majority of other marketing solutions is a B2C solution, albeit a good one. However, there is no migration path, but a reimplementation. In addition, SAP’s core clientele is B2B. Or, how about Salescloud V2 without a migration path from v1? Again, I do not say that these decisions have been wrong, but they shine a light.

Some more personal examples: In 2017 and 2018 SAP had the good idea to hire some salespeople from Adobe, to push its marketing solution. One of them told me that he had a hard time getting to talk to his former client and prospect contacts “because SAP doesn’t have a marketing solution”. Well, it had … To close off with this topic, around 10 years ago, SAP managed to oust itself out of the CRM market in Australia and New Zealand. Why? Strategy: SAP CRM was unsellable at that time. The cloud products weren’t quite ready by then. When they were ready, salespeople weren’t quite incentivized for selling them. The result, when this was finally corrected? See above. 

Why do I bring all this up?

A solid strategy in the CRM and CX markets looks different. And with that, there is a gap in the E2E story that Klein tells. A big one. And this gap extends into the strategy.

Why? Glad you asked. Let me explain.

The brief version is that it needs a lot of demand side aka CRM/CX data to train and then inform the AI. It is good to have an abstraction layer on top of other vendor’s data structures but that’s not enough as it complicates the software stack, which makes it more expensive, which reduces its value. SAP has all it needs and just needs to take more advantage of it.

Again, I hear the resounding ‘Why? SAP has a very strong position in the very attractive ERP market, which it needs to defend and extend’. This is true, while arguable the CRM and CX market meanwhile is bigger and faster growing than the ERP market.

However, if I compare ERP with the castle that SAP defends, its defensive system has a couple of holes while this castle is under ‘attack’ from different angles.

The simple truth is that SAP needs a strong and credible customer facing systems strategy and systems to stay credible and successful in the enterprise software market. Or else, there is the risk of becoming a niche vendor. Yes, you heard it right, I just called the ERP market a niche of the enterprise software market.

Now, what are these angles that I talked about?

• There are tier 1 vendors that offer a similarly broad and wide functionality while having more credibility in the CRM and CX market. These vendors are Oracle, and to a lesser extent, Microsoft.
• There are tier 1 vendors that, on top of delivering credible enterprise software, also have a strong infrastructure play. These are Oracle and Microsoft.
• There are tier 1 vendors that come from SAP’s open CRM and CX flank and offer a land-and-expand strategy via their AI. These are Salesforce, and to a lesser extent, Adobe.
• There are tier 2 vendors that offer a similar functional breadth - not necessarily depth. Some of these are NetSuite, ServiceNow or Zoho.

All of the above mentioned vendors, and some more that I did not mention here, have strong platforms, ecosystems, and LC/NC capabilities. More importantly, they offer quite strong AI capabilities. 

And AI platforms are the next battleground in this iteration of the Clash of the Titans. That’s why belittling CRM and CX software is a problem. Today, more than ever, enterprise software has become a platform game. And SAP is inviting strong and aggressive competitors in its house, its customer base, by leaving this corner open. From then on platform ownership at the customers means a fight for the data, i.e., an AI competition. It is not likely that customers want to run multiple different AI platforms, especially if they are integral parts of the business functionality - or worse, the business functionality is made integral to the AI platform, which is similar to what Satya Nadella suggested by reducing ERP to a CRUD layer on the database.

In this situation, the decision to harmonize on one of the available platforms lies only one little step away. After all, the introduction of AI is all about efficiency at this time. Why pay twice for very similar capabilities while using only one?

And it is unlikely that all these decisions are in favor of SAP.

The good news is that this challenge can be addressed quite easily by SAP.

Stop belittling your own CRM and CX chops

Again, SAPs E2E and AI stories are generally strong! Still, they can be made more credible and convincing.

I suggest three fairly simple actions that can be initiated by SAP to strengthen the own position

• The C-suite needs to talk more about CRM and CX to create a signal. Quote to Cash is great. Everyone believes that SAP’s ERP solutions can do this well. How about using more examples from Market to Order? It is not enough when the head of the CX division rings the CX bell. This is just noise.
• Work more and more consistently with the analyst and influencer community. This process, admittedly, seems to have started. Still, the perception of SAP amongst this community is between not good and abysmal. Turning this community helps turning market perception. 
• Evaluate and then offer more CRM core functionality as integral parts of S/4HANA. The more relevant CRM is in S/4HANA, the less need there is for SAP customers to shop elsewhere. The difficulty lies in finding the right mix to not cannibalize the CX division.

There we are. I said it. Am I wrong? Happy to discuss! Tell me what you think!

The News

A lot is going on in the SAPverse during October and the early days of November 2023. First, SAP conducted its CXLive event with CX-related announcements, then the company reported good Q3/2023 figures, a new version of its CX software that includes new generative AI capabilities got released and lastly, it executed its SAP TechEd event with a good number of AI-, BTP-, and ERP related announcements.

As this is quite a lot, I covered the CX world in a previous post and will cover the TechEd related news in this post.

So, what is new at SAP TechEd? For one, it is enough to fill a 17-page pre-event news guide that SAP sent out. SAP certainly is able to stack up the news for major events. I took the liberty to ask ChatGPT for a summary of the document, which I slightly edited afterwards. Here we are:

AI and Development Environments:

• SAP introduces SAP Build Code with generative AI, improving application development and testing, while new AI capabilities are integrated across SAP's ecosystem to drive automation.

Business Technology Platform (BTP):

• BTP is augmented with new guides for application deployment and makes the SAP Cloud SDK for Java open source.
• A new vector capability for managing unstructured data via high-dimensional vectors is announced as part of SAP HANA, enhancing developer productivity, and allowing for Retrieval Augmented Generation (RAG) that combines large language models with business data.
• SAP Graph is generally available, and now extends API management to offer a unified API for streamlined access to enterprise data, boosting productivity and integration efforts.

Cloud ERP:

• SAP introduces new features to facilitate cloud adoption, including a parallel project line for SAP S/4HANA Cloud and a rewards program for maintaining a clean ERP core.

Learning Services and Support:

• New certifications and learning resources are launched, especially for ABAP Cloud back-end development, alongside support services for RISE with SAP.

SAP Datasphere:

• SAP Datasphere is set to release enhanced capabilities for semantic onboarding, allowing organizations to integrate business data while maintaining business context. This includes importing entities from various source systems and providing simplified data sharing and prebuilt business content for data and analytics projects.

According to ChatGPT, “these updates underscore SAP's commitment to leveraging AI and offering robust tools and services to enhance developer experiences, optimize data management, and support businesses in their digital transformation journeys.”

The bigger picture

Like every other company, too, SAP has jumped on the generative AI train. For some time now, we are hearing of a lot of announcements and available functionality. This includes co-pilots as well as own foundation models or at least LLMs everywhere.

With all these, SAP is in tough competition. On the other hand, SAP is one of the very few – if not the only – companies that has the ability to cover the complete enterprise value chain with its software. It, indeed, looks at covering the value chain of complete industries with a vast variety of products and solutions.

One of the core problems that many vendors do have is that their product stack is a result of a number of acquisitions. Hence, the products and solutions base on different technologies and technology stacks. On top of that, different units often operate on different priorities, as tactics and opportunities vary. This makes it very hard to come forward with one coherent set of solutions. The necessary need for coordination may also make a company appear as slow in innovation.

My analysis and point of view

For the fun of it, let’s start with ChatGPT’s take on the announcements before I give you mine

“Overall, SAP's announcements focus on leveraging generative AI to supercharge development, modernize heterogeneous environments, harness the power of intelligent data applications, and provide foundational AI solutions for businesses. Additionally, SAP continues to evolve its BTP with new resources and support services, fostering a more agile and efficient business environment. The announcements also highlight SAP's commitment to learning and development for developers, emphasizing their pivotal role in the era of AI.”

SAP certainly let loose a flurry of announcements. TechEd being TechEd, a lot was about technology, in particular about how AI can improve all business processes from the creation of solutions through their delivery and their use.

Three-tiered SAP AI strategy; source SAP

This bases on a clear three-tiered architecture, supported by a strong ecosystem. The architecture shall overcome the two main challenges that SAP’s Chief of AI, Walter Sun, cites, namely the old training state of LLMs and the systems inherent inability to know specifics of the company.

Especially the ability of Joule to tap into external LLMs, external as well as SAP data – and in future also foundation model – has the potential to transform how users use applications and how businesses can improve their processes, especially considering the assets SAP has with Signavio and LeanIX. It is clear that SAP invests a lot into making strong AI capabilities available as a service to business applications, mainly via its new copilot, Joule. This certainly takes care of the relevant and reliable keywords that SAP uses in its messaging. The enhancements of SAP HANA to support vector storages is an additional precondition for this. The same holds true for Datasphere as the means for classification, organization and understanding of data. The value of this cannot be understated with SAP systems always being part of an ecosystem and SAP systems themselves not working on the same database instances or having a common physical data model.

The keyword “responsible” is a bit more difficult, though. SAP has a strong AI ethics policy and a corresponding AI ethics handbook. These lay out how SAP treats AI from an internal procedural level. SAP also trains its business AI only using anonymized data of customers that actively gave their consent. And more than 25 thousand customers gave this consent. This is testament to the trust in SAP’s responsible conduct and will help with relevance and reliability. While I do trust SAP, too, I think that it would be beneficial to also add information around how SAP makes sure on a technology level that customer data is kept secure and private when exchanging data with external systems, in particular AIs in the public cloud.

The tight integration of the SAP development environments from low code through pro code is important. The integration of Joule into SAP Build Code to speed up development processes is the icing of the cake.

What SAP delivered so far is a good way ahead on a road. Naturally, not everything is available yet, much is on the roadmap. A caution is necessary when it comes to SAP’s analytics cloud (SAC). As I understood the briefing and the part of the business application keynote about SAC during SAP TechEd, SAC does not (yet?) leverage this platform. It has its own low code development environment. Additionally, SAC uses a feature “Just Ask” that “complements Joule”. This I understand as Just Ask not using Joule.

Although this might be a temporary solution, the caution is that temporary solutions tend to become permanent.

On the positive side, it is obvious that SAP has deployed AI solutions across the value chain and can show strong outcomes.

Benefits of generative AI in business scenarios across the value chain; source: SAP

These outcomes have been showcased on numerous levels, so SAP clearly doesn’t only talk but also walks the talk and delivers across applications. A particularly interesting scenario was the clean core scenario using Signavio to identify custom code that can get removed. Imagine a scenario like this being extended to the system automatically adapting the code, testing it and offer it as a ready-made solution. I’d be thrilled to see something like this as a next step. This could help speeding up migrations from ECC6 to S/4HANA considerably while reducing cost. The consulting market doesn’t have the capacity that is needed for mass migrations, anyways.

The one thing where I advise some caution is SuccessFactors. While SAP showed an interesting case, I wonder how far we want to go as a business – or as a society – reducing people to numbers. The scenario is about skills, aka “having done it before” instead of talent, aka “being able to do it”.

Being a CX guy, I found it satisfying that there have been several references to SAP’s CX division, starting from above image, going on with a Retail Execution scenario, having Michael Nilles, Henkel’s Chief Digital and Information Officer talk about Trade Promotion Management on BTP with SAP and CX and Industry President Ritu Bhargava being part of the keynote. Adding on to the statements made by Christian Klein during the CX Live Keynote, this adds credibility to SAP being serious about CX.

All in all, I see SAP laying a strong technology foundation for innovative business applications that can deliver a lot of value to businesses, employees, and customers. Some portions of the messaging as well as the delivery could be somewhat refined or sharpened, though.

Still, it is clearly visible that SAP is on a strong path. I am already excited to see what Sapphire 2024 has in store.

The News

A lot is going on in the SAPverse during October and the early days of November 2023. First, SAP conducted its CXLive event with CX-related announcements, then the company reported good Q3/2023 figures, a new version of its CX software that includes new generative AI capabilities got released and lastly, it executed its SAP TechEd event with a good number of AI-, BTP-, and ERP related announcements.

As this is quite a lot, let me focus on SAP CX in this post. I will cover the TechEd related parts in another post soon. 

During his keynote to SAP CX Live CEO Christian Klein named CX “a very critical part of SAP’s portfolio. There is no intelligent enterprise without CX”. This got later reaffirmed by Chief Marketing Officer for SAP’s industry and CX solutions, Sven Denecken, who said “SAP is very serious about customer experience. If you heard otherwise, that’s not true”. Why is this important? You’ll find out in the next section.

The bigger picture

Like every other company, too, SAP has jumped on the generative AI train. For some time now, we are hearing of a lot of announcements and available functionality. This includes an own co-pilot as well as an own foundation model that focuses on business data and business decisions. Focusing on CX, SAP announced the availability of a number of AI driven assistants that cover the whole chain from marketing through service but also lead into fulfillment.  

With all these, SAP is in tough competition. The company is not perceived as a CX leader, some people even doubt it being serious about CX at all and also question the company’s ability to innovate. Re being serious about CX my favorite story is then just-not-yet board member Bernd Leukert telling the audience of the Wispubs SAP CRM conference in April 2014 that “SAP is a supply chain company” during his keynote. One could hear the proverbial needle drop on the (carpeted) floor. We could hardly have been more silent.

On the other hand, SAP hired CRM industry icon Bob Stutz, not only once, but twice. This does not speak of lacking commitment.

SAP is one of the very few – if not the only – companies that has the ability to cover the complete enterprise value chain with its software. It, indeed, looks at covering the value chain of complete industries. And SAP CX, with marketing, sales, commerce, service is covering some of the core components of the corporate value chain. On top of this, the holy grail of the customer record is part of SAP CX with SAP’s customer data solutions.

My analysis and point of view

In the field of CRM/CX it is hard to compete against Salesforce, especially when doing so head-on. On the other hand, SAP has an unbelievable amount of industry knowledge and the ecosystem to bolster this. This is one of the core reasons for SAP to pivot towards industry specific CRM. This pivot also jibes very well with the very credible industry story that SAP generally tells. Putting CX under one roof with industries and under the leadership of CX president Ritu Bhargava – as opposed to placing CX under industries – surely shows commitment to CX and the board’s trust in Ritu’s leadership abilities. This is especially interesting when considering that one of the main customer challenges cited that prevents them from moving into the cloud is lacking industry functionality (in the cloud).

One of the biggest weaknesses of SAP CX was and is not lacking functionality. SAP is surely well positioned in this respect. Instead, it is a lacking share of mind and a kind of what I’d call Cinderella relationship to CX. As in Cinderella, the unloved stepsister. Customers, partners, and analysts questioning an SAP commitment to CX certainly sometimes could perceive a lack of consistent strategy, as evidenced by Bernd Leukert’s statement and only rare mentions of CX by the board, a bumpy road from the on-premise product to a cloud product, interspersed with high profile hirings and acquisitions like Hybris, CallidusCloud, Emarsys or Qualtrics, to name but four. And this covers only the past decade or so.

SAP CEO Christian Klein publicly stating the importance of CX for SAP at the CXLive event after the board was silent about CX for quite a while is another steppingstone to regaining the trust into SAP’s commitment to CX; as is the positioning’s piggy packing on the intelligent enterprise slogan with “intelligent CX”. This needs to continue consistently. As needs the freshly energized analyst engagement.

On another note, I am not happy with naming any application intelligent. They essentially aren’t. Yes, they can be adapted to different or changing business needs – but the key is that they need to be adapted. In my opinion, the moment the applications adapt themselves to changing needs, we can talk about them being intelligent. 

This notion of “intelligent” seems to be shared by Ritu Bhargava when she said that she would build a CRM that is automated and intelligent during her interview with Nitin Badjatia during the CXLive event.

Still, this moment is not yet there. Till then, I guess that modern or flexible are probably better and more adequate terms with less hyperbole.

The second challenge that I see is remembering that the enterprise market is only so big. And it is quite saturated. SAP is not a name that comes to mind immediately when mid-sized companies are looking for a CRM system. This bears the risk of being disrupted from below by hungry vendors that move upmarket. Moving upmarket is admittedly easier than moving down-market. Still, there needs to be a strategy that helps not being pushed upwards out of the market. And this strategy needs to be linked to SAP’s flagship product S/4HANA.

What I mean with this is that SAP is not utilizing one of the core opportunities that its ERP reach gives the company. S/4HANA already offers a significant transactional part of CRM, with a focus on sales and service. Surely, it has some challenges – notably being somewhat clunky. Still, this is an underutilized asset that may very well help fending other vendors off in the core CRM market, if used actively.

All in all, I see that SAP has come on a good way when it comes to CX. SAP CX doesn’t have a severe product problem anymore, perhaps didn’t have for years. It has a perception problem. Having said that, the product can always be improved, too.

The company’s main problems in the CX field have been communication and a visible focus. The CX division has a viable strategy for quite a while now. It is just not enough that the CX leadership team or the CX sales teams talk about SAP CX. SAP CX needs to be talked about by the board and by analysts. This needs more analyst engagement – which has just been restarted – community and ecosystem outreach and, in general, continued, and consistent evangelism. This seems to be addressed. 

The “rest” is about listening, and acting upon what was heard.

A later step then could be a truly intelligent application that is more likely to be sold inside and outside the SAP installed base and there also into the mid-market. SAP has all the ingredients to pull this off, including the long breath.

A lot is going on in the SAPverse during October and the early days of November 2023. First, SAP conducted its CXLive event with CX-related announcements, then the company reported good Q3/2023 figures, a new version of its CX software that includes new generative AI capabilities got released and lastly, it executed its SAP TechEd event with a good number of AI-, BTP-, and ERP related announcements.

As this is quite a lot, let me focus on SAP CX in this post. I will cover the TechEd related parts in another post soon. 

During his keynote to SAP CX Live CEO Christian Klein named CX “a very critical part of SAP’s portfolio. There is no intelligent enterprise without CX”. This got later reaffirmed by Chief Marketing Officer for SAP’s industry and CX solutions, Sven Denecken, who said “SAP is very serious about customer experience. If you heard otherwise, that’s not true”. Why is this important? You’ll find out in the next section.

The bigger picture

Like every other company, too, SAP has jumped on the generative AI train. For some time now, we are hearing of a lot of announcements and available functionality. This includes an own co-pilot as well as an own foundation model that focuses on business data and business decisions. Focusing on CX, SAP announced the availability of a number of AI driven assistants that cover the whole chain from marketing through service but also lead into fulfillment.  

With all these, SAP is in tough competition. The company is not perceived as a CX leader, some people even doubt it being serious about CX at all and also question the company’s ability to innovate. Re being serious about CX my favorite story is then just-not-yet board member Bernd Leukert telling the audience of the Wispubs SAP CRM conference in April 2014 that “SAP is a supply chain company” during his keynote. One could hear the proverbial needle drop on the (carpeted) floor. We could hardly have been more silent.

On the other hand, SAP hired CRM industry icon Bob Stutz, not only once, but twice. This does not speak of lacking commitment.

SAP is one of the very few – if not the only – companies that has the ability to cover the complete enterprise value chain with its software. It, indeed, looks at covering the value chain of complete industries. And SAP CX, with marketing, sales, commerce, service is covering some of the core components of the corporate value chain. On top of this, the holy grail of the customer record is part of SAP CX with SAP’s customer data solutions.

My analysis and point of view

In the field of CRM/CX it is hard to compete against Salesforce, especially when doing so head-on. On the other hand, SAP has an unbelievable amount of industry knowledge and the ecosystem to bolster this. This is one of the core reasons for SAP to pivot towards industry specific CRM. This pivot also jibes very well with the very credible industry story that SAP generally tells. Putting CX under one roof with industries and under the leadership of CX president Ritu Bhargava – as opposed to placing CX under industries – surely shows commitment to CX and the board’s trust in Ritu’s leadership abilities. This is especially interesting when considering that one of the main customer challenges cited that prevents them from moving into the cloud is lacking industry functionality (in the cloud).

One of the biggest weaknesses of SAP CX was and is not lacking functionality. SAP is surely well positioned in this respect. Instead, it is a lacking share of mind and a kind of what I’d call Cinderella relationship to CX. As in Cinderella, the unloved stepsister. Customers, partners, and analysts questioning an SAP commitment to CX certainly sometimes could perceive a lack of consistent strategy, as evidenced by Bernd Leukert’s statement and only rare mentions of CX by the board, a bumpy road from the on-premise product to a cloud product, interspersed with high profile hirings and acquisitions like Hybris, CallidusCloud, Emarsys or Qualtrics, to name but four. And this covers only the past decade or so.

SAP CEO Christian Klein publicly stating the importance of CX for SAP at the CXLive event after the board was silent about CX for quite a while is another steppingstone to regaining the trust into SAP’s commitment to CX; as is the positioning’s piggy packing on the intelligent enterprise slogan with “intelligent CX”. This needs to continue consistently. As needs the freshly energized analyst engagement.

On another note, I am not happy with naming any application intelligent. They essentially aren’t. Yes, they can be adapted to different or changing business needs – but the key is that they need to be adapted. In my opinion, the moment the applications adapt themselves to changing needs, we can talk about them being intelligent. 

This notion of “intelligent” seems to be shared by Ritu Bhargava when she said that she would build a CRM that is automated and intelligent during her interview with Nitin Badjatia during the CXLive event.

Still, this moment is not yet there. Till then, I guess that modern or flexible are probably better and more adequate terms with less hyperbole.

The second challenge that I see is remembering that the enterprise market is only so big. And it is quite saturated. SAP is not a name that comes to mind immediately when mid-sized companies are looking for a CRM system. This bears the risk of being disrupted from below by hungry vendors that move upmarket. Moving upmarket is admittedly easier than moving down-market. Still, there needs to be a strategy that helps not being pushed upwards out of the market. And this strategy needs to be linked to SAP’s flagship product S/4HANA.

What I mean with this is that SAP is not utilizing one of the core opportunities that its ERP reach gives the company. S/4HANA already offers a significant transactional part of CRM, with a focus on sales and service. Surely, it has some challenges – notably being somewhat clunky. Still, this is an underutilized asset that may very well help fending other vendors off in the core CRM market, if used actively.

All in all, I see that SAP has come on a good way when it comes to CX. SAP CX doesn’t have a severe product problem anymore, perhaps didn’t have for years. It has a perception problem. Having said that, the product can always be improved, too.

The company’s main problems in the CX field have been communication and a visible focus. The CX division has a viable strategy for quite a while now. It is just not enough that the CX leadership team or the CX sales teams talk about SAP CX. SAP CX needs to be talked about by the board and by analysts. This needs more analyst engagement – which has just been restarted – community and ecosystem outreach and, in general, continued, and consistent evangelism. This seems to be addressed. 

The “rest” is about listening, and acting upon what was heard.

A later step then could be a truly intelligent application that is more likely to be sold inside and outside the SAP installed base and there also into the mid-market. SAP has all the ingredients to pull this off, including the long breath.

The News

A lot is going on in the SAPverse during October and the early days of November 2023. First, SAP conducted its CXLive event with CX-related announcements, then the company reported good Q3/2023 figures, a new version of its CX software that includes new generative AI capabilities got released and lastly, it executed its SAP TechEd event with a good number of AI-, BTP-, and ERP related announcements.

As this is quite a lot, let me focus on SAP CX in this post. I will cover the TechEd related parts in another post soon. 

During his keynote to SAP CX Live CEO Christian Klein named CX “a very critical part of SAP’s portfolio. There is no intelligent enterprise without CX”. This got later reaffirmed by Chief Marketing Officer for SAP’s industry and CX solutions, Sven Denecken, who said “SAP is very serious about customer experience. If you heard otherwise, that’s not true”. Why is this important? You’ll find out in the next section.

The bigger picture

Like every other company, too, SAP has jumped on the generative AI train. For some time now, we are hearing of a lot of announcements and available functionality. This includes an own co-pilot as well as an own foundation model that focuses on business data and business decisions. Focusing on CX, SAP announced the availability of a number of AI driven assistants that cover the whole chain from marketing through service but also lead into fulfillment.  

With all these, SAP is in tough competition. The company is not perceived as a CX leader, some people even doubt it being serious about CX at all and also question the company’s ability to innovate. Re being serious about CX my favorite story is then just-not-yet board member Bernd Leukert telling the audience of the Wispubs SAP CRM conference in April 2014 that “SAP is a supply chain company” during his keynote. One could hear the proverbial needle drop on the (carpeted) floor. We could hardly have been more silent.

On the other hand, SAP hired CRM industry icon Bob Stutz, not only once, but twice. This does not speak of lacking commitment.

SAP is one of the very few – if not the only – companies that has the ability to cover the complete enterprise value chain with its software. It, indeed, looks at covering the value chain of complete industries. And SAP CX, with marketing, sales, commerce, service is covering some of the core components of the corporate value chain. On top of this, the holy grail of the customer record is part of SAP CX with SAP’s customer data solutions.

My analysis and point of view

In the field of CRM/CX it is hard to compete against Salesforce, especially when doing so head-on. On the other hand, SAP has an unbelievable amount of industry knowledge and the ecosystem to bolster this. This is one of the core reasons for SAP to pivot towards industry specific CRM. This pivot also jibes very well with the very credible industry story that SAP generally tells. Putting CX under one roof with industries and under the leadership of CX president Ritu Bhargava – as opposed to placing CX under industries – surely shows commitment to CX and the board’s trust in Ritu’s leadership abilities. This is especially interesting when considering that one of the main customer challenges cited that prevents them from moving into the cloud is lacking industry functionality (in the cloud).

One of the biggest weaknesses of SAP CX was and is not lacking functionality. SAP is surely well positioned in this respect. Instead, it is a lacking share of mind and a kind of what I’d call Cinderella relationship to CX. As in Cinderella, the unloved stepsister. Customers, partners, and analysts questioning an SAP commitment to CX certainly sometimes could perceive a lack of consistent strategy, as evidenced by Bernd Leukert’s statement and only rare mentions of CX by the board, a bumpy road from the on-premise product to a cloud product, interspersed with high profile hirings and acquisitions like Hybris, CallidusCloud, Emarsys or Qualtrics, to name but four. And this covers only the past decade or so.

SAP CEO Christian Klein publicly stating the importance of CX for SAP at the CXLive event after the board was silent about CX for quite a while is another steppingstone to regaining the trust into SAP’s commitment to CX; as is the positioning’s piggy packing on the intelligent enterprise slogan with “intelligent CX”. This needs to continue consistently. As needs the freshly energized analyst engagement.

On another note, I am not happy with naming any application intelligent. They essentially aren’t. Yes, they can be adapted to different or changing business needs – but the key is that they need to be adapted. In my opinion, the moment the applications adapt themselves to changing needs, we can talk about them being intelligent. 

This notion of “intelligent” seems to be shared by Ritu Bhargava when she said that she would build a CRM that is automated and intelligent during her interview with Nitin Badjatia during the CXLive event.

Still, this moment is not yet there. Till then, I guess that modern or flexible are probably better and more adequate terms with less hyperbole.

The second challenge that I see is remembering that the enterprise market is only so big. And it is quite saturated. SAP is not a name that comes to mind immediately when mid-sized companies are looking for a CRM system. This bears the risk of being disrupted from below by hungry vendors that move upmarket. Moving upmarket is admittedly easier than moving down-market. Still, there needs to be a strategy that helps not being pushed upwards out of the market. And this strategy needs to be linked to SAP’s flagship product S/4HANA.

What I mean with this is that SAP is not utilizing one of the core opportunities that its ERP reach gives the company. S/4HANA already offers a significant transactional part of CRM, with a focus on sales and service. Surely, it has some challenges – notably being somewhat clunky. Still, this is an underutilized asset that may very well help fending other vendors off in the core CRM market, if used actively.

All in all, I see that SAP has come on a good way when it comes to CX. SAP CX doesn’t have a severe product problem anymore, perhaps didn’t have for years. It has a perception problem. Having said that, the product can always be improved, too.

The company’s main problems in the CX field have been communication and a visible focus. The CX division has a viable strategy for quite a while now. It is just not enough that the CX leadership team or the CX sales teams talk about SAP CX. SAP CX needs to be talked about by the board and by analysts. This needs more analyst engagement – which has just been restarted – community and ecosystem outreach and, in general, continued, and consistent evangelism. This seems to be addressed. 

The “rest” is about listening, and acting upon what was heard.

A later step then could be a truly intelligent application that is more likely to be sold inside and outside the SAP installed base and there also into the mid-market. SAP has all the ingredients to pull this off, including the long breath.

The News

On July 21, 2022, SAP reported its numbers for the second quarter 2022 and the first half of the business year 2022. In contrast to the last times, I’d like to cover this in written form, as this one is quite interesting and probably takes a bit longer than 5 to 10 minutes.

SAP changed the report structure to reflect the common cloud service terminology. It is reporting IaaS, PaaS and SaaS now.

The overall cloud revenues increased by 34 percent, with some tailwind by the current weakness of the Euro. The cloud backlog surpassed € 10 bn for the first time, growing at the same pace. S/4HANA Cloud revenue is up by 84 percent, with the backlog even growing at 100 percent.

This revenue growth is consistent across the reporting regions.

For the first time, SAP broke out PaaS revenues, which came in at € 389 million, up 49 percent yea over year. 

Not surprisingly, the profitability went down, which is attributable to loss of business due to the war in Ukraine and unfavorable conditions for SAP Ventures.

The bigger Picture

The enterprise cloud market is extremely contested. It is a saturated market that is dominated by few vendors that are able to support important parts of or even the complete business value chain. The challenge facing all these vendors is the necessity to scale down into the mid and lower mid-market. This, however, is a region that is covered by smaller vendors with similar aspirations, e.g., Creatio, Freshworks, Hubspot, Odoo, Pega, ServiceNow, SugarCRM, Zendesk or Zoho, to name but a few. 

The big vendors in this Clash of Titans follow different strategies and have different strengths. Oracle, SAP, and within limits Microsoft are full suite vendors, while Salesforce focuses on customer facing processes. Microsoft and Oracle have a considerable infrastructure business, something that Salesforce does not have and SAP to a limited extent (€ 257 million in Q2 2022). Oracle’s core domain is its database business, while SAP is strong in the ERP and supply chain areas. Microsoft has best access to consumers and data, thanks to LinkedIn and Bing. 

All of them have strong ecosystems, with Microsoft and Salesforce likely having the leading ones. Having said that, all ecosystems leave room for improvement in a sense that they are geared towards value generation at the hub.

Decisive in this game will be the ability to offer strong, well-integrated solutions that offer easy adaptability and extensibility with a fast time to value for the customers.

My Analysis and Point of View

The first reaction to the numbers reported by SAP should be that congratulations are in order although the falling Euro certainly helped. Still, the overall growth rate in all likelihood surpassed the growth rate of the main competitors. Their numbers will be interesting to see. The accelerating traction of S/4HANA Cloud shows that SAP certainly hit a nerve here, supported by the implementation program RISE, which, interestingly enough, seems not yet have to be copied by any competitor. I will not discuss the strengths and weaknesses of RISE here. This has been done by other analysts; I recommend reading Josh Greenbaum’s recent assessment.

It is also amazing to see, how a huge vendor like SAP can achieve a triple: A complete transition of its portfolio from on premise to the cloud, maintaining growth while staying highly profitable. This achievement is largely undervalued by the (finance) analyst community. There are other vendors that buy growth on cost of profitability. But then, I am an industry analyst and not a finance analyst and look a bit more geeky at things.

What makes the SAP numbers interesting, is that the usual vendor obfuscation changed somewhat. Cloud revenue is now split into the industry standards IaaS, PaaS and SaaS, which is laudable. This makes it also more obvious that SAP wants to be seen more as the platform vendor that the company is – and has been for quite some time. What it also enables, is a better guesstimate at SAP’s CX numbers, considering that the main revenue drivers of the SaaS portfolio are S/4HANA Cloud, Business Network, HCM, the industry clouds and the CX portfolio. Given this portfolio and the fact that its size – minus S/4HANA Cloud is at around € 1.9 billion, it is reasonable to assume that SAP’s CX business size is well below € 1 billion, probably at around € 600 – 800 million (per quarter). This would still not be a number to sneeze at, but clearly shows that there is some potential, also given the number of net new names in the S/4HANA business.

What is obvious by the lack of mention is that the CX portfolio is not one of the revenue drivers – means that its growth rate is below the 35 percent growth of the SaaS business, nor does it seem to be at the core of SAP’s strategy, which is unfortunate, as SAP is certainly competitive in the league for the tier one vendors.

Still, what needs to be said, is that its growth rate seems to be at least comparable to the numbers that were reported by Salesforce and Oracle for their last quarters (or Zendesk or Freshworks, for that matter). Again, the upcoming numbers of especially Salesforce and Microsoft will be worthwhile a deeper look. 

SAP certainly tells a strong story along not only corporate, but also whole industry value chains and underpins it with its Business Network and initiatives like Catena-X. Industry cloud narratives gain traction as well, albeit as a company that does industry processes for several decades now, this narrative came interestingly late.

The CX organization within SAP tells a good story as well. Refer to Jon Reed’s recent interview with SAP CX Chief Revenue Officer Jen Bailin for more details. Still, being a CRM/CX guy, I wished that this story would be told more prominently on the board level, i.e., outside the CX organization. That way, SAP would become far more visible in the CX market and could strengthen its position. It certainly has what it takes on the product side, especially considering the Commerce Cloud, Emarsys, and the Customer Data Cloud Solutions portfolio.

The future can be very bright for SAP. 

And the company is in a position that enables it to shape its own fate.

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.