SAPPHIRE 2018. In an Orlando convention center, far away from Walldorf SAP holds its annual conference, boldly going where no one has gone before. But enough of this poor allegation to Star Trek although it reasonably sets the tone. The first two days gave a deep view into the company strategy. Condensed into two press releases the company laid out its vision of the future of CRM and intelligent enterprises. And, doing so, shot a few broadsides at the competition, especially Salesforce.

The News

“The legacy CRM systems are all about sales; SAP C/4HANA is all about the consumer … when you connect all SAP applications together in an intelligent cloud suite, the demand chain directly fuels the behaviors of the supply chain” said SAP CEO Bill McDermott. SAP intends to achieve this link of front- and back office by fully integrating an augmented suite of solutions that base on the SAP Hybris Cloud solutions into the digital core, the transactional back end. This integration is done via the SAP Cloud Platform. Additionally, it is fusing the new high profile acquisitions Gigya and CallidusCloud into the solution. C/4HANA C/4HANA; source SAP The Customer Data Cloud is what has been Gigya. This model, as well as S/4HANA, will be supported by the SAP HANA Data Management Suite, which is essentially a beefed up Master Data Management Solution around the SAP Data Hub. The second press release is about AI, IaaS, and more AI. SAP starts to talk more about conversational AI and Leonardo, as well as blockchain get more to the forefront. Mostly on the back end.

The bigger Picture

The CRM suite is back! This is an inevitable consequence of the ongoing Clash of the Titans, aka platform war and the realization that customer experience is actually a platform play. Just that the suite now looks different from how it looked like say, 15 years ago, when we saw huge monolithic applications like the venerable SAP CRM, or Siebel CRM. What stays is where at least Salesforce struggles – a common data model underneath the suite. I am, frankly, not so sure about Oracle and Microsoft here, but think that they are following a route similar to SAP. And then there is Adobe, which takes the way from marketing into commerce in a pretty strong move. The acquisition of Magento might be game changing, also considering the strong relationship to Microsoft. Especially Salesforce is forging ahead establishing new abilities for their customers to build new business models by helping their customers and improving internal efficiencies. Being the undisputed number one in the CRM market, Salesforce is the natural target of the other tier one companies. And as I (e.g. here), as well as others, have written: Salesforce is vulnerable. AI and conversational user interfaces cannot be done without. Conversational user interfaces are what will change our way of using computers as helpers. They are what makes computing ambient computing. So there needs to be significant investment in this area. There are lots of specialists around, of which SAP acquired one. Blockchain needs to be covered, anyways. In my eyes, blockchain is still a topic for the back end. Ledgers, tracking and tracing, and so on. Identity seems to be on the verge, and then there are a number of marketing related ideas that I personally still do not regard as proven enough to be viable. Time will tell. Being a big vendor means that one needs to have a foot in that game.

My PoV and Advice

For the keen observer it was all in the coming. SAP always was a suite company. Even R/2 and R/3 already were suites right from the beginning. While some part of the announcement is achieved by a rebranding the overall picture is strong. It plays to SAP’s strengths of being able to deliver end-to-end. A caveat is that SAP is still suffering from a loss of mindshare when it comes to CRM. The company is addressing this for several years now, but it is still not where it needs to be. But the picture is improving as the solution suite is strong. Maybe not everywhere as strong as the competition, but the promise of integration and the sheer power behind a determined SAP is certainly convincing. I know of Marketing Cloud wins against Adobe although some, for marketers, important functionality is stronger in Adobe. Similarly are there (pre acquisition) wins of Cloud for Sales/Callidus against Salesforce Sales Cloud and their CPQ. A common denominator here is that customers did not know how easy to use and powerful the SAP software is. Lacking mindshare, wrong perception. But, what this says is that CallidusCloud, along with Gigya, have been some of the best acquisitions that could have been made (well, include Hybris here). Putting the front office applications under the Hybris brand back the day certainly helped, too. After creating momentum there is brand harmonization now, which is a good thing. Still, my recommendation to SAP is to look for low hanging fruits that are of benefit to the users. It is not all about the consumer. It is also not all about the best possible behind-the-scenes functionality, unless it is of clear benefit to a significant user group. Win the hearts of the users, too! They are the ones who are craving for having their job made simpler. Helping them might be less headline-worthy, but it will pay off in spades. This is where the intelligent enterprise, machine learning, and especially conversational user interfaces, come into picture. The announcement about this is relating to the back office but then there are use cases for the front office, too. Build them, talk about them. Some of them are even already there. But when it e.g. comes to AI based opportunity scoring even I think of Clari, not SAP – which is a shame. Conversational AIs and machine learning have become table stakes. It is good to see SAP productizing SAP Leonardo more and more. So far it looked more like a consulting solution, but this seems to change to the better now. Offering blockchain services seems to be a must these days. It is refreshing that SAP focuses on the back end side here. I am sure there will be some viable customer facing use cases but these still need to mature. Till then it is good to improve existing grounds instead of trying to disrupt. As a little side note, and also looking into Gartners 2018 Magic Quadrant of IaaS solutions, SAP is betting on the right horses. IBM shows up for the private cloud solutions only and is partnered for private cloud deployments. Google, AWS, and Azure are available for public cloud deployments. The next IaaS infrastructure to be partnered with for public cloud deployments should be Alibaba Cloud. All in all, SAP seems on a roll.  

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 the 2017 SAPPHIRE NOW conference SAP told the stunned audience about how they connected some dots to create better value and more intelligent business applications for their customers. In essence SAP lifted the veil on how the company will go ahead with two technologies that will dominate the next years and that are ordinarily treated as different topics. But which, in essence, are like yin and yang. I talk about AI and machine learning on one hand, and IoT on the other. SAP has been fairly quiet on the former and fairly vocal on the latter, although the first announcement was about machine learning powered intelligent business applications, back in November 2016. At that time SAP announced the availability of the machine learning platform for SAPPHIRE NOW 2017. After this, SAP announced SAP Leonardo, the bundling of their IoT portfolio back in January 2017. On day 1 of SAPPHIRE NOW SAP delivered on the November promise by announcing “it’s time for machine learning to take the work out of your work flow. It’s time for billions of devices to go from thinking, to doing. It’s time for SAP Leonardo, the SAP system for digital innovation.’ With this approach they even go beyond only connecting two technologies but they also add Blockchain, Big Data, Data Intelligence and Analytics into one single platform. Whereas one could argue that Big Data, Data Intelligence and Analytics are essentially the same. With this powerful combination, as Holger Mueller, Principal Analyst of Constellation Research, aptly observed, ‘technology for the first time can do more than business best practices want’. To accommodate for this, SAP added consulting elements into the new Leonardo brand. This makes SAP Leonardo more of a toolkit than an actual solution, but a toolkit that SAP proved to help solving specific business problems in short times. In the words of Mala Anand, president for SAP Leonardo: “SAP Leonardo is our brand variety but to deliver transformation at scale we need more than IT so we’ve expanded SAP Leonardo to be our digital innovation system that will help you, confidently, redefine your business for this digital world.”

My Take

A brilliant move. As I already indicated, AI and IoT are like Yin and Yang. They are facets of the same thing. While current ‘things’ are mainly sensors they are creating a tremendous amount of data that needs to be analysed for the patterns that allow for intelligent action and reaction. This massive amount of data also explains why SAP moved Big Data, Data Intelligence and Analytics into SAP Leonardo. In not so far future these ‘things’ will not only be sensors but also be actuators, means take action – self-driving cars are only the most discussed theme here. There will be many more. This is where the ‘things’ start the doing. And many of these ‘things’ will be inside the boundary of companies, SAP’s core domain. Although SAP also moves into consumer technologies, e.g. automated cars. Finally, SAP added Blockchain into the mix. This really rounds off the tool kit, as it is a security technology that is geared for establishing trust – first between systems and then by making the systems trustworthy to humans. More mature security technology is delivered via the SAP Cloud Platform that is the foundation of SAP Leonardo. With this set of technologies plus a methodology around them that helps in solving problems fast, SAP has something at hand that can hardly be overestimated. At this time I do not see the other big business application vendors having something of similar capability at hand, not Oracle, not Salesforce, even not Microsoft, which is probably closest to be there. Now, after these glowing words there of course are some buts. The first one is that there now can be some confusion about what SAP Leonardo stands for. Originally it was about ‘connecting intelligent devices with people and processes to achieve tangible business outcomes’. Now it is far more, and not only a technology anymore. While this shift is in my eyes straightforward, I would expect that it still needs some education. The second, and more important one, being that there are countless other IoT platforms out there in the market. There hasn’t been much of standardization yet and interoperability between those platforms is also still in its infancy. And SAP still has the reputation of being hard to work with, which is a clear inhibitor on the way to becoming the leading dog in this market. Similarly for the Blockchain technology. There are quite some groups of companies trying to get into a dominant position, with inter-group interoperation being very limited. On the other hand there are only few companies that can move with a similar thrust. One of them being Google, who just announced during the Google I/O conference that they will weave AI and machine learning into their products, around 2 billion of which happen to be the ‘things’ called smartphones. And Google has quite some interesting consumer use cases.