SAP invited me to attend Sapphire and I gladly attended the conference in Orlando. I missed the attendance number, but I’d say it was the same like last year. The exhibitor area of the show floor was even more dense, so more partner interest, spend and investment than last year (my guestimate). 


Earlier I already published my Day 1, Day 2 Keynote takeaways (here and here) and a News Analysis of the SAP and IBM partnership in the HCM area (here). Preparing for this post I also read my Event Reports of Sapphire 2014 (attended, here) and Sapphire 2013 (from the fences, here). If you have 10 minutes to invest, both blogs provide a very good perspective on what SAP’s challenges were, which ones SAP has tackled and which ones remain. 
Leukert and The Journey

3 Top Positives

SAP cozied up with BigData – or – Hadoop is no longer a bad word – For the longest time other database technologies were bad words at SAP. It was (and still is mostly) HANA, HANA … as I have said, tweeted, blogged and written research about, that put SAP at the losing end of next generation applications opportunity. First ignoring, not working, then co-existing with Hadoop made SAP not a viable provider for 21st century use cases (think IoT, Internet harvesting, Social Media, DaaS etc.) because the volume of business relevant information grows faster than memory chip prices fall. So it was never viable to have ‘all’ information in memory. The co-existence scenarios that SAP adopted fell short because there is always some key data in the BigData clusters that a next gen application needs to get to very, very fast. And data can’t be moved, as it’s too massive, hence we see the micro-services boom. With some projection and benevolent fantasy we can now assume that SAP is finding a way to combine HANA and Hadoop (likely via Spark as it was on Leukert’s slides) in a coherent way, running queries (natively?) across clusters. More from SAP to come but this too me was the (a bit geeky, ok) the #1 takeaway from Sapphire. 

Leukert with probably most important Sapphire Slide

SAP can’t stop here and needs more of an outside in perspective on this topic, e.g. it’s not only about getting the BigData back into ERP to HANA, it’s more about getting the ERP relevant data closer to the BigData. With that SAP can really play in next generation application scenarios. IoT being the most prominent one. Siemens selecting SAP for IoT is a key platform and reference win, and my guess is that Siemens also helped this new development [as Siemens’ IOT platform relies heavily on Hadoop.] And while most Sapphire attendees and decision makers may not have realized and may not build these applications (yet) – it is key that they know that their application provider, SAP, is now (more) future proof. 

Clark with other DBs than HANA

S/4HANA – The future is clear – or – Are we there yet? How do we get there? – There can be no doubt that S/4HANA is the future for SAP, featured prominently in all keynotes. It is very positive for SAP to rebuild its applications for the 21st century, for the cloud, as SAP described in the S/4HANA launch in January this year (see my First Hand blog here). And SAP is working very fast (maybe too fast – see the concern below) in adding more to S4/HANA than the ‘founding’ member Simple Finance. With the Fiori UI S4/HANA has a compelling and modern UI, in a Q&A Platter remarked that this was the first time he walked the show floor and did not see any SAP GUI, WebDynPro et al interfaces. 

Leukert with S/4HANA Cloud Edition and 25 on premise Industries
Truly good news for SAP customers, as usability of ERP applications in general and SAP in specific are a traditional challenge. And Leukert surprised regular audit and pundits with the announcement that the newly announced S/4HANA Cloud Edition (see press release here) will include (beyond Finance) Sales, Services, Manufacturing, Supply Chain, R&D and Engineering, Asset Management, Sourcing & Procurement and Sustainability. Looks very much like the mySAP ERP scope. Not enough with that, Leukert shared that all 25 verticals that SAP has built now ‘run’ in S/4HANA. That is an amazing scope and a very fast delivery (though only the vertical code is available now). SAP did not share publicly what will be available and when. What we know is, that the Cloud Edition of S/4HANA should see quarterly new releases and that the roadmap is available to SAP customers on the Service Marketplace. When asked in the executive Q&A Leukert explained how SAP got here so fast: When Simple Finance began, SAP copied ‘all the code’ (from my SAP ERP, ECC 6 – not clear / known to me what the source was) to the new development environment. After the S/4HANA launch the development teams have worked hard to make sure that the 25 industry code ‘runs’ with S/4HANA. ‘Runs’ means that the system will not crash, and works, but it is also not optimized for usage of HANA as the database, the products don’t have a Fiori UI, they are not simplified and augmented with modern best practices. 
Plattner TCO case for HANA and S/4HANa
All these aforementioned qualities (from Plattner’s list at the launch – see my play for play here) are gatekeeper to make it from S/4HANA on premise (or as managed instance by SAP) to the S/4HANA Cloud edition. Effectively that means that these qualities will come first to the cloud edition and then to the other editions (no commitment made for timelines). But it is probably fair to observe that not every addition / new product SAP builds on S/4HANA cloud edition may be able to run in the S/4HANA on premise edition. A lot of very quick product creation by SAP, so kudos, for the flipside read below in the Concerns section. 

SAP gets viable in IoT – or – (Hadoop) Data is the new gravity - SAP has been talking since summer last year about becoming an IoT player – read my first take here – but the concerns in regards of Hadoop being the operative data store for pretty much every serious IoT project out there was limiting SAP’s potential. With the announced (see press release here) and pending ‘embrace and extend’ (hope Microsoft doesn’t mind the re-use) of Hadoop / Spark that concern is gone. But it’s not just the database, enterprises need a development platform, and that is HANA Cloud Platform (HCP), basically SAP’s PaaS (First Take here). It is good that SAP is looking at all assets it can bring to the table, and good to see the mention of the venerable SQL Anywhere product, probably the best choice in the market when a ‘thing’ needs to run offline for some time. Now it will be key to watch that SAP can sign up similar caliber customers like Siemens, so the IoT / HCP platform does not get influenced too much by Siemens (long, long term SAP insiders will appreciate the deja-vu). But for now it is great to see an industrial heavyweight put is fate onto SAP / HCP. Moreover it is good to see SAP speaks more about HCP, though the statement that SAP cannot build all new applications and that therefore HCP is crucial was a comment made behind closed doors.
Leukert preps for IoT part with Siemens

Top 3 Concerns

Where there is light there is also shadow, so here are my Top3 concerns.

S/4HANA – changing the engines while the plane is flying - As we pointed out already last year (see here) there are 2 fundamental approaches how to build a massive new enterprise suite, while customer are live and using the previous generation. 

  • Isolation of the new - One approach is to build the new suite in a separate effort, sometimes even isolated in management, examples for that are Oracle Fusion, the new Infor Financials and HCM or closer to SAP byDesign. From a technology perspective this is easier, as the vendor isolates the efforts. Commercially the approach is a challenge, as the vendor needs to fund the new development, maintain the existing products and keep the install base as clean as possible from inroads by competitors. 
  • Innovate as you go - The other approach is to gradually move things to the new platform over time (this is what SAP is doing with S/4HANA). The commercial advantage is that the vendor can commercialize the new product right away (e.g. a SAP customer buying Simple Finance), try to declare technology innovation victory (e.g. ‘we are in the cloud’). On the technology and implementation side things are a little harder as integration between new and previous version needs to be re-shuffled every new release of the new platform. And that is what SAP has announced to do with S4/HANA. Multiple version of integration need to be maintained and supported as customers maybe on different versions between new and old. 

SAP has ten thousands of engineers and with Leukert a leader who understand the above very well. Coupled with the good quality track record (all is relative of course) SAP can pull this off, no question. The hard cold fact is, that SAP probably did not have a fair choice between the two approaches, as it did not really succeed with the first approach. With McDermott certainly SAP has more of a commercial leader than with Kagermann back then, so equally no surprise how the dices have fallen. And it will be back to McDermott and the sales team to evangelize, explain and monetize the approach taken with customers. No doubt they can do it, but concerns can pop up along the way. 
For instance that SAP could not present a live S/4HANA customer on stage at Sapphire. It was great to have an international customer on stage (Indian paints vendor asianpaints), but the enterprise go live is near (May or June) so still ahead. It was good for SAP not roll out its own Finance team again (already on stage 2014) and later we learnt that Constellation SuperNova award winner Florida Crystals (for adoption of HANA, more here) is live on S/4HANA. Maybe the sugar maker did not carry enough brand recognition to be on stage, or maybe wasn’t comfortable to speak to a broad global audience. To be fair of course, S/4HANA is only around since a little more than 3 months. But SAP has ten thousands of customers and considerable resources to pour into customer adoption and evangelism. This situation can only get better.
The HCP In Clark's presentation

Value Proposition Change – From integrated core to a temporarily networked core - The traditional SAP customer has bought into the vision and then experienced the value proposition of an integrated suite. SAP itself changed that with the advent of the separate mySAP xxx systems (CRM, SCM, SRM, PLM etc.). In the recent years SAP has re-integrated some of these, e.g. mySAP PLM into what was then mySAP ERP, now the Business Suite. But there was always a ‘core’ (and SAP calls S/4HANA again the core, trendily the digital core) of integrated automation. Now for the first time in SAP product history that core will – step by step – over the next years – migrate of the S4/HANA cloud edition. One can argue that there is not much of a difference of SAP maintaining interfaces between e.g. R/3 and mySAP CRM, or today between BusinessSuite and Cloud for Customer. But the economics and mechanics in the cloud age are different for cloud based enterprise software. They are implemented differently, upgraded more frequently – on the flipside they don’t offer the deep configuration and customization we have seen in the on premise era. So to see how SAP will keep customers happy in the transition to S/4HANA Cloud Edition will be an interesting development to keep an eye on. 
SAP will say that customers can stay on premise for S/4HANA, too – but new development is likely to be seen and run in the S/4HANA Cloud Edition. It will be interesting to see when SAP customers will move ‘in bulk’ to S/4HANA Cloud Edition. SAP certainly wants customers to move there – customers will seek re-assurances of adoption, quality and functional richness. But at the core is the integrated suite value proposition that was always the main value proposition (and differentiator) of SAP. How well SAP can make it through that transition will be key for its own and its customers’ success.
The largest tall ship built the Koebenhavn

21st century best practices - Or – the history of ship building applied to enterprise software – For the longest time mankind would cross waters in wooden, wind powered ships. 150 or so years ago iron became available in quality, quantity and price to build ships from it, including a steam engine. The new technology of ship building required new skills in the shipyards, and very little could be saved over from the wooden era. We see a similar change in technology today, were for the first time since mankind does computing, the computing capabilities surpass what business best practice require. The consequences are many, but one of them is that 21st business best practices are changing very quickly right in front of us. And the early adopters do as well as the first warriors with iron swords did against those with bronze swords. Or in other words, enterprises clinging to old business best practices will disappear quickly. Digital Transformation is not kind to laggards. This is a challenge for all enterprise software vendors: To react fast enough and built these practices into their software, this is not exclusive to SAP as a challenge. But for the first time enterprise software vendors need to show thought leadership and can’t rely on customer advisory boards and focus groups to tell them what to do. This input process is too slow and runs a high risk to leave both vendors and customers behind. So exciting but also strategic times.

As an analyst I try to assess how close a vendor is to the 21st century best practices by looking at how much new best practices make it in their product plans and how fast they can build code. Because we know that new best practices require new functionality that requires new code. And both points concern me with SAP at this point. Yes the keynotes had promising moments of new best practices, like mentioning simulation, decision management and ‘true’ analytics (more here). But the only new application on top of Finance was ‘new’ – Cash Pooling. And of course it makes sense to build Cash Pooling on top of HANA, but it’s the same process faster, much faster but not re-thought. The other concern is that SAP copied the code of (I assume her) the Business Suite, to build the base for S/4HANA. I am concerned SAP risks to have copied too much of last century best practices and then build on them. The ship building analogy would have been to take the largest wooden ship and but steel casing over it. Would not have worked then and it is likely not to work now. But it is speculation right now, way too early to tell. And fair enough to SAP, if SAP built S/4HANA from code line 1 – they best practices for the 21st century have not fleshed out yet. So would be a risk to build on the best we know in 2015. And this is why (see above) a modern PaaS is so important, let customers build something if they really want that. Of course along guided lines and without (hopefully) loosing key qualities that are need in the cloud age.


Analyst Tidbits

  • Simple Finance makes progress – It was good to sit down with the Simple Finance team and learn more on customer adoption on roadmap. Both are making good progress for the relative short time the product is around.
  • Technology business alive and well – With a new version of Lumira and a new push behind the former Sybase (we spend time on SQL Anywhere and Sybase ASE) – it’s good to see SAP using all its technology assets. 
  • HCP progresses – Good progress on the HCP side as well. More adoption, more open source and SAP becoming an active contributor to open source projects is a good trend to see. The Integration function is maturing and given the S/4HANA scenarios will have a lot of things to integrate in the near future. It is fair to say it is the ‘make or break’ for S/4HANA. 
  • Cloud for Planning – The ‘spreadsheet’ killer on top of HANA is making equal good progress, being even younger than S4/HANA (my First Take at product launch here). 
  • HCM – SAP announced partnerships with Benefitfocus and IBM (my News Analysis here). The IBM partnership is good for both SAP and IBM as SAP has a channel to sell more EmployeeCentral and IBM as a modern HR Core offering to shut out potential competitor aspirations. The Benefitfocus partnership allows SAP to close gaps on the Benefit functionality that have been difficult to address before. So both are good moves by SAP in the HCM space. 
Great visualization of global flight traffic for a HANA demo


    A good Sapphire for SAP that is in the process of bringing its core products to the cloud. If it fails, as Plattner said back at the launch of S/4HANA, SAP ‘is dead’. There are significant risks in the approach how SAP builds S/4HANA as well as the practice of copying code, making it work, then simplifying it and then enriching it. But then SAP probably didn’t have a choice in the approach anymore, given the advanced age of platforms and the ByDesign history. But that’s a key decision SAP and customers need to live for years to come.

    More importantly SAP has departed from an almost ‘cultish’ HANA (and database centric) view of applications. It is very good to see that this phase is over in my view, building next generation application with a ‘best tool’ philosophy vs. a single tool mindset can only be good for SAP and its customers.

    Moreover SAP needs to make the transition options and benefits vs TCO of moving to S/4HANA very clear. The SAP customer base (as diverse surveys show) has not been able to execute the HANA TCO equation in SAP’s favor. The S/4HANA equation has probably a one order of magnitude bigger price tag. Plattner showed an encouraging TCO comparison that made it look like a ‘no brainer’ to move to S/4HANA – if SAP can pull this off in this category in its diverse customer landscape on a multitude of systems, then S/4HANA adoption will be easy from a TCO perspective. That would be a huge win for SAP.

    Lastly, SAP’s business has been a rich ecosystem play, as the booths at Sapphire showed. In general pundits assume that for 1 currency unit for SAP, up to 7 are made in the ecosystem. That equation will change with S/4HANA and it will be key for SAP to keep partners on its side in the process. The enterprise software industry itself has been disrupting itself on the product side – but the impact on implementation services has been the strongest. Customers can and want configure enterprise software by themselves, maybe with a few special forces type consultants by their side, but not a company of foot soldiers aka consultants anymore. The disruption to the services partners is in full swing, with SAP probably driving the most generous ecosystem in the market, it needs to be extra careful to not create antagonistic trends.

    But for now – it is forward for SAP and its customers with all the ups and downs the creation of a new product brings. We will be there watching and blogging, please keep reading.



    And more on overall SAP strategy and products:


    • First Take - Bernd Leukert and Steve Singh Day #2 Keynote - read here
    • News Analysis - SAP and IBM join forces ... read here
    • First Take - SAP Sapphire Bill McDermott Day #1 Keynote - read here
    • In Depth - S/4HANA qualities as presented by Plattner - play for play - read here
    • First Take - SAP Cloud for Planning - the next spreadsheet killer is off to a good start - read here
    • Progress Report - SAP HCM makes progress and consolidates - a lot of moving parts - read here
    • First Take - SAP launches S/4HANA - The good, the challenge and the concern - read here
    • First Take - SAP's IoT strategy becomes clearer - read here
    • SAP appoints a CTO - some musings - read here
    • Event Report - SAP's SAPtd - (Finally) more talk on PaaS, good progress and aligning with IBM and Oracle - read here
    • News Analysis - SAP and IBM partner for cloud success - good news - read here
    • Market Move - SAP strikes again - this time it is Concur and the spend into spend management - read here
    • Event Report - SAP SuccessFactors picks up speed - but there remains work to be done - read here
    • First Take - SAP SuccessFactors SuccessConnect - Top 3 Takeaways Day 1 Keynote - read here.
    • Event Report - Sapphire - SAP finds its (unique) path to cloud - read here
    • What I would like SAP to address this Sapphire - read here
    • News Analysis - SAP becomes more about applications - again - read here
    • Market Move - SAP acquires Fieldglass - off to the contingent workforce - early move or reaction? Read here.
    • SAP's startup program keep rolling – read here.
    • Why SAP acquired KXEN? Getting serious about Analytics – read here.
    • SAP steamlines organization further – the Danes are leaving – read here.
    • Reading between the lines… SAP Q2 Earnings – cloudy with potential structural changes – read here.
    • SAP wants to be a technology company, really – read here
    • Why SAP acquired hybris software – read here.
    • SAP gets serious about the cloud – organizationally – read here.
    • Taking stock – what SAP answered and it didn’t answer this Sapphire [2013] – read here.
    • Act III & Final Day – A tale of two conference – Sapphire & SuiteWorld13 – read here.
    • The middle day – 2 keynotes and press releases – Sapphire & SuiteWorld – read here.
    • A tale of 2 keynotes and press releases – Sapphire & SuiteWorld – read here.
    • What I would like SAP to address this Sapphire – read here.
    • Why 3rd party maintenance is key to SAP’s and Oracle’s success – read here.
    • Why SAP acquired Camillion – read here.
    • Why SAP acquired SmartOps – read here.
    • Next in your mall – SAP and Oracle? Read here.


    And more about SAP technology:
    • HANA Cloud Platform - Revisited - Improvements ahead and turning into a real PaaS - read here
    • News Analysis - SAP commits to CloudFoundry and OpenSource - key steps - but what is the direction? - Read here.
    • News Analysis - SAP moves Ariba Spend Visibility to HANA - Interesting first step in a long journey - read here
    • Launch Report - When BW 7.4 meets HANA it is like 2 + 2 = 5 - but is 5 enough - read here
    • Event Report - BI 2014 and HANA 2014 takeaways - it is all about HANA and Lumira - but is that enough? Read here.
    • News Analysis – SAP slices and dices into more Cloud, and of course more HANA – read here.
    • SAP gets serious about open source and courts developers – about time – read here.
    • My top 3 takeaways from the SAP TechEd keynote – read here.
    • SAP discovers elasticity for HANA – kind of – read here.
    • Can HANA Cloud be elastic? Tough – read here.
    • SAP’s Cloud plans get more cloudy – read here.
    • HANA Enterprise Cloud helps SAP discover the cloud (benefits) – read here
    Find more coverage on the Constellation Research website here.