SAP BDC strives to be an AI catalyst, but clarity is needed

The data struggle

Data management is a priority for many SAP customers, which means there should be strong interest in SAP BDC, according to Conor Riordan, chair of the UK & Ireland SAP User Group.

Companies are struggling with data spread across different parts of the business, Riordan said. While there are various digital tools that can capture valuable information from the data, it often sits in isolated systems and lacks business context.

"As organizations ramp up their AI initiatives, the ability to unify and extract greater value from data will be more crucial than ever," he said.

SAP introduced Datasphere in 2023 so that customers could create a data fabric architecture -- or a single environment -- that integrates data from across the organization.

Datasphere is a "solid product" that saves customers time in dealing with data issues, but it hasn't taken off, according to Gavin Quinn, CEO at Mindset Consulting, an SAP partner based in Minneapolis.

BDC addresses a couple of the elements that Datasphere lacks, including a practicable way to migrate data from BW to Datasphere, he said.

"There's a BW bridge concept, but that didn't meet people's needs, so that became a big block, as customers don't want to redevelop everything they've done on BW over 15 years all on Datasphere. That's too much of a lift," Quinn said.

Customers also struggled with data silos between internal and external environments. The Databricks integration should help customers who have been building data lakes with the vendor or other products outside of SAP, he said.

"They're trying to replicate from SAP in their own ways out to their broader data ecosystem," Quinn said. "Databricks, based inside of BDC and with this more open framework, [will ease the things] that were holding customers on jumping into Databricks historically."

An SAP priority, but will it be for customers?

BDC is a priority for SAP and underscores potential revenue growth from AI, cloud and data, according to Ben McGrail, managing director at Xmateria, a London-based firm that provides data migration and other services for SAP customers.

It also drives technical relevance around data in much the same way that Rise with SAP attempts to drive the conversation around cloud migration from systems integrators and cloud hyperscalers back to SAP.

"There's an element of that here with BDC," he said. "They don't like data being taken out of SAP going off to Snowflake or some of these integration products. They're definitely trying to get control of that again and bring this back within SAP."

However, BDC also indicates that SAP is listening to customers who have said they have a massive unrealized value in their AI investments so far, McGrail said.

"They're doing all sorts of small projects like [proofs of concept] and pilots that are not seeing that value," he said. "SAP is saying that they'll build apps that can take advantage of their capabilities in AI and that integration with the core data, whether that's in a data lake or in S/4HANA."

As the business AI capability grows over the next 10 years, you don't want to get five or six years into that and wish that you'd moved to S/4HANA already.

The Databricks integration provides an ability to integrate SAP data with external data from a variety of sources and in various formats, which is an advantage for BDC, McGrail said.

Customer adoption is still in question, and SAP will need to find ways to explain the differences between BDC and Datasphere, McGrail said. But opening up its data platform could prove to be another reason for customers to move from legacy systems to S/4HANA Cloud.

"It's not the only reason why customers will move to S/4HANA, but as the business AI capability grows over the next 10 years, you don't want to get five or six years into that and wish that you'd moved to S/4HANA already," he said.

SAP plays offense, defense with BDC

Given the focus on data and AI from enterprises, BDC is potentially an important product for SAP, according to Joshua Greenbaum, principal at Enterprise Applications Consulting.

One problem for SAP is that every potential BDC enterprise customer likely has several vendors vying to do the same thing, including SAP's hyperscaler partners, Azure, AWS and Google Cloud Platform, Greenbaum said. It forces SAP to walk a fine line between offense, where it attracts customers with ease of use and relevant applications, and defense, where its offerings keep customers in their environment, he said.

The ability to lift and shift data from SAP BW to BDC could be useful, but moving data from one environment to another is potentially problematic, even more so when the target environment has different data structures or functionality, Greenbaum said. Customers should approach this data migration carefully, particularly because how they use data in BDC could be radically different than how they used data in BW.

"BDC sets the stage for a lot of advanced analytics, decision support and AI capabilities across heterogeneous environments, which is not necessarily what you're doing in BW," he said.

Greenbaum also wanted more clarity around the new apps in BDC because some capabilities are covered by existing capabilities inside the SAP Cloud environment such, as Taulia financial planning integration.

"The Insight apps are being marketed as net-new applications and they look interesting, but how they fit into what's already available in the market is a big question," he said.

While SAP needs to provide more details on how BDC will work, it's an important step in the enterprise AI data story, Greenbaum said.

"SAP needs to set a flag in place on this hill about data management and data quality, because this is where all forms of AI, analytics and decision support take root," he said.

Jim O'Donnell is a senior news writer for Informa TechTarget who covers ERP and other enterprise applications.