SAP Business Network, S/4HANA critical for SAP in 2021

Industry-specific focus

Josh Greenbaum, principal, Enterprise Applications Consulting

SAP's biggest opportunity rests in the SAP Business Network [enabling connections with business partners as well as data and process integration] and the industry focus that SAP is putting forward. There's a huge opportunity there, and there's a lot of real market differentiation that can come out of that effort, both at the network level as well as pushing these industry-specific initiatives. The challenge is that they're basing a lot of this on SAP Ariba, which is a product in desperate need of a renaissance in terms of user experience and functionality. John Wookey is now the man in the hot seat for that, and I expect he'll do a good job. Simultaneously, another returning executive Bob Stutz has the same thing with SAP CX [Customer Experience], and SAP has a big opportunity to take the concepts in CX and CRM and extend them into the broader industry processes that SAP's really good at. This is something Salesforce can't do with its current products.

Josh Greenbaum

S/4HANA migration is actually doing relatively well. The real question isn't going to be if they can they sell net-new, which they've done a decent job, but how do they bring that installed base forward in a way that makes sense for the customers. That's been the perennial problem for the last few years, and it's going to continue. There are a lot of reasons why customers are holding back on doing a wall-to-wall S/4HANA implementation, and a lot of that has to do with translating the complexity of the older generation into the cloud and into this new model. That's going to be a big challenge, but I'm starting to see more and more in how they present the opportunity that they're understanding the complexities of the journey and they're understanding that it is a heterogeneous multi-cloud world. If they support the customers in that reality instead of pushing this monolithic view that the answer to every problem is S/4HANA, they're going to do better in the market.

Re-win the customer base for S/4HANA success

Trevor White, analyst, Nucleus Research

SAP's biggest challenge is the fact that now that they are moving legacy customers on to the cloud, it gives them the opportunity look at other vendors. So they have to go out and re-win their customer base, and that's never an exciting prospect. They have a lot of holdouts and a big customer base that has to be moved to the cloud, so there's a real risk there that you're taking a lot of your continued revenue and moving that over. You've got to keep all of those customers happy again, you've got to go back out and prove your value and worth to them because someone like Oracle is licking their chops; they're standing over [SAP's] shoulder waiting for them to mess up so they can jump in and say, 'If you're going to go through this pain anyways, why not have a better system at the end?'

Trevor White

However, when we talk to SAP customers that are moving from on premises to cloud, it's obviously not the smoothest transition, but for the most part they're happy with the experience. It's a headache to have to do that stuff, it requires a lot of resources, it requires a lot of support not just from SAP because you also have to have other consultants and vendors involved. Trying to keep that process in a manageable framework for so many customers at such size is going to be a challenge.

One opportunity SAP has -- and not just for them, but for any larger enterprise applications vendor -- is with people who may be a little bit hesitant or unsure even as the economy opens up, they may look toward more traditional vendors. It's that 'nobody ever got fired for buying IBM' deal, so they may look at SAP or Oracle rather than take a risk with going with a best-of-breed vendor, even an established one like Workday. Customers may think that it's not the flashiest car, but it's the reliable, traditional, good value thing -- the Crown Vic, if you will.

Opportunities in CX and CRM

Predrag Jakovljevic, principal industry analyst, Technology Evaluation Centers

SAP remains the ERP giant with a massive install base, global brand recognition, and because [they have] legacy customers who typically switch their ERP systems only when absolutely necessary.

Predrag Jakovljevic

SAP has possibly the strongest vertical solutions for industries such as chemicals, oil and gas, railways, metallurgy and natural resources, utilities and the public sector. Its sales organization knows both the vertical and horizontal processes and how to sell -- and the R&D folks are smart.

In the short term, SAP's biggest opportunities can be found in reinventing the CX initiatives. SAP has a critical element of the customer lifecycle that CRM and other front office products lack: actual purchase history and pricing guidance. Also, sourcing and supply chain visibility has been important during COVID-19, and SAP Ariba and the SAP Business Network can help there, again with integration to the back office.

The major challenge is that there's no easy path from on-premises legacy systems to S/4HANA without a complete reimplementation. Even using SAP HANA for analytics is not that practical because the data models are so different. So SAP customers aren't upgrading to their latest ERP release because it's a complete rewrite, because of HANA, and because people can't see the benefits. In-memory database is becoming a commodity now, and is it really enough of a motivation for a totally new implementation?

The cloud is an imperative

Dana Gardner, president and principal analyst, Interarbor Solutions

Dana Gardner

For SAP, the cloud model is no longer a goal, it's an absolute imperative. It needs to be digital and data-driven, and to look for distributed supply chain, distributed workforce, contingent workforce capabilities. It also needs to bring a system of record to bear on that so that it's not chaos. [You need to] manage the massive amount of change that people are facing but with systems that offer data and a dashboard approach to visibility into what is or isn't happening or working. This is a big opportunity for companies like SAP to show that they can be an accelerant to change, but safe and low-risk change. There's change and then there's change that doesn't bite you in unexpected ways. So this is an opportunity for business services, business applications, data-driven platforms to show that they can be agents of change, but also agents of mitigating risk and giving businesses the tools they need to weather these storms and, even more importantly, create the new normal after that storm has passed.

With the SAP Business Network, SAP has taken the Ariba Network model and is extending it, and the timing couldn't be better because networks are the name of the game. The old handshake-and-meeting-at-the-trade-show personal relationships thing is in the rearview mirror. So it has to be discovery and searching and digital, but doing it with KPIs in place and the ability to develop trusted relationships even if they are digital or remote. It's only the platforms and systems that can establish those types of trust, because the old-fashioned physical contact relationships level of trust has been greatly diminished or even made obsolete. We now need the systems and the technology to start creating new levels of trust for distribution, for transactions, and for the discovery of partners and alliances. In many ways what SAP in general and Ariba in particular have been doing is more important than ever, and it needs to scale across the globe and across all kinds of business activities, not just contingent labor and supply chain and procurement.

Business-oriented cloud transformations

Jon Reed, co-founder, Diginomica

SAP has made some important hires to lead their cloud lines of business -- Bob Stutz for CX and John Wookey for the Intelligent Spend business unit -- and I never underestimate hiring the right leadership. This is the year that SAP needs to prove that its cloud assets are greater than the sum of their acquired parts, and Wookey and Stutz could be a big role here.

Jon Reed

SAP has a chance to push back against the cloud hyperscalers by offering a better, more business-focused cloud transformation. During SAP TechEd, SAP leadership spoke more specifically about helping customers migrate to the cloud and continue to improve their businesses by standardizing legacy customizations and partnering on transformation efforts. This is new territory for SAP, but it is far better than the lift-and-shift approach to S/4HANA ERP in the cloud.

I don't expect to see too many companies embark on the big S/4HANA ERP projects that SAP has typically used to bolster its revenues. The question is, where will SAP find the quick wins to keep customers seeing SAP as relevant to their business execution and not just a so-called back office backbone.

Transitioning to cloud business models is not just a technology shift, it's a culture shift. Increasingly, I think SAP's executive leadership gets this, but will this translate down the organization to the account rep level and to the partner level? Sapphire Now 2021 will provide an important gut check on all of this.

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