ASUG CEO says SAP's 2019 strategy faces IT-business divide

ORLANDO, Fla. -- Few people have a better view of SAP's sometimes fraught relationship with users than Geoff Scott, CEO of Americas' SAP Users' Group (ASUG). Scott leads a 130,000-member educational and advocacy organization that aggregates customer opinion in ways that SAP can act on, he said. "ASUG provides a voice to many that they wouldn't have singularly."   

Scott joined the ASUG board in 2013 and has been CEO for five years. Previously, he was CIO of TOMS shoes and the U.S. division of global meat processor JBS.

ASUG co-locates its annual conference with SAP Sapphire Now. In an interview the day before the conferences, Scott talked about SAP's 2019 strategy, including the recent emphasis on experience management resulting from its acquisition of Qualtrics, and ongoing challenges such as migrating to S/4HANA, SAP's next-generation ERP. The interview was edited for clarity and length.

What are the top issues that ASUG members will be watching at Sapphire?

Geoff Scott: Intelligent enterprise, [and] within that framework, IoT, [machine language], AI. The ASUG community research that we do every year says that 56% of the customer base of our statistical sample -- which is representative of the population, we do believe -- has not yet fully formulated their plans to go to S/4. They know they need to go, but they haven't fully formulated that, so there are still a lot of questions here about S/4.

The early adopters have gone [ahead with it]. The ones that have done it either because of [mergers and acquisitions] or major business-process change, or just stepping back and saying, "I think we could do this better" -- and there are a lot of them out there -- they have largely moved through the pipeline. Which leaves you the next group of people who see value but aren't able to really articulate it, [and] see that there could be some incremental improvements, but they're not exactly sure how to get the [line-of-business] peers and their CIO and CFO aligned on it.

What about this week's Qualtrics-related announcements?

Geoff Scott

Scott: This crowd has some curiosity around it, but this is a core ERP, IT technology crowd. The Qualtrics software is not playing to that audience base. So I think there's some curiosity here about that software, what does it mean, why would SAP spend what they spent -- if [the customers] even understand or pay attention to that.

Why should I care about experience management? I think they should, long term. As I think about digital transformation and the SAP customer's customers coming closer and closer to the front doors of the ERP, they should care. If you want to get all that transaction processing done, you want to be real time, you want to be able to have better customer experiences, and SAP is at the epicenter of the organization -- and it's the thing that gets stuff done … you should care.

[The ASUG CMO and I] went to the X4 event, Qualtrics' big user event. We just went as regular attendees … and sat in the audience. What you saw there is exactly a mirror reflection of [Sapphire]. That X [experience] crowd knows about their X stuff. If you said "tell us about SAP," they don't know.

I think you find a very similar reaction [here at Sapphire]. "I've been used to O [operational] data. That's my thing. What do you want me to do with this [X data]?

I think, long term, SAP is right. Moving the customer bases on both sides of that together is the thing we need to watch and see how it goes.

How good a job has SAP done of explaining the connection between ERP and customer experience?

Scott: I don't think they've done a very good job at all. I kind of, sort of understand it, but I'm paid to. If you were to sit down with our 13-member board of directors and give them a quiz, I think they would struggle to articulate it.

[O-data users] may be running Qualtrics, but the marketing organization purchased it, and they're using it for customer research.

There's a lot of early adoption [of Qualtrics] around employee sentiment. That's not as interesting to me, but I get it. If the best thing we can say is, "we acquire Qualtrics and we can tell you how your employees feel about you" -- all right, but ultimately I want to know how my customers feel about me.

In theory, there are supposed to be synergies between the two.

Scott:  Certainly, happy employees give you a lot better chance at happy customers. There's a causal link there.

I've been a CIO multiple times. I'm now a CEO. As I learn to wear that CEO hat, the customer piece of this is intriguing to me. CIOs traditionally are not in positions to think about customers. The services that the back-office IT organization's been classically responsible for never touch the customer. It's changing, but that's been the historic view.

The recent ASUG community survey showed a reduction in the influence of C-suite and IT people and a little bit of an uptick in line of business.

Scott: That follows the general trend. The technology purchasing has become more distributed, as you've been able to buy more off-the-shelf software applications that work for your enterprise, you don't have to go through a massive integration engine within IT. You can buy stuff you want to use. I think that's what that survey result shows. The line of business is taking more accountability for the software that they're using to run the line of business, and not just looking at IT and saying, "I have a problem. How do you think I should solve it?" 

What are the implications for SAP of this shift in who the customer is?

Scott: They have to be able to appeal to the other lines of business, and that's a very tricky line to walk, because historically their bread and butter has been the IT and finance crowd. I feel bad for SAP, because as soon as they step outside those lines they get crushed by the internal stakeholders.

The problem is actually larger than that. The other stakeholders have never seen SAP through a different lens. SAP's always been the IT solution, the CFO solution. If you think about the very basic tenets of where SAP started years and years ago, it was: This is a finance app. [If] I'm a marketing person … and someone knocks on my door one day and says, "Congratulations, you've implemented SAP. Here's how you're going to do procurement, here's how you're going to do your budget, and here's the SAP system you're going to use to get anything done," it doesn't help them be more creative. It's not seen as an enabler; it's seen as a process control point.

What's still remembered is why SAP showed up to begin with, which was to control my department, not liberate it.

That group of buyer has never been terribly infatuated with SAP. March forward now, and SAP's got much better solutions in marketing, much better solutions in CRM, and probably has a much better story to tell. But what's still remembered is why SAP showed up to begin with, which was to control my department, not liberate it.

SAP has to establish enterprise trust, and that doesn't happen overnight. Does Qualtrics help with that? I don't know.

What other pain points do you hear from ASUG members?

Scott: Integration is always a pain point. The product portfolio for SAP continues to widen, and the complexity of utilizing that product portfolio widens as well.

Customers want to be able to use these solutions easily, access them really easily, and just use them, and it's not quite that simple. At the same time, you have these cloud properties that have their own very specific enhancement and feature-functionality plans.

So you have a choice. [Cloud company X] can continue to add features and functionalities that my core users are looking for, or I can say to the mother ship, "OK, I will do better integration so that the product is more uniform. Which would you like me to do?" What wins all the time? Features and functionality.

What was the last difficult discussion you had with SAP senior management?

Scott: The [indirect access licensing] conversations have been challenging, because you're walking a very careful line between SAP really wanting to protect its [intellectual property] and to feel like it can monetize it, and us as customers trying to get to realistic outcomes. Sometimes those conversations, if not carefully managed, can go flying off a cliff.

At the end of the day, SAP is in business to sell software. If the customers continually nibble at their heels and [say]"give us more for free"… [SAP gets] very defensive about that, and I understand that. Striking that critical balance and moving the needle forward is the art, and that takes a lot of energy and effort.

S/4 would be the second one. People need to adopt, and how do we help them adopt? [SAP] just kind of walked out and said, "Here's S/4, and here's some guidelines," but you didn't think about where the customer base was in that journey.

On prem still can be in cloud, right? We use these words, and they mean a million different things. I don't know what the percentage is, but it's fairly large -- of customers who call themselves cloud because they're running an on-premises piece of software in Amazon [Web Services], [Microsoft] Azure or Google [Cloud]. What exactly is cloud? I mean, my head starts to spin.