SAP forecasts clarity in the cloud

Martin Bayer: At the moment, user companies are still hesitant to adopt cloud computing, but also SAP’s RISE and GROW programs, especially in Germany. Last year’s message that certain core innovations would only be offered in the cloud has also caused some resentment among users. How do you want to take your customers with you on their journey?

Christian Klein: I understand there’s some reluctance among [German-speaking SAP user group] DSAG and some other customers to embrace the cloud. But we have a strong cloud result. This indicates that many customers in Germany are also transitioning to the cloud. And even the companies that have heavily invested in SAP on-premise for years are moving to the cloud, with Microsoft Teams and Microsoft 365 — best-of-breed applications — or they host their ERP systems.

I don’t know of any customer who doesn’t use the cloud somewhere in their IT landscape. SAP has a legacy of on-premise systems. That’s why we also say we won’t switch over tomorrow. We’ve made a long-term maintenance commitment for on-premise applications. We won’t change that.

But how are you going to convince your clients to journey to the cloud?

We created incentives that take into account the previous investments our customers made in our solutions. That’s the commercial aspect. In addition, we’re investing in our tools with generative AI to facilitate migration. More importantly, and this is something we’ve experienced ourselves, is the transformation that companies need to undergo. Customers are also aware of this. All business models, across all industries, and especially in Germany, are undergoing fundamental changes. That’s why I advise against simply replicating old processes into the new software world, or just hosting the ERP upgrade. It’s about more essential topics such as process standardization and the definition of new business models. And above all, it’s about making these innovations, which ultimately keep companies competitive and productive — or sustainable, accessible and usable.

Companies recognize this and I don’t encounter any resistance here in Germany. It’s all about how to get there. With the new executive board division under [head of customer services and delivery] Thomas Saueressig, we focus on this very topic. In the past, many SAP users have customized their systems extensively. This raises questions such as what do I still need from it, and if I need some of it, how can I bring it to the new world.

SAP intends to answer these questions in the course of the RISE and GROW programs. This is where clearly defined and regulated migration processes take place, and SAP basically dictates how the move should occur. Do you think it’s okay from the point of view of the user companies to relinquish control to a certain extent?

In some conversations with customers, the issue of control arises. With RISE, we only handle the basic operation of the SAP system. We’re experts in this stack around HANA cloud. We also keep up with all the infrastructure innovations, and we excel at the lifecycle management level. After all, we built all of this ourselves. Beyond this basic operation, customers have the freedom to customize.

SAP is also neutral when it comes to choosing a partner with whom customers want to implement the RISE package. Ideally, the next upgrades will be highly automated. There are no more costly projects that consume millions to keep SAP systems up to date. In my opinion, it makes a lot of sense to entrust this SAP basic operation to us. We offer high-quality service-level agreements, high system availability, and robust cybersecurity measures. Other providers do the same, but users must buy everything end-to-end from one provider. We’re more flexible and open.

Restructuring is currently a main topic at SAP. Is this the biggest in the company’s history?

I rather view it as an evolution. We began our own transformation more than three years ago and decided to focus on the cloud. Besides that, we’ve had some other developments, such as the breakthrough of generative AI in 2023, which significantly sped up the pace of innovation. Internally, we need to remove the barriers our customers and our employees face. We’re very deliberate about what we take on. After all, every reorganization takes time and requires proper change management. But the change is necessary because SAP is going through a transformation, and that also demands an organizational transformation.

Where do you want SAP to be in five years?

SAP is highly  innovative already today. Our software enables users to perform their tasks more efficiently, and with AI, the programs become smarter, faster, and more insightful. This allows users to make better decisions in various domains, from supply chain and logistics, to sustainability reporting and more. SAP also attracts a lot of new talent. Ultimately, it’s always a combination of experienced colleagues and young top talent we recruit globally.

And now with AI, we’re adding new competencies once again. We have a large number of data scientists and data experts, and we’ll continue to invest in this area because we’ll embed AI directly into our software. In five years, we’ll have made significant progress in this regard, and I long for the days when customers spent a lot on ERP upgrades to be over. Hopefully, you’ll be able to say our offerings such as RISE and GROW have helped accelerate innovation cycles. So in five years, we plan to deliver the innovation to customers much faster.