I had the opportunity recently to attend the invite-only SAP Executive Summit at TechEd Barcelona to gain a current understanding of the state of their cloud partners ecosystem. Headlined by Jurgen Mueller, SAP‘s new CTO as of January, 2019, it was clear from the outset that the enterprise software giant sought to present the most thought through go-to-market for data-driven cloud platforms currently available.
There is a lot of interest right now particularly in how SAP works with all of the large, hyperscaler cloud providers. This was another key focus as SAP seeks to work as a high-order enterprise business platform on top of existing commodity cloud offerings. Overall, the day succeeded in its goal, but the fuller story is better revealed in some of the key details, particularly in the extensive and mature partnerships with top-tier vendors like Microsoft and Red Hat.
Figure 1: Incoming CTO Juergen Mueller kicks off the SAP Exec Summit at TechEd Barcelona
Five Levels of Data-Driven Organizations
Key to unpacking the day was Mueller’s opening talk about the five levels of thinking about data-driven organizations, a strategic idea he's been talking about publicly over the last year. These ideas, which were echoed repeatedly in subsequent presentations, are presented -- rightfully in my view -- as the full range of options organizations must embrace to be digitally competent and competitive in the cloud today.
Juergen has come up with “five hypotheses”, or approaches for organizations to make money or extract value from data. The first strategy is just having a culture of data-driven decisions that are delivered to the “complete extremities” of the organization. That’s not only the management level, which is thinking that “I have all my fine dashboards, but it's each and every person in the front row. Are they thinking analytically? Are they making decisions with actual data?” The second pattern that he sees is companies saying, “Hey, if I have so much data, maybe I can automate the process completely.”
The third aspect of this model is getting even more deeper into deriving the value of data as it gets embedded in products and services. More and more companies are realizing that if there are two competitors, and one provides a product or service and the other provides product and service with contextual data embedded in it, customers are willing to pay a premium for the latter. Juergen made clear this is the value add that SAP is aiming at offering. The fourth part of the pattern that he is seeing, as companies even evolve further, is that they're looking at the data and realizing they can make a completely new business entirely driven by this data.
The fifth and final part of the cloud enablement of data is the business model change it directly helps realize. If enterprises can reinvent what their businesses are, based on what they’re reading from their data, and understanding the market better, they can offer new insights and other data-driven value streams that the market will pay for.
Figure 2: Five strategies for turning data into business value
Juergen’s view of data as a strategic asset can be much better understood through the agility, elasticity, and cost effectiveness of the cloud, since the cloud is a much more natural home for an integrated view of enterprise data across all systems.
Then came a series of talks that explored how this vision is actually realized using a wide range of partner solutions that each run SAP, by employing delivery frameworks that empower modern cloud strategy.
Explaining the details of SAP’s cloud strategy was Damien Johnson, Chief Architect of SAP’s Cloud Business Group. He explored new customer research that showed their customers were encountering an experience gap when it came to achieving both cost reductions and business impact using the cloud. Early on, new to cloud, they don’t necessarily know the right practices to employ or have predefined blueprints that enable them to deploy faster and quicker and cheaper, with less risk.
Enter SAP’s Embrace initiative, a way of accelerating customer success by combining well-defined migration pathways, ready-to-use digital business capabilities, reference architectures, and open, extensible, and composable SAP solutions.
Figure 3: The Embrace initiative for quickly adopting SAP cloud solutions
The key to this model of course is that a business will run SAP’s business applications that range from customer experience to enterprise resource planning, but the actual digital core underneath these systems is entirely in the cloud service providers arena. This model gets SAP out of the highly commoditized hyperscaler business, and keeps them closest to their zone of excellence, which is running the day-to-day business operations of enterprise customers.
The sweet spot of the Embrace initiative is the concept of a ready-to-run migration program complete with a set of services, scenarios, and agreements to help facilitate the move from on-premises customers to Microsoft Azure in a manner aimed at reducing time-to-value and reducing risks.The Embrace initiative also makes good use of SAP’s existing partner ecosystem, such as their global service providers, as well as conferring the ability to our customers to leverage the underlying value that’s provided by the cloud service providers, such as economies of scale, usage elasticity, and very low capital expenditure.
I expect that if consistently successful, the Embrace collaboration with Microsoft will be used widely as a rapid path to maturity, low risk, and fast ROI by enterprise customers as they adopt new SAP platforms, applications, and solutions, including those of partners. Notable in the approach is SAP’s support of the full range of on-premise, cloud, and hybrid scenarios, which reflects the complex reality in which large enterprises operate.
One insight that was made evident is that SAP is far from solely focused on its own solutions when it comes to customer success. The company made that abundantly clear by dedicating most of the rest of the executive summit to top vendor partners that enable SAP in the cloud in some way. Certainly, this is a critical approach as most serious enterprise scenarios today involving digital systems requires a whole constellation of other products and vendors, from networking providers to cybersecurity. By establishing close partnerships with top vendors like Microsoft, Red Hat, and others, SAP ensures better uptake, faster adoption, deeper integration, more rapid deployment, and the long-term success of its solutions.
SAP Cloud Means Choice of Commercial Clouds and Implementors
Kicking off the third-party vendor portion of the executive summit was Matt Ordish, head of product for SAP Solutions on Azure. Arguably the hyperscaler cloud with the most enterprise uptake, Microsoft laid out a case that its customers have long used both companies’ products extensively.
Moreover, the two firms have a partnership going back 25 years. Microsoft is a 100% SAP shop when it comes to ERP, and is one of the largest SAP customers in the world. Microsoft runs its SAP S/4HANA instances entirely on Azure, and so is very experienced at connecting the two platform stacks.
Figure 4: The three evolutionary stages of how SAP is used on Azure
Matt noted that running SAP solutions on Azure is basically straightforward today. The issue is more of a cultural one. That’s because as a company shifts how it thinks about running compute today on premise, that when running the same workloads in a cloud, the principles are fundamentally different. That means accepting how hyperscalers operate, especially their security principles and their networking principles.
As the key partner in SAP’s Embrace initiative, Microsoft is looking at more than just lifting and shifting existing SAP customers onto Azure. They are specifically sitting down and asking SAP customers what kind of outcome they are seeking to create with their move to the cloud.
Matt also explored Costco’s migration of SAP to Azure and how it gave them the ability to dynamically compose IT in a way that enabled new types of on-demand data warehouses that were not possible before due to the poor malleability of previous legacy systems.
So, although a lot of the focus that we’ve seen on the industry is to make SAP run on hyperscalers like Azure, the next chapter is how does that focus mature, so customers can then move on to accelerate to capture new digital opportunities and function on a higher operational plane. This is where Microsoft and SAP are collaborating to establish a jointly proven roadmap to maturity for SAP solutions running on Azure.
Although Azure is the leading hyperscaler for running SAP today, there are plenty of customers using SAP or who want to use SAP solutions using a private cloud or hybrid cloud model.
To address this customer segment, SAP partner Red Hat, now a part of IBM, presented their vision for an data-intelligent private/hybrid cloud stack they call E2E. Based entirely on open source, the stack is fully-enbabled as an SAP-ready architecture. It enables integration, intelligence, automation, interoperability, and robust of cloud structure, pulling in SAP’s or Red Hat’s solutions and services wherever they make the most sense, often both.
Figure 5: Red Hat offers an end to end open source cloud run time for SAP solutions
Red Hat is perhaps the most respected name in high end, open source private and hybrid cloud. They provide a unique and differentiated offering for SAP customers that want to move to the cloud while having more control in an incremental fashion.
To round up the different ways that SAP customers can move to the cloud, Hitachi company oXya presented how they can provide a complete, turnkey managed service for cloud-based SAP solutions running on platforms like Azure.
By creating economies of scale across many clients, then steadily proving out processes, methods, governance, and security, oXya can cost manage SAP’s cloud solutions far better than any individual organizations could achieve in their own.
To recap, SAP does not really provide it's own native cloud-based infrastructure. Their business solutions, ranging from ERP to customer experience, analytics and IoT, are all focused higher up in the realm of business domain. They then allow customers control and choice over which hyperscaler cloud runtime to use to operate these solutions.
Overall SAP’s partner vision for the cloud makes sense and has a reasonable choice for most customers. It’s clear that each one of the partners is dedicated, experienced, and mature when it comes to deploy and SAP solutions using a variety of cloud models and configurations.
Figure 6: The six elements of SAP cloud strategy across experience and operations
Mature Cloud Partnerships Strengthen SAP's Go To Market
SAP’s overarching vision that separates the business platform from the technical platform will almost certainly pay off for them long term by being inclusive and diverse when it comes to technology stack that customers can mix and match. How the company increasingly delivers on its vision on operations, experience and analytics as the three major pillars of its business platform will require that this partner strategy continues and evolves.
Enterprises today, however, are likely to find an option that suits their pre-existing choices of cloud runtime and vendors as they move their SAP solutions to the cloud — or acquire new SAP solutions — particularly as the software giant's offerings and grasp expands across more and more key business functions in the enterprise.
Additional Reading
How SAP's partner ecosystem is built for long-term growth | ZDNet
As SAP's New CTO Takes the Reins, a Grand Enterprise Strategy Matures
SAP Democratizes Product Development & What It Means for Customers
