Several theme’s emerged from the day I spent talking to SAP partners, executives and analysts at the company’s sales Field Kick-Off Meeting (FKOM) in Las Vegas two weeks ago week.
SAP has made clear it is a “cloud first” company, with revenue primarily from acquisitions of Success Factors for HR and Ariba for Procurement. SAP’s co-CEO Bill McDermott suggests that more M&A is in the works.
SAP’s growth in cloud has been almost entirely from acquisition, which means that either SAP has to sell much more to show continued growth, or continue to acquire its way to growth. SAP will probably use the M&A policy to acquire growth as a short-term solution whilst, but cloud is already the focus for SAP’s sales force — and good cloud people have generally been promoted to leadership roles.
Power is shifting away from the CIO to Chief Data Officers and Chief Marketing Officers, and this means that SAP has to become much more relevant to the Line of Business leads and the front office. This was a big theme at FKOM, with sessions less about “what to sell” and “product sales enablement,” and much more about “selling.”
This requires a consultative, customer-focused sales approach that is highly effective — and customers love it. But the inevitable effect will be attrition among the traditional sales force.
The Enterprization of Consumer
This will be a big theme in CES 2015, where I expect SAP to take a stand for the first time. SAP must go to the consumer by acquiring companies like Concur or Expensify, which is the key to making SAP relevant for the people.
SAP could build an Ariba-style link to their ERP software, or enter plain consumer apps using its River technology. It should also build consumer apps in a freemium style model, solving small pain points and becoming relevant in the Internet of Things — possibly even wooing startups to build on the HANA platform in a SaaS model.
HANA Exits the Early Adopter Phase
SAP HANA will move from Early Adopter into Early Majority this year, and it will cause an explosion for several reasons. First, customers with HANA projects in 2012 and 2013 are now doing more projects and are consuming their shelf-ware, meaning they will go back for more. Second, Intel’s Ivy Bridge and DDR-4 memory will mean that the hardware price-point tumbles, especially for Business Suite customers.
Third, the amount of apps available to purchase is increasing, and the early apps like BW now have more investment, making the business case much more compelling. Fourth, SAP has stated that it will deliver cloud-based licensing for HANA — one amount per month. This license will totally change the TCO of the HANA Enterprise Cloud, and it will be available via various outsource partners.
Focus on Industry Verticals
Most of the really interesting companies that would be acquisition targets for SAP are either not easily bought (Salesforce, Workday) or too expensive (Tableau, Qlikview, Concur). But there are some very interesting industry-specific targets (Panopticon was one, but DataWatch bought it). These have smaller revenues but they bring the relevance back to SAP in the industries — analytics, predictives and automation. SAP will need to snatch up a quantity of smaller cloud companies, but it will be well worth it.
Executing well on this strategy means SAP will be able to break into the front office of industries where it is not currently relevant, such as financial services and healthcare. There is huge revenue growth potential here because several of these industries are ripe for disruption.
Mobile is Dead
“It’s not mobile, it just … is,” someone said to me this week. All apps need to be consumable on all devices — and that just gets you to the table. For the SAP Mobile Platform, this hopefully means that SAP will focus just on selling apps, and giving away the runtime license for the platform.
I suspect this year we will hear the announcement of R/4 — or whatever SAP calls the successor to the Business Suite. I predict it will be an SAP River, SAP HANA-based application built from the ground up, and it will be 20x smaller and 20x simpler than R/3. That means building apps 20x more quickly — and immediately integrating all operations. This will deliver on SAP Chairman Hasso Plattner’s vision to transform the ERP industry. And this could be the framework for the renewal of SAP’s core business.
We will also see a focus on new analytics markets and integration with KXEN. When I met with product development lead Michael Reh last week, I saw an SAP that was keen to innovate in new directions where other companies aren’t treading (sorry, I can’t give any spoilers!), rather than to try to compete where competitors are strongest.
A few weeks ago, I thought that 2014 was going to be a do-or-die year for SAP, where they pushed the whole pricing model to cloud in the first quarter and shook up their entire DNA. That’s clearly not the case.
Whilst SAP’s shift to the cloud is explicit, it is not as disruptive to their business model as I first thought it would be. So let’s see what comes this year!