This post was originally published on LinkedIn
In May 2014, during his keynote at Orlando’s SAPphire, Hasso Plattner had invited Clayton Christensen, Kim B. Clark Professor of Business Administration at the Harvard Business School, renowned expert of disruptive innovations and author of the best-seller “the Innovator Dilemma”.
Maybe some of you had noticed, Plattner had underlined quite honestly during a short aside his disagreement with Christensen about the disruptive nature of HANA. It must be said at that time HANA was mainly perceived by its potential users as an expensive technology dramatically accelerating massive data analysis and logically targeting SAP largest and most profitable customers… basically the exact opposite of Christensen’s definition of a disruptive innovation.
But now that SAP has unveiled S/4 HANA, the question has to be rephrased: we do not discuss any more the dramatic performance increase of an application but rather the redefinition of the information system itself on the premise of a new technology. The disruption might not stand within the technology but rather in the better service provided to the user: new easy-to-use applications, not yet adapted to the requirements of the large and profitable accounts but addressing the needs of smaller customers.
At the end of last century performance issues and the complexity of applicative integration had lead SAP to give up on the monolithic structure of R/3 and develop a set of satellite applications (BW, CRM, APO, etc.). Hasso Plattner had highlighted this strategic move during his Keynote at Orlando 2002 SAPphire. Nevertheless such a complex multi-applicative architecture generated a new major problem: weak accessibility and scalability of SAP applicative solutions, especially for the SMB market. For sure SAP had created the SMB business unit and initiated the “All-In-One” and “Business One” projects; Hasso Plattner had even promoted the “one-server” concept targeting specifically SMB customers. But considering those initial ambitions, and even if a very good job had been done on the preconfigured solutions, the final result was more of a marketing speech and a pricing strategy than a true technological innovation.
So to put it simple, SAP S/4 HANA will be disruptive if it dramatically eases the deployment of SAP solutions and simplifies the operations of small organizations: it will have to support their agility and allow them to grow without undergoing the usual discontinuities of migrations nor the heavy investments the BW, CRM and alike APO installations were triggering in the past. But most important, it will truly be a disruption if it addresses the needs of small customers that were previously inaccessible to SAP.
Some of you may have understood my point here: I am not talking about HANA but about an agile and evolutive Cloud solution. The challenge is real for SAP because it is nothing else but the cloud transformation that is at stake. SAP still needs to prove its understanding of Christensen’s model, especially that disruptive innovations contaminate the market by the low-end. In this model established leaders tend to stay focused on their historically most profitable customers, their expectation levels making them slower to adopt disruptive technologies.
Emerging market players have already addressed the low-end needs. The more the niches are going to be saturated the more these new entrants will gain a competitive advantage and be motivated to supplant the established leaders. Through the acquisition of companies alike Successfactors or Hybris Software, SAP has bought some time. Yet SAP still faces the challenge of simultaneously addressing the Cloud emergence and continuing to satisfy its installed base. In this strategic context HANA is not a disruptive innovation but rather the technological and marketing tool that maybe will ease a faster convergence of its historical customers to the disruption of an agile Cloud.
Maybe a few years from now Hasso Plattner will be credited for comprehending very early the Cloud disruption; in the end his argument with Christensen might not be so fundamental. SAP seems to have all the tools at hand to deal with the forthcoming market transformation: it just has to prove its ability to execute.