Software vendors are delivering software for decades and are most of the times solving common problems for multiple customers. You need the software to streamline your operational excellence but don’t give you competitive advantages nowadays. In the past, implementation of software was very expensive. You need an upfront investment for hardware and implementation costs and have after-live support costs. The waterfall implementation of the software took quite some time and it could give you competitive advantages between 6 months and 2 years. The time your competitor needs to also implement the solutions. Besides the degree of process automation, adoption of new processes and technologies and knowledge level of the end-user, key differentiator and long term competitive advantages can be found in your modifications and enhancements of standardizing code and the development of custom build code.
By using cloud solutions instead of on-premise software, this will change completely. Cloud offerings will remove the investment hassle and shift them to operational costs. This makes it possible to start small and grow by subscription, which will lower the barrier and risks to start projects. Cloud solutions are mostly offered as standardized best practices and industry solutions. This reduces the implementation time and costs. And by standardization also the after-live operation and support cost.
For on-premise customers, cloud solutions feel restrictive to flexibility and possibilities of the implementation. Of course, this can be the case, but keep in mind that Cloud Solutions only provide solutions for operational excellence. The innovations and competitive advantages should just like before come from custom build applications and new possibilities.
A big advantage of Cloud solutions is the possibility to bring innovations, security updates and bug fixes to the solutions. In an on-premise world, the software will only be available after buying and installing the updates and new functions. In a cloud subscription solution, this is part of the deal. Also, the breakdown of a big software solution in smaller micro-services without disruption is an advantage of the cloud. This makes it also possible to upscale the selling of the solution by selling parts of the solution as well as a complete and integrated solution. Looking into the ERP world, this is what happening right now.
The last couple of years SAP is following this road. It breaks down its own SAP Business Suite and reorganizes their acquired key cloud vendors to provide a fully integrated Intelligent ERP Suite, which can also be sold as one complete Suite solution or as separate SAAS solutions.
Only functionality and adaption of new innovations within SAAS solutions is not enough to provide customers competitive advantages. Your competitor can have them too. The openness of the SAAS solution and the flexibility to build easy and fast innovative custom-built applications will be the key differentiator. Customers should build their own solutions on top of the SAAS solutions based on an open but fully integrated platform. So they distinct from each other by own applications.
SAP recognized this. It gives customers the possibility to adapt the S/4HANA system with In-App extensions and it provides PAAS solution, named SAP Cloud Platform, as the glue between their own SAAS applications and the customers’ needs. This PAAS is a result of own developments, acquisitions, partnerships and the use of open source. It brings SAP new innovations in the underlying platform for IoT, artificial intelligence, virtualization, mobility and in-memory, and non-relational databases. By providing the platform on top of key hyper-scalers like Google, Amazon, Microsoft, and Alibaba, where you can develop your applications in your own languages or containers and can easily make use of cloud services from SAP and third parties, customers are able to build fast robust scalable applications with low risks. This comes with a price, but in my opinion, it will bring the customer in a unique position with competitive advantages.