Hear about the open innovation platform for SAP, our partners, and our customers, and learn specific utilities solutions in this episode of Industry Insights by SAP. Josephine Monberg interviews Emil Bruusgaad, Managing Director at Thüga SmartService, and Henrik Ostermann, Co-Innovation Lead Cloud for Utilities at SAP.
Hello everyone. And welcome to this episode of our podcast. Today, we are talking about something that’s going on with SAP and with our customers. And that’s really how we approach innovation because we believe that being able to partner closely with our customers and our partners and our big ecosystem is critical to ensure that our customers continue to innovate. And what we’re going to talk about specifically is called SAP’s Industry Cloud. You’ve probably heard about it if you tuned into some of the previous episodes. And what we’d like to do is to look at it in context of a specific industry to make it more real and tangible for everyone. Today, we were looking at the Utilities Industry. And to do this, I am blessed to have two awesome guests in their virtual studios. I have Emil Bruusgaard, who’s the Managing Director at Thüga SmartService. And then I have Henrik Ostermann, who’s the Co-Innovation Lead for SAP Cloud Utilities. First of all, thank you so much both for being on the show. I always like to introduce our guests to our listeners. Perhaps starting off with you, Emil, can you tell us a little bit more about who you are and what you do?
Yes. Hello everybody. And thank you for having me. Yeah, like you said, I’m the Managing Director of Thüga SmartService, which is an IT service provider, obviously, for the Utilities industry and is part of the Thüga group, I’ll explain Thüga group a little later. Our portfolio spans a large variety of platforms and services along the entire value chain of the utility. And basically, what we do is we develop, we refine, we run platforms for pretty much all use cases within metering, IoT billing and ERP, and the latter two, obviously. And that’s why I’m here as a guest today based on SAP technology. And our mission is I can say probably to spare had the digital transformation journey within the Utilities industry in Germany, which obviously is ongoing right now. And we’re lucky to be a partner of SAP in this journey. One word perhaps for Thüga, the audience will probably don’t know what that is. Thüga basically is an investment company with local roots in Germany. It was founded approximately 150 years ago and is basically a minority shareholder and roundabout 100 local utilities in the energy and water industry, across the entire Germany. In respect of majority shareholders, then our cities and municipalities.
Such an interesting size. And it’s so interesting what you guys do and so relevant for this specific topic. Now, Henrik, tell us a little bit more about what you do at SAP.
Yeah, for sure. My name is Henrik Ostermann and, I’m working in the Global Solution Management for Utilities industry, and I have the role of the Co-Innovation Lead for Cloud for Utilities. And within this role, I work very closely with a global group of our customers and we, of course have a strong, big footprint to Germany. I’m very happy to work very closely with Thüga SmartService here together on this topic. And yeah, it’s really a very interesting and insightful to work such close with these customers, and to see really what they need and also get their feedback on what we are doing. I think that’s a both way, both ways work well. And I think that the entire industry, the Utilities industry, and this includes also us, it has to learn from other industries and as to enable a culture of trying out things there, because we’ve seen that the traditional models in the Utilities industry become problematic. And that’s very interesting to design this together with our customers.
And actually, let’s talk a little bit more about that. I mean, what’s going on in the Utilities industry, because you both alluded to the fact that there’s happening big changes right now. I’m assuming, especially related to the digital future of Utilities industry. Emil, what are you seeing that’s happening right now in the Utilities industry?
Yeah, that’s a very interesting question. I guess we could probably use the entire day to talk about that or the entire week. I have a history in Telco, I’ve been spending a lot of my career in the telco industry. So, I see a lot of repetition. I have a lot of déja-vus as you would state currently, but if I had to point out to specifics at random, I would probably say what’s going on in the industry that is for once customer centricity, that is loyalty and retention, and cross and upselling. And needless to say, this does imply massive changes, not only to, you know, processes and key systems, but also to cultures and the organization as is. When it comes to processes and key systems, these do take on a very vital role in enabling this much needed transformation in industry. And that’s why, you know, also call for Utilities is a very important program because it kind of lays the foundation on which Utilities can reinvent themselves and, and stand up to the increasing competition that we were also seeing in Germany. As a result of the deregulation that legislation has set forth, I think that’s a journey that we are embarking on right now, which will probably accompany us for the next 5 to 10 years approximately. So, exciting times ahead. A lot to do. And we’re excited to be part of this.
Yeah. And Henrik, we just touched on it, but a lot going on, the market is more open, Utilities perhaps need to rethink their strategy. What are you seeing that’s happening in the Utilities industry right now?
Yeah. Emil has mentioned the most important point in staff. If we look in the retail business of the Utilities industry, it’s about customer centricity. Yeah. We come from a regulated market where customers have no choice. They have to go with that utility. This is turning around and of course we were deregulated for the last 30 years now, nearly. But this is to be a mind shift, I think, which needs to happen. And this happens with the customer centricity. And to that also belongs of course, having a fast time to market in order to adapt the markets demands, and to adapt to the customer demands. To being flexible in those productive initial, for example. These are exactly the terms Emil mentioned already before. I think this is what we are addressing with the Industry Cloud, because the challenge we have in the Utilities industry is that, of course, today, the money it comes from the commodity business. Selling electricity, selling gas, and also of course the other divisions like water and distributing and these kinds of things. And there, the money comes from you need to keep that stable and optimize that business at the same time and ramp up new business. That’s the huge challenge I think the Utilities industry is faced by right now, and this is what we have to do. And there the Industry Cloud provides the innovation platform for the industry. Also is forcing to have a central concept like the resistance, the efficiency, and also the flexibility for the transformation. These are central concepts of SAP’s Industry Cloud, and here in the Utilities industry. And I think that’s why Utilities industry is one of the first industries being in the Industry Cloud program is that we are front runner here and we have a very good transformation story in the Utilities Industry to tell. And, of course, we as SAP, have to serve these transformations. A story I don’t have to serve and have to come up with the right solutions in order to solve the actual interests.
And just super quickly, Henrik, if you could maybe tell our listeners for those listening who are like, well, what is SAP’s industry cloud? Can you quickly define what it is?
Yes, of course. Industry Cloud provides the innovation platform for the industry and is forcing to be extended. So, it’s not that SAP is delivering everything. This is a thing, of course we are delivering components for Industry Cloud, but also, we see a good portion in the industry itself and our partner network to extend it. For example, this is also I think, a very good use case for you, Emil, to put added value onto Industry Cloud, what we are delivering other standard. And then of course we have to take care of central concepts. Like I said, I repeat myself, but resistance and the efficiency, of course, are very important criteria for this. This is Industry Cloud basically and extends our core components by the industry specific requirements. That’s what we’re doing with Industry Cloud.
And, Emil, now over to you. Can you tell us, because you’re a prime example of somebody who’s really adopting the strategy of SAP Industry Cloud, why has Thüga SmartService done this? We’ve talked a little bit about it, but I’d love to get more of your thoughts on that.
Interesting question. Actually, the answer is quite straightforward. Basically, we are also seeing the pressure that our customers are facing in the market. This is not only pressure that is produced by increasing competition, but also a pressure that is produced by legacy IT systems. And you look at for example, ISU, as the billing engine, and the past 20 years, we’ve seen a lot of money going into individual developments and the adaptations to local processes in these companies. And, you know, our customers have done the same thing with our help, obviously. Although we have, as one of very few providers in Germany, always been on a real platform, maintaining a very high standard. Nonetheless, our customers are asking for standards because this is something they connect to: Cost Efficiency and Cost Efficiency Cost to Serve. But also, Time to Market that is customer acquisition costs in the end is something that is driving our customers. Why is it driving our customers? Because they see that IT is an increasing part of the overall end to end process, and thus taking on increasing part of the costs. If you’re talking about cost aggression, you need to talk about IT, right? And then again, we’re coming back to standards. So, what we’re seeing is SAP delivering a standard in the new technology stack in the cloud which will help us serve our clients the best possible way with the right functionality, at the right cost, and the possibility for us to adapt to the individual market situation our clients might be in. In the end we see a high amount of vertical integration across the infrastructure and the architecture. We see a high functional coverage. And these are aspects that we need to serve our clients. This is why we are adopting the strategy for us. It’s the right fit, very simply put.
Well, that’s a good way of putting it. What about, obviously we’re doing this as a co-innovation approach. It’s something that we’re doing together. And as I said in the beginning of this episode, it’s so important for us that we collaborate closely with our customers and our partners. What is Thüga SmartService expecting and receiving out of the co-innovation approach we are in together?
What are we expecting? I mean, first of all, we are proud of the fact that we were one of the kind of founding members of the program itself. I mean, Henrik knows that I’ve always been very critical with partners. This includes SAP, but critical in a challenging way. I think that just makes us better altogether. What we’re seeing is that we are at the forefront of innovation, we are at the forefront of building the future architecture of the Utilities industry on the SAP technology stack. And what we’re seeing is that we’re not only very close to the delivery roadmap, we’re also very close to the global program, which again, is a very interesting because we can see what is going on in other international markets. And we can kind of for ourselves and our clients do cherry picking when it comes to best practices, when it comes to do’s and don’ts, and the end, all Utilities are selling energy in one way or another, even though markets are different, there’s a lot to be learned, and that’s a huge takeaway now for us. So, it’s a great program.
Now looking a little bit more specifically on what you’re doing with SAP’s Industry Cloud. Can you talk a little bit more about that, Emil?
Sure. What we’re doing is, besides being part of the program and defining the standard processes, which will be implemented in the individual modules’ components, we are also actively implementing parts of these cloud products, the sales cloud, very actively service cloud. We’re looking at the marketing cloud. Although the marketing cloud is a very mighty tool and is for us probably a very good example for a platform business, because if you look at our customers and the German market, very importantly, the marketing cloud is the best example for a platform product. This is something that scales with mass processes with mass data, and this is something that well have to follow the market logic so the time for a marketing cloud is for me to come. It’s an interesting product but coming back to the sales as a service cloud that is of more imminent use for our clients at this point in time. What we’re doing is we’re actively, we have them up and running already we’re live with the sales cloud with a lot of our customers. We’re seeing big demand for the product. We’re very happy that we’ve successfully implemented this with I think seven of our clients to date. And we do learn a lot along the way when it comes to the question of how much standard is delivered by SAP and what is needed by our clients. What is the Delta and how do we approach this? What is the value that we as Thüga SmartService can add to the product? And what I can say today is that works. The value proposition for SAP as our partner, as well as us is compliments itself, which is probably the best way it could turn out to be right.
I’m vividly nodding my head. I know our listeners can’t see that, but I think that’s really where the beauty happens, right? When there’s a partnership that’s mutually beneficial and each partner brings their core strengths to the relationship. If you could put it that way. Henrik, do you have anything you’d like to add to that?
Emil has described it perfectly. I can also maybe comment on our view on this co-innovation, in the transformation Emil and Thüga SmartService are going through. We are supporting them in a very close way and all that because when the moment comes to an implementation of one of our products, the customer really makes it concrete. This is very valuable to see and get the feedback and being allowed to listen there and to get the feedback and to talk to the customers. Also, to the end customers of Thüga SmartService to see directly and hear directly from firsthand what they need. And if this is sufficient what we provide. Emil also said a very important point, which is about the, let’s say, level of share of standard processes and to differentiating processes. Of course, this is negotiated every time we meet, because this is where we say we as SAP as a standard software, when of course want to cover all the non-differentiating processes and by this giving the room and the flexibility and the capability for our customers to really work on the differentiating things that really make a difference in the industry. Also, for the success, of course. It’s perfectly described.
Well, it’s always good when somebody describes something so perfect you can’t say it better yourself. And Emil, what’s next for you? I’ll let you kind of end our episode today.
What’s next? What I can promise. Let’s start off with that. What I can promise is that we will continue to be challenging with our partner SAP. Henrik knows we’re always into the market and that’s our dedication. We’re always trying to be as objective as it can be when it comes to possible solutions. We screen the market continuously and we confront SAP with our findings. And today SAP has always had a good answer in the end. It has always been a fruitful discussion and that’s why we are sticking to our partnership, and that’s why we are implementing these products. Does that mean that we will adopt the Cloud for Utility in total? That depends on what our customers need. We can’t answer that today because we don’t know what the strategy of our customers looks like in total. We know where they’re heading, and we know whether they need to go from a competition perspective, but in the end, it’s their decision. When it comes to the next, let’s say five years, I think we will close look at the rollout plan of SAP. We will find our way of coping with the products that come to the market and where it’s of use and value for our customers, we will adopt and that we will do closely. I can just hope and wish if I may, that this program will continue that we will find a way of creating an institution when it comes to the content that we’ve been creating and the innovation we’ve been driving. We’re doing this for the sales part right now. Perhaps SAP will come up with a similar program for the network part two, or the metering part. That would be something which would be of high interest for us.
And I can say that we are working on this, and you can be sure that you will be invited to that.
Well, here’s an invitation on the podcast for everyone to hear is the now it’s there. Guys, thank you so much for coming on the show and talking about such an interesting industry where there’s so much going on, right? Customer centricity is something that’s going to be crucial moving forward for the industry. The market is open. So, there’s a new form of competition that we haven’t seen before. And we all know that in today’s world, partnering up closely is really what is key to success and being agile and flexible, which is really what SAP’s Industry Cloud offers is also crucial. Thank you so much for coming on the show and everybody to listen to this episode. Thank you for listening in, and hopefully I’ll see you on the next one. Bye everyone.