In a digitally driven world, developers can make or break company success. SAP recently set the direction for its global development organization, where the customer is still king, but data is queen.
Roughly a week after it pre-announced annual growth in its cloud software business, SAP’s over 22,000 strong Research &Development (R&D) community gathered in Mannheim, Germany and virtually to reflect on what was achieved in 2015 and to synchronize their plans for 2016. In 2015, SAP was able to gain market share in the enterprise software market, with cloud and software revenue up 20% year-on-year.
The battle for the cloud is not only fought in board rooms and through the media – it is also waged in global R&D centers where the enterprise software is designed, and built by leagues of the best and brightest software engineers. At the SAP development kick-off meeting, Bernd Leukert, member of the Executive Board of SAP SE, Products and Innovation, was resolute in his appeal to his own development organization. “We will be THE cloud company for business,” he stated. Then he laid out development priorities for the year, which he and his management team believe will help keep the company ahead of the pack.
The mission for 2016 and beyond
According to Leukert, this is a journey that all SAP employees must fully embrace. Resting only on the laurels of the traditional on-premise business, he says (which surprised analysts with an unexpectedly high 10% increase for 2015), is not an option. “We must provide all our capabilities in the cloud,” said Leukert. He also emphasized that the company’s success in the cloud also serves to drive license revenues for its on-premise software. The financial markets currently reward on-premise and cloud earnings very unevenly: Every euro earned through cloud billings converts to about eight euros value in market capitalization, whereas every euro of license revenue from on-premise software is rewarded by a factor of only 3.5.
Nucleus of a digital strategy: SAP S/4HANA
SAP’s product head then presented a framework of capabilities that the company will deliver in the cloud to help companies thrive in the digital economy. These are split into five areas: The centerpiece of this framework is SAP’s digital core, SAP S/4HANA. Launched in February 2015, SAP’s new generation business suite currently has more than 2,700 customers. Adoption has been even faster than the company’s iconic ERP system, SAP R/3, launched in 1992. A major priority for the company in 2016 will be the launch of further innovations for SAP S/4HANA, cloud edition. “With regard to our core, we will shift the development investment to a huge amount into cloud.”
Additional development priorities in 2016 include line of business solutions which help companies differentiate themselves in the digital economy, such as workforce engagement software (SAP FieldGlass, SAP SuccessFactors), business networks for supplier collaboration (SAP FieldGlass, Concur, SAP Ariba), applications for customer engagement & commerce (SAP hybris and “hybris as a Service”), and solutions that enable enterprises to take advantage of the Internet of Things (IoT), including SAP HANA Cloud Platform, SAP HANA Vora, and SAP Cloud for Analytics.
Engage the ecosystem with SAP HANA Cloud Platform
“We have the ambition to provide the digital platform for the industry in the future,” Leukert told his global development community. To achieve this, SAP needs to establish its digital platform, the SAP HANA Cloud Platform (HCP), as the de facto industry standard development platform among partners, customers, and other third parties.
Adoption of the open platform by third parties to extend SAP’s industry and line-of-business applications, and also build their own “front office” applications is key to the success of SAP’s product strategy. To gain mass adoption of SAP HANA Cloud Platform, SAP is incorporating business services that developers can build their applications on top of. These can be industry-specific software services, line-of-business services, or generic services for cross-industry IoT scenarios.
IoT is SAP’s business opportunity
The Internet of Things is “one of the biggest opportunities for SAP and its customers to reinvent their businesses in the digital economy,” said Tanja Rueckert, EVP Internet of Things & Customer Innovation at SAP. She also highlighted the window of opportunity is small for enterprises of all sizes and industries to become a leading player in IoT. “There is no clear IT leader in this sector right now, and SAP is well positioned because, we have a track record of expertise in digitizing business processes, and we benefit from in-memory technology in our IoT platform, predictive algorithms, and prepackaged IoT apps.” she explained. SAP and the ecosystem provide customers access to the full IoT stack to better understand data patterns and close the loop from Thing-To-Insight-To-Action.
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