Cloud ERP Close-Up: Transforming Finance-Led ERP a...

BeSchulze · ‎09-07-2023

Welcome to a new edition of the Cloud ERP Close-Up after a short summer break!

As business complexity and pace of change rises, companies must drive rapid transformation of finance operations, monitor the business, and reduce organizational risk. Particularly fast-growing organizations have the need to follow a “post-modern ERP strategy” – which means that they differentiate between their operational and their administrative ERP capabilities.

In this blog post, we will explore how ERP solutions are revolutionizing and propelling these industries toward sustainable success. The entire blog series is all about sharing knowledge with a broader community, building confidence in the journey to the public cloud, and making product adoption a successful and delightful experience.

Last time, we put our lens on product-centric cloud ERP and additionally shared a podcast interview with Axel Herrmann, Product Management Lead for Product-Centric Cloud ERP. If you missed it, you can find it here.

This blog post will focus on Cloud ERP for finance-led and service-centric companies. I had the pleasure to interview SAP’s SVP and Head of Product for Finance-Led & Service-Centric Cloud ERP, Sabrina Kunze, and talk with her about her vision and strategy for companies in this area. But before we dive right into this interesting interview, take a closer look at the benefits of a cloud ERP for finance-led and service-centric companies:

Understanding Finance-Led ERP and Service-Centric Industries

Organizations look for a stable and reliable administrative core with high integration capabilities that support fast growth at predictable cost. At the same time, service-centric industries, such as professional services for example, are faced with downward pressure on fees, increased regulatory scrutiny, new service delivery models, lack of resources, and intense competition. Those are accelerating the pace of business while their profitability is attacked. Many companies’ organizations are aiming to move their back-office and core processes to the cloud to best leverage recent AI capabilities and achieve the next level of process automatization and effectiveness.

According to Gartner, a service-centric cloud ERP solution is a suite of integrated products that provide functionalities for at least three of the following areas: financial management, order to cash (O2C), human capital management, procure to pay (P2P), and administrative ERP.

Alongside those functional requirements, Gartner defines cloud ERP solutions for service-centric enterprises as serving companies in the professional services, software & IT, financial services, media, public services, non-profit, telecom, healthcare, and real estate markets.

SAP S/4HANA Cloud, public edition is recognized as a leader in the 2023 Gartner® Magic Quadrant™ for Cloud ERP for Service-Centric Enterprises. Download the report here.

Figure 1: SAP S/4HANA Cloud, public edition is recognized as a leader in the 2023 Gartner® Magic Quadrant™ for Cloud ERP for Service-Centric Enterprises.

Service-centric industries are at the forefront of the changing cloud ERP business landscape, facing distinct operational needs and challenges. ERP solutions tailored to these industries empower organizations to excel by streamlining processes, delivering exceptional customer experiences, and facilitating efficient financial management. By embracing cloud ERP systems, businesses can drive sustainable growth, innovation, and competitiveness in their respective fields.

Let me now welcome SAP’s SVP and Head of Product for Finance-Led & Service-Centric Cloud ERP, Sabrina Kunze, who will share her vision and strategy for companies in this area.

Bert: Thank you for joining the Cloud ERP Close-Up, Sabrina! Let's start with your view on how the direction for SAP’s cloud ERP offering has evolved. What is crucial looking at service-centric customers’ needs?

Sabrina: Bert, thank you for having me! Across industries we see our customers exposed to a lot of change and the need to be well set with their IT to run their business. We are here to support customers solving their day-to-day business challenges and equip them best to steer their company. Especially for service-centric businesses, the solution is very well equipped to serve their growing business demands with predefined best practices across their enterprise. Comprehensive financial steering and insight to action as well as intelligent process automation is key. We utilize our deep experience in running global business processes across industries to serve our customers with our public cloud ERP solution.

Bert: What is your personal vision for service-centric industries in cloud ERP?

Sabrina: My vision is to provide our customers with a predefined public cloud ERP that allows them to smoothly and provenly adapt innovative business models, is easy to consume, and enjoyable to use. With that, it delivers value to our customers’ business users every day. Manifold business models offered as end-to-end scenarios support our customers in serving their customers best. These scenarios are designed to be easy and stepwise adoptable, supporting a transformation to a public cloud solution suite.

Figure 2: A business model for every customer need.

Bert: Why is end-to-end so important in public cloud in your eyes?

Sabrina: When our customers subscribe to a public cloud solution, they expect pre-defined best practices which they can quickly adopt running their business processes.

"Project-based services" and "solution business" are two examples for such end-to-end processes. While project-based services support selling, delivering, billing, and accounting of customer projects, the solution business enables companies to successfully transform to selling combined solutions of product, services, projects, and subscriptions. Consequently, we structured our portfolio and product priorities including the way we operate along end-to-end scenarios.

For SAP as a software company, this means the entire process flow needs to be seamlessly integrated not only for subprocesses such as creating and managing quotes, orders, contracts, or projects, but also for processes spanning logistics execution, billing, and finance. The way we offer end-to-end processes needs to support our customers’ transition to new business models to outperform their competition. We also put an emphasis on personas involved in an end-to-end scenario. After all, it’s important for everyone to have a consistent and delightful user experience while getting their job done.

An end-to-end process is composed in a modular way to utilize the best technological capabilities for each business discipline (highly elastic, scalable, deeply integrated, etc.) Therefore, our end-to-end business process offering spans from the SAP S/4HANA core to the BTP (Business Technology Platform) and integrates with our SAP Cloud portfolio. Those integrated end-to-end processes also have to fulfill cloud qualities and need to e.g., be extensible, so that partners and customers can adjust process flows as required for their specific and differentiating business environment.

Figure 3: Customer value delivered by an evolving ERP.

Bert: Let's put the lens on a few elements of quote-to-cash processes. What are our customers looking for and why?

Sabrina: Quote to cash is a key business process for many companies as it enables front and back-office operations to realize the company's top line. It provides the ability to quickly monetize new offerings, from modelling and bundling offers to managing sales quotes and orders. Further on, quote to cash handles billing, invoicing, collections, revenue recognition, and accompanying analytics. For companies operating with lean teams, having a streamlined and efficient quote-to-cash process is especially critical to their success and growth.

Figure 4: SAP solutions for quote-to-cash management.

Customers and partners have told us that, as they add subscriptions and usage-based plans, their existing quote-to-cash process is unable to accommodate these new recurring revenue models. For example, when products, services, and subscriptions are bundled together, orders end up being processed manually, leading to fulfillment delays and errors. Lack of billing transparency and inaccuracies lead to increased billing disputes. In other words, customer experience suffers, while more internal resources are spent on the quote-to-cash process.

This is why SAP is providing modular quote-to-cash solutions that allow companies to automate and streamline the entire quote-to-cash process regardless of whether they are selling physical or intangible products or services on a subscription base, along with usage plans, or any other business model. This trend towards growing flexibility of the offering requires agile adoptable process support. Daily operations must be executed with a significantly higher degree of automation and benefit from embedding artificial intelligence in the quote-to-cash process chain. This helps customers to reduce operational costs by achieving a higher level of operational excellence at the same time.

Consequently, we are continuously investing in new innovations that leverage AI and machine-learning capabilities. Some examples are identification of non-paying customers, optimization of customer payment to balance out cashflow as well as automated creation of sales orders finally evolving to a low touch, intelligent order management.

Excited to take a deeper look and connect? Find more insights here: CPQ, Billing, Accounts Receivable, Revenue Management.

Bert: As you just mentioned, one aspect all our readers are interested in: The whole world is talking about AI. What are your thoughts on SAP’s opportunities with AI?

Sabrina: Look, we need to distinguish between the most recent discussions around generative AI and what I would call traditional AI cases. Within Cloud ERP, we have started offering AI cases and closely engage with our customers and product management on an impactful AI offering early on. Two prominent examples are our cash application software and our offering to create sales orders via automatic extraction:

https://support.sap.com/content/dam/productfeatures/assets/00033/901B0ED1A0641EDAB8BDCC9CB0A1C0F7/de...

Figure 5: This video shows the creation of sales orders via automatic extraction.

Most of the traditional AI scenarios target efficiency and cost savings, while the next generation of AI unleashes a new potential. The way generative AI and large language models take presence in our day-to-day life requires all of us to shift perspective. It offers a huge potential for unlocking new creativity and productivity, given we use it in a responsible way. By embedding generative AI into our business applications, we apply this, framed by the ethical and business standards we stand for, while unlocking new ways of interacting with the software and prepare better business decisions and value creation. Please also see:

SAP Business AI,

Business AI in Finance,

3 Ways CFOs Can Capitalize on AI in Finance

Thank you so much for your time and the great insights, Sabrina!

Doubling down on Sabrina’s words on order automation, especially efficient sales order processing is a critical aspect of any business, and in today’s rapidly changing business landscape, organizations are constantly seeking ways to improve efficiency and enhance customer satisfaction. SAP S/4HANA Cloud supports your order-to-cash processes with low touch order management and automated billing capabilities. Internal sales representatives can make better decisions with actionable insights that make solving problems seamless.

It is important to ensure that orders be filled correctly before they are shipped. SAP is working to speed up the processing of customer orders by prepopulating details from your master data and based on historic entries and auto-completing missing information using AI and machine learning technologies.

If you are interested in more of the existing AI use cases concerning the intelligent sales order creation and execution powered by AI, see the following blog post:

Sales in SAP S/4HANA Cloud, Public Edition – Automated Order Process with SAP's Intelligent Technolo...

I hope you enjoyed our conversation and can make the best use of the shared content.

I hope to see you as a frequent follower of our Cloud ERP Close-Up – stay tuned and discover more product highlights next month.

All the best,

Bert

Follow us on @SAP and #S4HANA, and myself on bert.schulze, LinkedIn or Twitter.

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