Here are Bill McNee’s top six takeaways from SAP’s annual user group conference (#SapphireNow) this week in Orlando, Florida.

Cloud, Cloud, Cloud. With the acquisition of Successfactors, SAP has fully transitioned its vision and strategy, and has squarely put its chips down on the Cloud as foundational to the company’s future, as it now fully recognizes how significant the priorities of its business and IT customers have shifted.

New Business Unit. Lars Dalgaard is clearly in charge of SAPs Cloud business. It has set up a completely separate Cloud business unit, where all of its assets are now located. The unit is also responsible for the firm’s Social technology initiatives as well. This new unit has its own sales, technical and market staff, and will only leverage key corporate resources such as HR et al, as appropriate. Most importantly, the traditional sales force and the new business unit sales organization are now aligned in the most important way, as SAP will be double “comping” for all Cloud deal activity. Lars is a big believer in continuous innovation, is very customer focused. and has an enthusiastic and infectious personality that is clearly driving change at SAP.

Loosely-Coupled Architecture Rules. In many regards, the move toward loosely-coupled architecture as foundational to SAPs Cloud strategy began some time ago. However, as Nicholas Cumins, SVP, Solution Management in SAPs On-Demand line of business emphasized in a 1-on-1 meeting, for SAP to arrive where it is today, it had to go through three important rights-of-passage. First, Large Enterprise (LE) customers needed to become the primary focus of the firm’s Cloud strategy. Second, focusing on an API-driven and loosely-coupled architecture had to become central to its approach (as it is elsewhere in the rest of the Cloud ecosystem – why not at SAP). And third, that it is the solution that matters, not the underlying platform SDK (as SAP has many) – and what is critical is that SAP delivers a consistent (consumer-grade) user interface and user experience.

Building the Ecosystem. While not something that I could have emphasized years ago, SAP made some important integration partner announcements, including deals with MuleSource, Dell Boomi, and IBM Cast Iron. As my Dad always taught me, it’s not what you say, it is what you do - and this is a strong signal that SAP is better understanding that the Cloud is all about partnering … as no single vendor can do it alone.

Attempts to Simplify Product Messaging. Boy, oh boy, this is a positive in my opinion – but more work needs to be done. With so many product lines, I can imagine SAP customers’ heads spinning as they have attempted to keep up with the range of legacy and first generation Cloud positioning and messaging. Instead, the new Cloud unit will focus around four key segments titled Customers, People, Money and Suppliers.

  • Customer: includes its already-released Sales On Demand offering, with plans longer term to deliver both Service On Demand and Marketing On Demand solution sets (both of which will get carved out of ByDesign, and further enhanced). 
  • People: includes a wide range of assets, many of which are foundational to the SuccessFactors portfolio. This includes Employee Central (core HR), a soon to be release Payroll On Demand (July timeframe – essentially a redeploy from its on-prem ERP offering), Talent Management and Workforce Planning. 
  • Money: includes Finance On Demand, which is a carve-out from ByDesign (available in August), and its Travel On Demand offering. Interestingly, when shown a ByDesign component map, it became clear that Finance On Demand will represent more than 50 percent of the core functionality of ByDesign, to which it will add key new functionality to make it a more robust stand-alone offering (e.g., revenue recognition). Additional capabilities on the drawing board include some performance management / dash-boarding capabilities. 
  • Supplier: includes Sourcing On Demand (an in-market offering we have gotten strong customer feedback around – built with Frictionless SDK), with future plans to add additional solution capability around the Business Network / Procurement / Collaborative Commerce.

In-Memory and Mobile Front and Center. SAP now has 353 active HANA customers. But the real story is how the entire application portfolio, from basic Cloud apps, to ERP, to BI to portals, et al, are being designed or redesigned with its in-memory technology at its core. As Co-CEO Snabe highlighted in the opening keynote, a core SAP assumption is that everything will be Cloud, Mobile and in-memory within five years – suggesting a similar scenario to Saugatuck’s that hybrid Cloud is only transitory (see Research Alert “SaaS Survey Indicates More User Focus on Business Improvement, With Big Changes Coming Soon”).

As my colleague Bruce Guptill explains in his companion blog post (and soon to be released Strategic Perspective), this is an “All In” strategy for SAP. Over the past year, we have seen SAP shift from viewing the Cloud as an extension to its on-prem core business, to a Cloud-first mentality, and toward what some SAPers are referring to as a “best-of-breed Cloud suite.”

For SAP to win (big) with LE customers, it must truly deliver best-of-breed functionality and a consistently excellent user experience. At issue longer term is the pending battle with other providers like Workday who will likewise be selling the benefits of an in-memory Cloud-based architecture, with modern workflow, but with the additional benefit of process integration within the solution suite (HCM/Payroll today, with strengthened Financials and Procurement tomorrow). Other key players who SAP will clearly do battle with going forward, especially around core Cloud-based Financials, will include NetSuite and Oracle, among others.

What we wished we had heard more about at the conference its evolving Social strategy (beyond the excellent 1-on-1 had with Holly Simmons and her colleague) – but we assume that SAP has not yet rationalized how it is going to pragmatically bring its two core Social technologies together (Jam from SuccessFactors, and StreamWork from SAP). We also look to learn more about its emerging Cloud development platform that is in the works for customers wishing to extend and integrate its portfolio of loosely-coupled Cloud apps (regardless of SDK), apparently planned for July availability. Tentatively named “NetWeaver Cloud,” it will provide both design and runtime capabilities, and leverage HTML5 for UI development/customization. While the NetWeaver branding will no doubt resonate with SAPs traditional customer base, I’m not convinced that this makes the most sense if going after net new customers ... More on that as it becomes available.

Interestingly, my most lasting take away from the event is the commitment to innovation that SAP is demonstrating, across all of its product lines. They are no longer afraid of cannibalization, and are finding innovative ways to help bring along its massively sized customer base. A great example is bringing B1 to the Cloud (and re-platforming on HANA).

This blog originally appeared at Saugatuck Lens360.

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