I dropped by SAP's sales kick-off meeting in Las Vegas two weeks ago week. I decided not to come for the whole event, but rather to drop in for a day. I talked to other SAP partners, SAP executives and analysts. Here are the themes.
It's cloudy outside
SAP has made a clear announcement that it is a "cloud first" company. However, the revenue from this primarily comes from SAP's acquisitions of Success Factors for HR and Ariba for Procurement and there isn't so much evidence that there is so much revenue from other lines of business yet. The undertones of SAP's CEO Bill McDermott suggest that more M&A is in the works, and this wouldn't surprise me.
SAP has a tough battle here, because the growth in cloud has been caused almost entirely by acquisition, which means that either SAP has to start selling much more to show continued growth, or they have to continue to acquire their way to growth. I suspect that in 2014, SAP will use the M&A policy to acquire growth as a short-term solution whilst they convert the sales-force to a "cloud-first".
But cloud is the focus for the sales force, and good cloud people have generally been promoted to leadership roles. I talked to one Sales VP about a solution I am building. Question 1: Is it Cloud? Question 2: Is it HANA?
So it's Cloud First, HANA Second.
Customer-Centric Selling
In the consulting world, we have been using customer-centric selling by industry and line of business for many years. SAP lost quite a lot of its industry talent in the last 15 years, and a lot of the people who implemented complex software like MRP are no longer there. There is a shift of power away from the CIO to Chief Data Officers and Chief Marketing Officers and this means that SAP has to become much more relevant to the Line of Business leads and the front office.
This was a big theme in FKOM - the sessions were much less about "what to sell" and "product sales enablement" and much more about "selling". This requires a consultative, customer-focussed sales approach that is highly effective and which customers love, but it will have the inevitable affect of some attrition of the traditional sales force. The phrase of the week, by the way, was "selling outcomes".
The Enterprization of Consumer
This is my big suggestion for SAP in 2014, and I think it will be a big theme in CES 2015, where I expect SAP to take a stand for the first time. I've been advocating that SAP goes the last mile to the consumer by acquiring companies like Concur or Expensify. This is the key to making SAP relevant for the people and it is the missing gap. Right now, I do my expenses in Expensify and then input them into SAP - then attach the Expensify report in my email to my Finance team for them to print for the file. SAP could build an Ariba-style link to their ERP software and charge per expense claim.
It's also possible that SAP could enter plain consumer apps using its River technology. It would be a smart move to just start building consumer apps in a freemium style model, to solve small pain points and become relevant in the world of Internet of Things. Possibly with the below announcement on HANA, SAP will be able to woo startups to build on the HANA platform in a SaaS model.
HANA exits Early Adopter phase of technology adoption
SAP CTO Vishal Sikka wrote that SAP HANA had crossed the chasm, but if you look at technology adoption curves, the "chasm" is still during the early adopter phase. I believe that HANA will move from Early Adopter into Early Majority this year, and it will cause an explosion.
There are several reasons for this. First, those customers who did projects in 2012 and 2013 on HANA, are now doing more projects and are consuming their shelf-ware. This means they will go back for more. Second, Intel's Ivy Bridge and DDR-4 memory will mean that the hardware price-point tumbles, especially for Business Suite customers. Third, the amount of apps available to purchase is increasing, and the early apps like BW now have more and more investment, making the business case much more compelling.
And fourth, SAP has stated that it will deliver cloud-based licensing for HANA - one amount per month. Whilst HANA has been available in the cloud for some time, CIOs like Marks & Spencer's Darrell Stein have said that the HANA Enterprise Cloud TCO doesn't add up. This license will totally change the TCO of the HANA Enterprise Cloud, and it will be available via various outsource partners.
Focus on Industry Verticals
Most of the really interesting companies that would be acquisition targets for SAP are either not easily bought (Salesforce, Workday) or too expensive (Tableau, Qlikview, Concur). There are however a number of very interesting industry-specific targets (Panopticon was one, but they were bought by DataWatch). These have smaller revenues but they bring the relevance back to SAP in the industries - in analytics, predictives and automation. I suspect that SAP will need to snatch up a quantity of smaller cloud companies, but it will be well worth it.
If SAP executes well on this strategy, and the business leaders in this space make compelling people, then they will be able to break into the front office of industries where SAP is not currently relevant like Financial Services, Healthcare and Oil and Gas. There is a huge revenue growth potential here because several of these industries are ripe for disruption.
Mobile is Dead
Mobile is gone, and as someone said to me this week "it's not mobile, it just... is". All apps need to be consumable on all devices and that's just a tax to get to the table. I'm not sure what this means to the SAP Mobile Platform - hopefully it means that SAP will focus just on selling apps, and giving away the runtime license for the platform. Don't get me wrong: mobile platforms are incredibly important, but they are
Software Announcements
We have mutterings around this but I suspect we will hear the announcement of R/4 this year, or whatever SAP calls the successor to the Business Suite. My prediction: it will be a SAP River, SAP HANA-based application built from the ground up, and it will be 20x smaller and 20x simpler than R/3. This will deliver on SAP Chairman hasso plattner's vision to transform the ERP industry. I recently built a River app and I found that it was 20x smaller and 20x simpler than the equivalent traditional app. This meant that we could build it 20x more quickly and immediately integrate all operations. River is in short, quite amazing, and I believe it will be the the framework for the renewal of SAP's core business.
We will also see a focus on new analytics markets, integration with KXEN and when I met with product development lead Michael Reh last week, I saw a SAP that was keen to innovate in new directions, where other companies aren't treading (sorry, I can't give any spoilers!), rather than to try to compete where competitors are strongest.
Final Words
A few weeks ago, I thought that 2014 was going to be a do-or-die year for SAP, where they pushed the whole pricing model to cloud in the first quarter and shook up their entire DNA. That's clearly not the case and whilst SAP's shift to the cloud is explicit, it is not as disruptive to their business model as I first thought it would be.
So let's see what comes this year!