Forrester analysts attended SAP’s key customer event Sapphire this year in Barcelona and Orlando. This year “Digital” and “AI” were the two keywords used in almost every presentation, sometimes maybe abused.
Two things caught our attention:
Digital hubs as a business enabler. SAP estimates 80% of B2B transactions will happen via digital channels by 2025 according to the global head of digital Sam Masri’s speech at the digital hub in Barcelona. With its 15 digital hubs around the world, SAP is trying to better leverage its remote workforce and dispersed expertise to speed up the decision-making process of its clients. SAP claims it will be able to eliminate the need to put together big teams that have to travel long hours and in person to reach customers at their sites. This vision from SAP has somehow an oxymoronic taste though. Putting together hundreds of employees in a digital hub to deliver value to the client remotely makes indeed wonder whether the digital hubs are at all necessary to enable the vision or if a simple remote collaboration solution would suffice. The point is: are digital hubs a true differentiator for serving the clients or are they modern and fancy offices meant to delight and retain talent? In 2025 we will know how the strategy will have worked out.
Human-driven AI to improve productivity. The 22-page brief introducing new offerings sent to analysts and media reps before Sapphire, mentioned “AI” 47 times. The AI capabilities presented at Sapphire 2023 though were more a collection of advanced automation solutions than a holistic AI solution such as Google’s Bard or ChatGPT. During the keynote, SAP executives presented the use case of a Chief People Officer leveraging the “AI” embedded in SuccessFactors and its integration with Microsoft Copilot to respectively generate a job description and refine its language according to diversity and inclusion criteria. The use case cast some light on the art of what is possible with SAP’s AI but highlighted its limitations too. While Gen AI should bring a 15% increase in employees’ productivity according to SAP executives’ keynote, this does not take into account the work required to manually check what the AI produced. An obvious bottleneck is just around the corner and is being deliberately disregarded despite the notion of human-driven AI used to describe SAP’s AI value proposition.
SAP’s important themes this year included also a stronger commitment to the cloud and to standardization of the core ERP system, a new focus on sustainability with the Green Ledger, the SAP Business Network for Industry, and the announcement of SAP Datasphere.
Cloud Calls For More Standardization With The SAP Clean Core
“There is no way that S/4 HANA will ever replicate all the features of ECC”. This was a bold statement from SAP’s management in a panel with CEO Christian Klein, reflecting the state of the art and the path ahead for this offering. Customers expecting S/4 HANA to become some sort of cloud-based ECC soon now know for sure that this won’t happen. This vision for S/4 HANA also makes SAP’s commitment to stop the support for ECC6 in 2027 more credible.
The move to the cloud is forcing more standardization of the core system (the so-called “clean core”), as opposed to the high level of customization characterizing some ECC implementations in the past (sometimes up to 70% and more). Having a standardized core system represents an opportunity for SAP’s customers. These can leverage purpose-built solutions for their use cases instead of complicating their ERP core with heavy customizations that – in turn – increase the cost of maintenance. Breaking the ERP monolith for SAP means cutting the offering into modules, and leveraging an ecosystem of solutions ranging from human capital management (SuccessFactors) to process management (Signavio).
According to SAP’s executives, greenfield implementations are getting the lion’s share while brownfield implementations are losing traction due to a need for faster implementations and accelerated cloud adoption by end-user organizations. For SAP’s clients this translates into a trade-off: a) go brownfield and reduce the change management to a minimum – as well as the benefits from the transformation; b) go greenfield, with an extra effort on change management, and maximize the benefits (if organizations do manage to get through the transformation in one piece). The report Select Your Paths To SAP In The Cloud explains the available options and what end-user organizations should consider when embarking on a cloud journey for SAP’s solutions.
Green Ledger Connect Carbon and Financial Accounting
SAP also announced solutions to support carbon accounting helping companies towards building and maintaining a “green ledger”. With this move, SAP’s sustainability offering becomes part of RISE with SAP and GROW with SAP for SAP S/4HANA Cloud, public edition. SAP sees sustainability as part of a CFO role’s key delivery as financial reporting expands to include non-financial ESG metrics and disclosures.
While several analysts at Sapphire Orlando 2023 event inquired SAP executives whether they have seen more skepticism in the US due to severely divisive political opinions on ESG, SAP appeared to be dismissive. That may be because they do not see their products themselves as directly producing content to meet ESG reporting requirements like the EU’s Climate Sustainability Reporting Directive (CSRD) and the soon-to-arrive stringent climate disclosure requirements in the US. SAP reiterated that their experience working with firms in the US and globally has been quite the opposite as there is huge interest in having ERP systems cover sustainability tracking and measurement capabilities. However, SAP is still just a year or so into this and it is yet to be seen how their clients can successfully use their green ledger to meet long-term sustainability goals.
In the US specifically, with SEC’s ongoing rule proposal which would require US publicly traded companies to disclose annually how their businesses are assessing, measuring, and managing climate-related risks along with disclosure of greenhouse gas emissions, this reinforces why it would fall under the CFO umbrella. This would really underscore why SAP’s approach to developing a “green ledger” is probably the right one as they respond to market forces.
SAP Business Network for Industry
SAP Business Network for Industry leverages the existing SAP Business Network and aims to help customers in specific industries. Its goal is to improve and extend key business processes with trading partners and suppliers. SAP has already supported its clients in the automotive sector exchanging data within the Catena-X data space. SAP is now creating a similar data space with Pfizer. Among the expected benefits SAP is listing the improvements for its clients to address objectives in line with Scope 3 by using its infrastructure to reduce the carbon footprint of these data spaces. The creation and support of industry data spaces is an interesting play for the German vendor in Europe and is casting new lights on data space initiatives. Expect to see further collaborations between SAP and specific industries, to meet the burgeoning increase for data sovereign spaces for exchange of sensitive information.
SAP Datasphere
SAP also launched SAP Datasphere, a comprehensive data service that enables every data professional to deliver seamless and scalable access to mission-critical business data. In addition to the SAP Datasphere (formerly SAP Data Warehouse Cloud) product enhancements, SAP also announced exciting partnerships with Collibra, Confluent, Databricks, DataRobot, and Google Big Query. These partnerships will help customers to reduce complexity in their data landscape to provide secure and governed access to data and will drive business outcomes thereby evolving SAP Data Warehouse Cloud towards a business data fabric.
Integration between SAP and non-SAP systems is a top focus area for a large portion of SAP clients, with several stating that master data maintenance, governance, and integration are top challenges. It has the potential to deliver meaningful data to customers across cloud, hybrid, and on-premises SAP and non-SAP systems and environments, with that data’s business context and logic intact. For clients with investments in various vendors like SAP, Microsoft Azure, Salesforce, and Oracle this is a powerful takeaway. The coming year should really show how big of a differentiator datasphere ends up being to its predecessor SAP Data Warehouse Cloud.
Our Reflections On SAP Sapphire 2023