Companies today have numerous choices when deciding to implement cloud solutions. The availability of various cloud software offerings is making SAP look closely at its main cloud competitors. At issue is the threat — at times real, at times surreal — that two major cloud vendors pose for SAP: Workday for human resources management systems (HRMS) and Salesforce for customer relationship management (CRM). But are these vendors really as much of a threat to SAP as many believe? Or, perhaps, more importantly, do they truly provide the opportunity for innovation that they purport to offer? Therein, as we parents of young children say, lies a teachable moment.
There is no doubt that Workday and Salesforce can count a fair number of SAP shops in their respective customer bases, much like PeopleSoft and Siebel could do in their day. And a large number of the SAP customers who went with PeopleSoft and Siebel have since migrated to Workday and Salesforce, for the right reasons — sort of. Many of these reasons looked good at the time the buying decision was made, but the rationales behind those decisions have not aged well. And the reasons for not choosing SAP solutions have similarly not aged well.
The Cloud Argument
The early momentum, and much of the current momentum, for choosing Workday and Salesforce could be seen as fitting into four big buckets: These vendors were cloud pioneers in their respective domains; they have focused, best-of-breed functionality that appeals to a specific line-of-business (LOB) executive who is willing and able to act independently; they have charismatic leaders who excel at attracting customers to their cause; and they have been able to appeal to the former customer bases of PeopleSoft and Siebel, from which the majority of their enterprise customers have been drawn.
Two of these factors remain relevant today. First, their leaders still have a positive impact on the customer base. Second, the negative appeal of Oracle, the owner of the now-defunct PeopleSoft and Siebel brands, has led many former customers into the arms of Workday and Salesforce.
But the other two arguments in favor of these two vendors have faded away over time, and the lack of punch that these opinions now carry makes the argument in favor of SAP all the more relevant today.
The first-to-cloud argument has clearly fallen, and fallen hard. Salesforce today is seen as a legacy CRM product, at least in terms of its user experience, and Workday is now merely the most well-known in an increasingly crowded HR and talent management market of which SAP’s SuccessFactors solution portfolio is one of the more credible offerings. In contrast, moreover, SAP’s cloud message and product set has had a significant infusion of new technology and new functionality — starting with SAP HANA, and then the SuccessFactors acquisition — among many other developments.
SAP’s cloud message and product set has had a significant infusion of new technology and new functionality — starting with SAP HANA, and then the SuccessFactors acquisition — among many other developments.
A Complex Business Process Opportunity
Perhaps the most important of the early rationales to fall, however, can be seen in the deconstruction of the best-of-breed appeal of Workday and Salesforce now at work in the market. In the past, a vice president of sales or HR looking for an upgrade from some old technology (Siebel), or system that was so customized it needed a whole new implementation and not an upgrade (PeopleSoft), could just go out and take advantage of the per-user, per-month pricing of Salesforce or Workday and get up and running quickly.
But something important has happened that makes that kind of short-term thinking look short-sighted: the need to extend CRM and HRMS beyond the domains of their respective lines of business. I call this the complex business process opportunity, and its arrival at the intersection of business and technology spells huge opportunity for SAP and big challenges for its competitors.
In a nutshell, a complex business process is one that spans multiple silos of functionality — say ERP, CRM, and HRMS, for example. These complex business processes span deployment silos as well by orchestrating processes that move between on-premise and cloud applications. Orchestrating user functionality and processes across these silos delivers enormous value and supports real-world business processes and users. A complex business process like enterprise asset management (EAM), for example, needs integration between multiple LOB applications, regardless of whether they are in the cloud or on premise. Doing this successfully in EAM and many other domains will become an important measure of enterprise innovation in coming years.
It is in these complex processes and their orchestration that SAP has a distinct advantage and Salesforce and Workday have distinct disadvantages. SAP has made it clear that this orchestration is a best practice that it brings to the table. While no one company, SAP included, owns all the apps that need to be orchestrated for most complex business processes, in general, SAP has more of the necessary individual applications and vertical industry functionality than Workday, Salesforce, or any other siloed cloud vendor.
The challenge for SAP and its customers in understanding SAP’s advantage is that selling complex business processes is, well, complex. Historically, with the vice president of HR or CRM calling the shots, any need for complex business processes was subsumed by the more short-sighted demand for fixing an LOB problem — upgrading Siebel or PeopleSoft, or getting out from under the thumb of Oracle, for example.
A Larger Conversation
What SAP may want to do is open up a broader discussion with its customers about the desirability and value of extending an LOB domain like CRM or HRMS into part of a complex business process. Simultaneously, customers need to understand the issues that a proliferation of cloud silos poses in terms of setting the stage for the next level of business process innovation. Just having cloud CRM or HRMS, even from a market leader, simply won’t cut it; these apps need to be part of a larger and more valuable complex business process that goes well beyond what most cloud vendors can deliver.
That bigger business process picture — the orchestration of multiple silos along vertical industry domains — clearly plays into SAP’s strengths. While being mindful of the competition is always a good idea, SAP may be better served by focusing more on fully articulating its advantages against the largely outdated appeal of Workday and Salesforce.
The conversation with the market should focus on how SAP can solve the complex business process problem. Just tackling LOB problems, and patching them with some cloud software, was good once upon a time. But those days have passed, and it’s time for SAP and its customers to think about long-term solutions and long-term value, and that means looking beyond the lines of business to the needs of the enterprise as a whole.