Dion Hinchcliffe (DH), Vice President and Principal Analyst, Constellation Research
Bjorn Goerke (BG), SAP Chief Technology Officer and President, SAP Cloud Platform
Dion Hinchcliffe: Hello, and welcome to SAPinsider. We have Bjorn, CTO with SAP with us. Bjorn, glad to have you with us.
Bjorn Goerke: Thank you. Thanks for having me.
DH: SAP is a well-known enterprise software company. It’s been around for many years and practically defines the term ERP, Enterprise Resource Planning. And I think what everyone’s conception of SAP is kind of fixed from five or 10 years ago when SAP was really making a name for itself in those areas. Can you tell us a little bit about what SAP is doing today that is different from those times, or even a year ago?
I think what is very different today than let’s say two years, five years, 10 years ago is definitely that we are much more than an ERP company these days. If you look at the kind of breadth of the portfolio that we have in the meantime, it really goes beyond the classical ERP scope. What we’re doing with business networks in the procurement space, with total spend management solutions, with travel and expenses. What we’re doing in the human resources, HCM space. If you look what we’re doing especially in the front office space where classically you have seen SAP as a back-office ERP solution provider and now with our C/4HANA portfolio we’re clearly attacking in the customer experience space, in the front-office space through a number of major acquisitions that have become part of the SAP portfolio in the past (few) years.
I do think it’s a very different SAP than what we have been 10 years ago. And the level of customer focus and engagement, the focus on innovation has never been as strong as I would see right now, and I’ve been with the company for the last 20 years. So I think I have a good feeling of what’s different now than a few years ago.
DH: You said the key word there: innovation. Things are moving so fast digitally, and when people think of SAP they don’t necessarily think things like Blockchain, or Internet of Things, or Artificial Intelligence. Yet platforms like SAP Leonardo that is clearly happening and now you’re clearly foraying into the front office and even customer experience. Is the motivation there to really be this end-to-end, one-stop shop for the enterprise?
BG: In the end, all our customers independent of which of the 25 industries they are in that we are supporting – and maybe in some areas like retail it’s more obvious than in maybe the gas and oil downstream industries – but it’s basically the overarching theme. And what we see that customers are busy with is what – sometimes people refer to it as digital transformation and I know the term is a hype word and most people are sick of hearing it in the meantime – but it is the reality of what’s happening and I strongly believe that this is an area where new technologies, capabilities like machine learning, like big data management in the cloud play a major role to deliver on what digital transformation is all about which is improving customer experience and bringing an innovation culture into those companies.
So the goal clearly being independent of industry providing a better customer experience and it could be better product, it could be delivery of better services, but it is a clear customer focus that is coming in here. And in order to do that, and to optimize that experience those companies have to innovate, technology is playing a major part in that. Getting better operations within your company, being faster in delivering, more agile in adapting to customer needs. The same thing what is going on in the real world and connecting real-world insights with the representation of the business that you see within your corporate systems has become kind of an absolute must independent of the industry. And that is why it is so important to find ways how SAP providing those classical enterprise solutions in the back office and also in the front-office space works together with customers in innovation projects to connect those two worlds, to look into those new scenarios they are going after to provide more flexibility in how systems and solutions are wired up.
And that requires SAP to have a strong focus on innovation ourselves, and adapt also our portfolio to serve those customer needs. And that is largely happening by our own move to the cloud that allows us to be more agile, that allows us to deliver complete integrated end-to-end solutions that provide us to keep innovating at a fast-paced cycle and roll it out to a large customer base much more so than it was possible in let’s say 10 years ago where we had to ship kind of software in an on-premise fashion, we required customers to run complex upgrades and update projects, and it is clearly a different way how we need to do business with those customers. So customer-centricity, innovation is something that in the end our customers need and only together with SAP we can get these things going.
DH: I’m struck when I attend SAP events that you really have taken up this language of design as a way of introducing the capabilities into the enterprise and you’re taken up the mantle of design thinking which is a term in the industry about … here’s a thoughtful way, a customer-centric way of applying these capabilities and platforms to business problems in a meaningful way. I wonder if you could talk about that for a moment?
BG: Absolutely. At the end as I said it’s customer-centricity. If innovation at the end is delivering value to the customer that’s what innovation is about. And we’re kind of applying applications, we’re applying technology to solve exactly that problem. And the only way to do that is to really sit down with the end users of those processes, of those systems, and jointly design a solution for a particular problem and then kind of optimize that. And that’s the design thinking approach; validating ideas with the end users, not only the customer – even the customer is an abstract thing – but who are the people sitting in front of those solutions? If you design kind of new processes where you bring for example farming data in from rural areas in India or Africa it doesn’t help to design a solution somewhere in the dark in your office but you have to reach out and directly work with those people that you expect will use your solutions at the end of the day. And that’s exactly what design thinking brings to the table. It’s a very, very powerful and successful methodology to really design solutions that work as expected, or as intended for the real users of that problem. And that’s the kind of … bringing as much standard and reliable and proven solutions to the table but then customize and kind of build specific solutions in an agile fashion using design thinking as a starting point and as a design point and then using topics like our cloud platform as an agile delivery mechanism where you can start small, validate prototypes and proof of concepts early on, roll them out in a concise fashion to a certain group of users and as the solution matures, or proves itself valuable, use cloud as a means to quickly scale solutions from an early proof of concept to a worldwide deployed solution. And I think that’s quite a different SAP than what people used to think of maybe 10 years ago. That’s a level of let’s say customer centricity, of innovation focus, and also of an ability to be agile and scale which is absolutely mind-blowing from my perspective.
DH: Taking it all in, we look at this end-to-end capability and the platform that you’re bringing in around a common view of the customer, speaking of buzz phrases Artificial Intelligence, machine learning, and analytics are now really at the forefront of investment in organizations. And SAP has been encouraging organizations to become intelligent enterprises. It’s a phrase you’ve been using. I was wondering if you could explain that in really simple terms so that people can understand it. And then explain why you would want to do that, and how does SAP help?
BG: In the end, what companies see today and no matter what company or CIO I talk to, they all have a – it’s not that they have a lack of data, what they usually have is a lack of insight into what that data actually means. So there’s usually huge amounts of data silos sitting around in their landscapes within the enterprise, outside the enterprise, in the cloud, and they have a really hard time to make sense of the data that is distributed. It has to do with access possibilities, with governance, with correlating it in a meaningful fashion. So there is a huge set of problems associated to better understand what is actually going on with the company and to correlate what you think is actually going on versus what is happening in the real world so your kind of perspective on what’s happening in your logistics chain or in your warehouse or in your production site might be completely off. And it’s very hard to make the right decisions within your business if you don’t know exactly what is going on. So becoming an intelligent enterprise means first and foremost you need to get clear about the data assets that you have, so there needs to be data quality involved. You need to know you’re sitting on … you’re trusting the right data assets.
Then you need to be able to correlate that data, kind of combine what’s within your business systems and what is coming from the outside. I mentioned IoT data for example, spatial data from your logistic chain or trucks or products and warehouse – you need to be able to correlate that and look at what it means. And that’s about insights, and given the growth of data there is no way that you would basically do that in manual efforts. So at the end of the day you need a powerful analytics tool that allows you to predict what is going on based on historical data, you need to be able to apply machine learning algorithms to make sense out of what is going on from a larger perspective with your company and you want then the business applications to be smart about helping you make decisions.
So ideally you can automate a lot of processes within your existing system where today you have deployed people kind of doing repetitive tasks. So machine learning can definitely help you kind of automate a lot of these manual processes today which allows you to then focus on what really makes a difference to the customer. And there you expect systems to actually become proactive so you want systems to trigger you with alerts if something is going out of bounds, if whatever your delivery KPIs are not met, if you have a supply chain problem or there is likely a supply chain problem coming up based on some insights that an algorithm can find in your system you then want to trigger end users in your company to take action, and in order to take action you need context of what is going on.
So the way people work with systems is very, very different. We see that this is the direction that also enterprises are going; we know that from our personal lives and how machine learning is improving the way how we get from A to B if we use some nav apps on our mobile phones. So it’s already become a reality of our day-to-day lives and still in the enterprise it’s really about how do you industrialize machine learning capabilities within the application? So how can you apply machine learning algorithms in a standardized fashion within applications so that business users without being data scientists, without being kind of expert users get support from the system and making smarter decisions. And that is what the intelligent enterprise is about and clearly this is not something that ends within a single application. This is clearly something that goes across applications, it goes across lines of business within companies from marketing to sales to service and support to your finance department. So you really have to look at processes from an end-to-end perspective to apply these machine learning and artificial intelligence and analytics capabilities and that is why again SAP is so uniquely positioned with kind of the breadth of the portfolio that we can bring to the table to the level of integration from a data to process perspective we have within those applications to then apply those intelligent technologies as kind of a standard means to the assets end-to-end.
And that’s a very unique value proposition that will be impossible to kind of copy if you go for individual best-of-breed solutions that you need to stitch together yourself, where you have data silos sitting within those applications. And that’s clearly something where SAP can help kind of give you a more open and more end-to-end view of what’s going on within your business.
DH: You said some important things there. One I think is the most important and I often speak about is that when you look at a vision for intelligent enterprise, analytics can generate far more insights than you can act on, at least if humans are running things manually. Does the intelligent enterprise take the notion of connecting analytics to operations to be able to handle the scale?
BG: That’s a very good point, and as I said I think it starts with removing data silos and making data accessible. With SAP HANA technology, I think one of the biggest benefits to reap now as it’s deployed underneath all our solutions is that with our analytics cloud solution you can seamlessly tap into all those data assets that we have sitting underneath our applications and correlate it in an extremely powerful fashion. So we can push down query execution, we can push down machine learning and predictive analytics algorithms basically in a consistent fashion into the databases and the data assets underlying our solutions. All of the semantics and the analytics then of course takes the semantics of the data into account, so it’s very important to understand whether something is a head count in HR over a month-per-month period or whether we talk revenues. And you need to have the understanding of the semantics of the data point to draw the right conclusions and then analytics solutions can provide you as an end user with an easy way to start querying the system, looking for insights that help you take the necessary actions to drive your business. With that you can put even things like national language processing on top where an end user without understanding and having any deeper insight into the underlying data models can query systems and derive insights in a fashion which is like asking Google for travel tips to California for example. So it’s a very, very intuitive way to get into that. And you need cross system access, and you need kind of an integrated suite of solutions and that is exactly what the intelligent suite is about.
DH: That makes a lot sense. So taking a step back for a moment, we talked about what should enterprises really be considering when they look at their application strategy. How does cloud play into that? Is that primarily being used to extend investments, or is that being used or should it be used as a way to develop your application portfolio from scratch going forward?
BG: I think cloud is the future. It’s definitely the way to consume innovations in the easiest possible fashion. I think it has definitely moved from a pure cost consideration to an innovation consideration, so the speed at which customers can tap into innovations delivered by the providers is way beyond what could ever be delivered in a classical on-prem delivery vehicle, so I clearly believe that cloud is the future. Reality of course is that hybrid will be with us for at least one decade if not more decades, so we will definitely see that customers move at different speeds to the cloud. We will see that hybrid support of on-premise and cloud landscapes is of utmost importance; nobody switches landscapes overnight. All the companies we talk about of relevance have kind of huge deployments out there today which can’t be kind of completely moved to the cloud overnight. So that will be done in a very conscious fashion. It will happen step-by-step and that’s why it’s so important that with SAP you get both the on-premise support but also a strong kind of portfolio in the cloud and that we connect the two worlds and make sure that we support customers in their journey and not just put a target out and hope that they get there, but we need to of course take care of this journey to that.
DH: One final question, my understanding is that you’ve moved back to Silicon Valley, Bjorn, what’s the next big thing for you there now that you’ve arrived?
BG: The next big thing. I think the next big thing here in particular and that is also the reason why I came here is that none of what we are talking about here we can do alone. In the meantime this is really an ecosystem and partner play to a large extent as well, in particular in the cloud where we are working with very important partners for example like Google, like Microsoft, like Amazon for example to extend our cloud reach and working very closely with them on innovation topics as well. So the times of individual companies delivering all solutions are definitely over; it’s definitely an ecosystem play that we look into as companies differentiate their businesses, standardizing at the core and that is something we need to drive and that is one of the main reasons why I decided to be back here in Silicon Valley where we have of course enormous partner ecosystem around us, a huge start-up ecosystem driving innovations in all kind of imaginable areas and it is super important to be there and kind of combine what we are doing from an internal perspective with innovation that is coming from outside and making that accessible and successful for our customers.
DH: Thank you so much Bjorn for making time for SAPinsider today.
BG: Thank you very much.