examining the future role of sap - hcl technologies · pdf fileexamining the future role of...

A Proprietary Research Briefing by HCL Technologies

STEVE CARDELL AND JAMES RILEY

Examining ThE FuTurE rolE oF SaPIncorporatIng the VIews of 225 global companIes

“The real voyage of discovery consists not in seeking new landscapes

but in having new eyes.”MARCEL PRouST / french noVelIst (1871 - 1922)

Examining the future role of SAP

About the Authors

STEvE CardEll is the President of HCL’s EAS division and a Senior Corporate Vice President of HCL Technologies. Prior to joining HCL he was the Chief Executive of Axon Group PLC, the FTSE-250 SAP Transformation specialist listed in London. Axon was the techMArk 100 top performing company for three consecutive years.

When Steve joined the company it was a $30M domestic SAP player. Under his leadership it has scaled to the near $1 billion business it is today and is ranked as a leader by IDC, Gartner and Forrester.

For the past twenty years, Steve has advised large, global corporations on how to leverage enterprise technology to transform the performance of their business operations.

JamES rilEy is the Head of Innovation within HCL’s EAS division and a Senior Vice President of HCL Technologies. Based in New York, James is responsible for the overall product development and investment in disruptive technologies. During his more than 15 years with the company, he has held a number of leadership roles including Global Head

of Solutions and Global Head of Business Intelligence. Following the acquisition of Feanix Corporation in April 2005, he relocated from the Uk to the US as part of the management team that successfully grew the Americas EAS business from inception to $300M in four years.

As Global Head of Solutions, James led a team of more than 100 of HCL’s most experienced consultants, architecting cutting edge solutions and creating value for clients.


1


The research project involved interviewing Executives from 225 of SAP’s Large Enterprise (LE) client base. The interviews were conducted between January and March 2013 and covered North America, Europe and Australasia.

The focus of the research was to understand the profile, priorities and strategic intent for the use of SAP products within large organizations, and so a minimum threshold of $1 billion global turnover was set for inclusion in the project.

APAC/RoWNorth America

Europe

<10,00010,000–50,000

50,000–100,000>100,000

$1 – 5Bn$5–10Bn>$10Bn

Life SciencesConsumer Services

Public ServicesFinancial Services

Manufacturing

gEograPhy

no. oF EmPloyEESglobally

ComPany SizE ($bn)

SECTor*

5% 10% 15% 20% 25% 30% 35% 40% 45%

Survey Participants

*The micro verticals are as follows: Life Sciences: Healthcare, Medical Devices, Pharmaceuticals Consumer Services: retail, Hospitality, Consumer Packaged Goods, Consumer Electronics, Telecoms, Media & Entertainment Public Services: Government, Utilities, Travel Transport & Logistics, Oil & Gas, Aerospace & Defence Financial Services: Banking, Insurance Manufacturing: High Tech, Industrial, Automotive, Semi Conductors

TablE 1 / DemographIc profIle of project partIcIpants

2

13%

47%

40%

18%

34%

34%

15%

39%

37%

24%

33%

15%

16%

23%

13%


Executive Summary

ThE JournEy So Far » sap’s heritage is found in the ‘super’

large enterprises from the process industries

» sap landscapes are more fragmented and diverse than you might imagine

» module penetration shows a surprising variation

» Version 4.6c brought a step-change in employee adoption

» single instance consolidation carries a $132 billion global business case

» two highly divergent strategies exist towards single instance

ThE road ahEad » five disruptive technology trends are

reshaping sap

» could hana be as significant as the move from r/2 to r/3?

» mobile is growing 10 times faster than applications, 3 times faster than cloud

» Do workday and salesforce prove that cloud is the route in for the young pretenders?

» technology is not bI’s problem, so it cannot be it’s saviour

» social media; 90% boredom, 10% sheer terror, probably irrelevant

To WhaT dESTinaTion?

3

When SAP released version 1.0A of its r/3 product on the 6th July 1992, it was

recognized as a breakthrough technology, both in its architecture and in its functionality. The benefits were most obvious for very large organizations (who could leverage the significant risks and capital costs involved in an SAP r/3 implementation in the 1990s) where they had highly repeatable and transactional processes. The benefit was compounded where those processes dealt with significant volumes of transactions, and where control and compliance were strategically important characteristics of their design. It is therefore not a surprise, that whilst the average LE user in our survey first implemented SAP exactly 7 years ago, those firms with turnovers above $10 billion averaged almost 9 years.

Furthermore, whereas 22% of our respondents first implemented SAP over 10 years ago, for those industries with a strong process nature (Consumer Services, Manufacturing and Life Sciences), this number rises to 30%, whilst for more service oriented sectors (Public Services and Financial Services), this figure plummets to just 10%.

TablE 2 / fIrst ImplementatIons oVer ten Years ago

SAP’s heritage is found in the ‘super’ large enterprises from the process industries

Examining the future role of SAP / ThE JournEy So Far

4

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Less than $10Bn

PERCENTAgE oF RESPoNDENTS IMPLEMENTINg SAP oVER 10 YEARS Ago BY SIzE ($Bn)

PERCENTAgE oF RESPoNDENTS IMPLEMENTINg SAP oVER 10 YEARS Ago BY SECToR

Process Industries: Consumer Services, Manufacturing, Life Sciences

Service Industries: Financial Services, Public Services

32%

68%

88%

12%

ProcessIndustries

More than $10Bn

ServiceIndustries

When the battle for application strategy really developed in the mid 1990s, it

was a philosophical debate between those who advocated the single-integrated ErP vision (one database, one application, one architecture, no integration) against those who proposed a best-of-breed plus integration position (pick best functionality for each part of your business; the benefits will outweigh the extra integration and middleware costs). SAP was the strongest proponent of the single ErP message.

Clearly our survey respondents have found that compelling strategy a dream harder to achieve than first imagined. The average respondent is running 5.1 different SAP instances. This fragmentation is seen most evidently in larger enterprises and the Life Sciences sector; SAP’s earliest adopters and an industry that has seen significant M&A activity.

Whereas one might assume that the majority of LEs would be operating off a global single instance, this prize has only been achieved by 6.2% of our survey participants.

Whilst some highlight specific reasons for having two instances, including country specific requirements, (for example, export or data-holding legislation) disaster recovery strategies or hardware sizing (for the very large enterprises), a very significant majority of respondents highlight that this is due to multiple implementations through their

SAP landscapes are more fragmented and diverse than you might imagine

companies’ histories, often in different business units, never being rationalised or consolidated.

What is perhaps more surprising is the prevalence of very dated SAP versions still being used as core operating platforms amongst some of the world’s largest and most profitable companies. Indeed, 88% of our survey participants are running at least one instance of version 4.7 or older. Almost a quarter (22%) are still running on r/3. Given that version 4.6C was released before the turn of the millennium, that’s a lot of systems with a lot of miles on them.

TablE 3 / aVerage number of sap Instances

r/3

4.6C

4.7

ECC5

EEC6

22%

22%

PERCENTAgE oF CoMPANIES RuNNINg AT LEAST oNE INSTANCE BY VERSIoN

44%

54%

37%

TablE 4 / exIstence of release VersIon


5

0

1

2

3

4 4.14.6

6.2

4.5

5.2 5.46.0

4.55

6

7

$1–5

Bn

$5–1

0 B

n

ove

r $1

0 B

n

Cus

tom

er S

ervi

ces

Publ

ic S

ervi

ces

Life

Sci

ence

s

Fina

ncia

l Ser

vice

s

Man

ufac

turin

g

BY CoMPANY SIzE ($Bn)

BY SECToR

Many participants spoke of an ‘ErP-first’ strategy. In essence, implementing a

backbone of ErP (typically incorporating finance and procurement) and then extending the SAP footprint through time into customer

TablE 5 / moDule aDoptIon bY sector, companY sIze anD geographY

Module penetration shows a surprising variation

6

More than $10Bn

$5Bn –$10Bn

$1Bn –$5Bn

APAC/RoW North America

EuropeFinancial Services

Life Sciences

Public Services

Consumer Services

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

business objectseam

bI

plm

hcm

srm

scm

crm

erp


contact (CrM), human resources (HCM), operations (SCM, PLM, EAM, SrM) and reporting (BO, BI). And certainly it is no surprise that at 61%, ErP has the highest module penetration rate. But from there on,

the suggestion that companies’ SAP platforms are more fragmented and diverse than first imagined gathers evidence.

MoDuLE ADoPTIoN BY SECToR

MoDuLE ADoPTIoN BY CoMPANY SIzE ($Bn)

MoDuLE ADoPTIoN BY gEogRAPHY

Manufacturing

A number of surprising observations emerge when module coexistence is compared. For example, if BI and BO penetration is combined (at 53%), that informs us that almost half of SAP LE clients are using BI products from other providers within their application landscape. Or that more respondents who have implemented

TablE 6 / cross-moDule penetratIon comparIson*

7

5%

10%

15%

20%

25%

30%

35%

40% business objectseam

bI

plm

hcm

srm

scm

crm

erp


*THE gRAPH DEMoNSTRATES CRoSS-MoDuLE PENETRATIoN BY SHoWINg THE % oF oRgANIzATIoNS THAT uSE ADDITIoNAL MoDuLES BY EACH INDIVIDuAL MoDuLE. FoR ExAMPLE 34% oF THE oRgANIzATIoNS WITH ERP, ALSo HAVE CRM.

SAP HCM do not have ErP than do. Or that almost 20% of our survey participants who have implemented SAP CrM also do not have ErP. The further you consider the correlations, the clearer it becomes that numerous companies have bought SAP as a best-of-breed product in particular areas. And that the vision of a single-

instance enterprise platform has not only fallen short in terms of multiple versions, but also in terms of functional integration. The average ‘SAP-core’ company is clearly operating with a more diverse application landscape than you might have expected given the maturity curve of the industry.

BI ERPHCM CRMSCMPLMEAM SRMBusinessobjects

The average company in our survey has 16,407 users connecting into the SAP platform. 23%

of them are professional SAP users, and the remainder are non-core users. For those who are operating off ECC6.0 that split is 17% versus 83% respectively. A division between core and non-core users, which has remained broadly unchanged since the arrival of 4.6C.

Until the release of 4.6C, professional users accounted for more than 30% of total SAP users. Around that time, developments in areas such as employee self-service, mobile sales and reporting, all led to the expansion of SAP away from the core back office processing staff and began the journey of SAP being a true enterprise-wide solution. Perhaps what is surprising is that the overall user numbers and the split between core and non-core users has barely shifted since that release. When we look later in this report at the emerging disruptive technologies of Cloud, Social Media and Mobility, it may be that this long plateau is coming to an end and the further expansion of SAP products within the operating platform can begin again.

Version 4.6C brought a step-change in employee adoption

8

TablE 7 / sap users bY sector anD companY sIze


$1Bn – $5Bn

$5Bn – $10Bn

More than $10Bn

Manufacturing

Consumer Services

Public Services

Financial Services

Life Sciences

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

SaP

uSE

rS

by

SE

CTo

rSa

P u

SEr

S b

y

Co

mPa

ny

Siz

E (

$bn)

SAP CoRE uSERS VS SAP NoN-CoRE uSERS

AVERAgE uSERS(ToTAL 16,407)

Core usersNon-Core users

Core users

Non-Core users

Total

3,693Total

12,713

25%

30%

24%

33%

28%

29%

23%

22%

75% 4,061

2,365

4,971

3,044

4,333

1,944

3,464

5,000

13,291

8,019

20,914

8,838

14,250

6,083

9,774

19,667

70%

76%

67%

72%

71%

77%

78%

Since the first release of SAP r/3 hit the market in 1992, there have been an

enormous number of innovations, as well as market maturity. Today implementations happen faster, at lower cost, and with greater benefit certainty. Infrastructure costs have dropped dramatically in that twenty year period. Support providers have emerged in low cost geographies, such as India and the Philippines and numerous automation tools have been developed. Yet the average cost of supporting a core user has barely changed in that entire time period. It has remained remarkably close to $1,500 across the entire installed base with the two most recent releases both above the average.

It could be that as each productivity or cost reduction innovation arrived, so did an equivalent costing expansion in the use or deployment of the SAP product. Or it could just be that SAP has done an exceptional job at revenue protection. But given that a significant portion of user costs are often internally controlled (network, infrastructure,

system support & maintenance, service desk), it raises the clear question as to how much efficiency companies have been able to create through time.

• Cost per user shows very little variation across company size (economies of scale appear limited), across module breadth, across industry or even version release. But one variable does make a huge difference

Single instance consolidation carries a $132 billion global business case

TablE 8 / aVerage cost per core user baseD on sap VersIon

$1,518

$1,580

$1,643

$1,460

$1,584

$1,527

$1,300 $1,400 $1,500 $1,600 $1,700

Total

R/3

4.6C

4.7

ECC5

ECC6

9

to cost per user, and that is how many different versions of SAP are being run

• We found the average cost per core user for those companies operating off a single, global instance at $1,135, more than a 25% saving. Set this saving against the average core user population of 3,782 and SAP’s 22,000 or more LE ErP customers, and you quickly arrive at a direct SAP operational cost saving of around $30 billion.


Common business benefits:

• Implementation of company-wide shared services in areas such as finance, procurement, facilities, HR and customer services

• Increasing use of multi-channel services (including self-service), enabling employee, supplier and customer interactions to be handled through lower cost routes

• Working capital reductions in accounts payable & receivable, and from indirect and core supply chain stock-holdings

• Reduction in third party procurement spend

• More effective tax planning and legal and fiscal structuring

• Greater use of effective outsourcing arrangements.

But the direct SAP operational cost is not the case put forward when SAP implementation projects are recommended at board level. rather it is business factors such as working capital reduction, headcount savings, facility rationalization, consolidated procurement leverage, transaction volume reduction, improved order fill-rates and so on that carry the business case. For 25 of the survey participants a more detailed analysis was undertaken to find the typical ratio between direct IT savings and broader business benefits, within the overall business case. On average, for every $1 saved in IT, the business expects to find $3.4 of leveraged savings.

If a single instance consolidation would release $30 billion in direct IT savings globally, the broader business savings will be in the order of $100 billion. For the average company in our survey the direct IT savings are around $2 million and the total expected company savings around $8 million.

10


Whilst it may seem surprising, given the inherent logic and financial business

case, that only 6.2% of companies have achieved a single instance platform, the very substantial political and operational hurdles that stand in the way are clearly evident. Moreover, the business case for such projects often fails to make the cut when set against more obviously forward-moving initiatives that directly affect growth or cost reduction. And so we observed two highly divergent strategies amongst the survey participants in responding to the aspiration of single instance.

Two highly divergent strategies towards single instance

Strategy 1

FiniSh ThE Job rEgardlESS oF ThE PoliTiCS

A number of survey respondents, especially amongst the larger companies, appeared to have grown in resolve to drive through the political and operational barriers to single instance. Several highlighted extremely aggressive plans to move at pace to single instance; almost a sense that after so many years of trying to persuade and encourage different business units to get on the same page, patience had run out and a top-down decision has been made. Indeed, for many, the savings potential made political complaint irrelevant in the current economic climate.

Strategy 2

SToP FighTing bECauSE iT’S ThE Wrong baTTlE

A similar number of respondents highlighted a view that single instance would never be achieved, and that actually, it was no longer the battle to be fighting. With the dramatic improvement in integration technology, the arrival of solutions that sit below (In-Memory) and above (Cloud, Multi-Channel, Mobile) the core application, as well as a realisation that there are only 10-15 strategic ‘operational differentiators’ in any given business, (which can be dramatically improved by highly focused use-case investments) competitive advantage and speed can be gained by being outcome focused, rather than architecture purists.

11


Since around 2010, various themes have been discussed by analysts, market observers and

the large enterprise software houses, regarding where technology will disrupt the current status quo and how shareholder expectations can be met through replacement and additive revenue streams. Through this debate, a consensus seems to have been reached which revolves around five central technology opportunities:

1. mobiliTy: The consumption of existing business processes and intelligence through a range of mobile devices and the potential to create new ones.

2. SoCial mEdia: The ability to extend the organizational boundary into communities and social networks beyond the employee paradigm.

3. analyTiCS & big daTa: The ability to convert almost any volume or diversity of data into business intelligence in close to real time, and the development of analytical and predictive models to take advantage of that data in the future.

Five disruptive technology trends are reshaping SAP

4. Cloud: The ability to move from on-premise to off-premise, from up-front to on-demand, from multi-tenant to single code, from CAPEx to OPEx.

5. in-mEmory: Removing the divides between the database and the application, OLTP and OLAP, to not only do what is

done today faster but to enable things that could not be done before.

All of these trends clearly resonate and impact SAP’s future and what it can offer the marketplace. And its customers believe it will remain front and centre of that conversation.

TablE 9 / expecteD sap role In bIg fIVe technologY trenDs

12

10%

20%

30%

40%

50%

Cloud

PERCENTAgE oF CuSToMERS WHERE SAP HAS A CuRRENT oR PLANNED MAJoR RoLE IN THE FIVE TREND AREAS current

major role

40%

25%

37%

30%

40%

34%

24%

43%

23%

39%

In-Memory MobilitySocial Media Analytics & Big Data

Examining the future role of SAP / ThE road ahEad

There are two highly important facts that suggest a seismic shift could take place

over the next three years. The first is that HANA is new. The very first version was released in November 2010, but only in 2013 has a HANA solution which looks at the whole business suite, rather than just BI or other component areas, become available. The second is that despite its infancy, four out of five of our survey state that they expect SAP to play a major role in their in-memory strategy. This is significant on three fronts.

It is significant for SAP. This was a zero revenue stream for SAP just 24 months ago. According to their latest results, for calendar year 2012, HANA crossed 1,000 customers, generated revenues of $392M and grew by 142%. If the 80% penetration number is anything close to reality, and we assume around 40,000 LE customers, this means SAP could be looking at over 35,000 HANA users. The revenue stream for SAP could be immense.

It is significant for the database market. keeping clear water between the SAP application and the database choice has

always been of benefit to the database players. SAP is a powerful player; the world’s number one in fact, in its chosen market. And so preventing them from having influence in the choice of database was always in that industry’s best interest. But now, not only has SAP gained influence, it has developed a product, which if it does in fact grow up to deliver all of its early promise, could materially change the landscape of that industry. It was

Could HANA be as significant as the move from r/2 to r/3?

often viewed as slightly odd that Oracle often had the biggest stand at SAP’s annual show, SAPPHIrE. But of course, the reason is that more SAP systems run on Oracle databases than anything else. In time, Oracle may not need to make the trip. And certainly, based on SAP’s latest investor presentation, they are certainly not being timid about their intent. If HANA is as good as they think, why constrain it to just supporting SAP?

ExhibiT 1: sap hana DeVelopment strategY

It is significant for business performance. The potential of HANA goes well beyond fast reporting. If core business processes, like MrP runs, or sales & operational plans, or month-end billing processes, or smart-grid consumption readings, or POS retail transactions, could all be processed in close to real time, the impact on business process capability could be transformational. And given that HANA will likely be cost neutral on a straight IT cost against your existing profile, a tipping point could be closer than we realize.

SAP Business Suite

Any DB HANA DB HANA DB

BW

Any DB

SAP Business Suite

HANA DB

BW AppsSAP Business Suite

13


ACCELERAToRS SAP BW oN SAP HANA SAP BuSINESS SuITE oN SAP HANA

SAP r/2 was released in 1979, replacing its r/1 version called YSr which had been the company’s launch product six years earlier. r/2 remained the company’s primary solution

for thirteen years until the arrival of r/3 in 1992. Another thirteen year spell will have passed in 2015, and by then we will probably know whether HANA can deliver on its

potential to do for SAP now, what r/3 did for it back then.

14


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%E

uro

pe

1Bn

– 5B

n

No

rth

Am

eric

a

5Bn

– 10

Bn

Aus

tral

asia

Mo

re t

han

10B

n

SAP’S ExPECTED HANA PENETRATIoN BY gEogRAPHY

SAP’S ExPECTED HANA PENETRATIoN BY SECToR

SAP’S ExPECTED HANA PENETRATIoN BY CoMPANY SIzE ($Bn)

Cus

tom

er S

ervi

ces

Pub

lic S

ervi

ces

Life

Sci

ence

s

Fin

anci

al S

ervi

ces

Man

ufac

turi

ng

TablE 10 / sap’s expecteD hana penetratIon bY geographY, sector anD companY sIze

Mobility has followed an unexpected journey. The core technology has been

around for a long time and achieved basic adoption in both consumer and business markets relatively quickly. And then Steve Jobs happened, completely transforming how already existing mobile technology could be repurposed and redesigned to solve all manner of problems and open up endless new markets and opportunities. Suddenly professionals had faster, cooler, more functional, more collaborative and more outcome-focused technology at home than they did at work. And so began the consumerisation of the workplace – a bottom-up revolution requiring corporations to catch up with the sort of solution-based technology our children use daily.

It is this driving force that has turbo-charged the growth trajectory of the mobile market.

Mobile is growing 10 times faster than Applications, 3 times faster than Cloud

Yet at the same time, for many companies, because mobile is a quick and easy technology, at least to cover the basics, it might already have reached maturity in some markets. In North America, 51% of our

respondents have already broadly deployed mobile solutions within their business, and if those who have completed narrower deployments are included, penetration is already at 90%.

ExhibiT 2: aVerage annual growth rate 2011-2015 for major technologY areas

Cloud 16.10%

Applications 3.90%

Mobile 52.30%

Database 9.70%

Analytics 10.30%

Source: CMMI

15


The question being asked by many of our survey participants is whether there is a mobile 2.0 yet to come. If ever there was a technology that could be deployed tactically, absent of any strategic context, and without much thought to the rest of the IT landscape, then it is mobile. But these are often only superficial and already appear to just provide

TablE 11 / sap’s expecteD mobIle penetratIon bY geographY, sector anD companY sIze

a ticket at the game. An employee being able to book their holiday, or a customer being able to make a reservation, or a field sales representative being able to pull up a client’s information on the road is already table stakes... and has it really helped us do things we couldn’t do before? Convenient? Yes. Transformational? Doubtful.

Is there a more integrated mobile platform to be developed? Is there a new level of process re-design to be considered? Certainly, as the world’s largest business mobile platform provider, SAP is in just the right place to capitalise on this growth if the answer to those two questions is yes.

16


Eur

op

e

1Bn

– 5B

n

No

rth

Am

eric

a

5Bn

– 10

Bn

Aus

tral

asia

Mo

re t

han

10B

n

SAP’S ExPECTED MoBILE PENETRATIoN BY gEogRAPHY

SAP’S ExPECTED MoBILE PENETRATIoN BY SECToR

SAP’S ExPECTED MoBILE PENETRATIoN BY CoMPANY SIzE ($Bn)

Cus

tom

er S

ervi

ces

Pub

lic S

ervi

ces

Life

Sci

ence

s

Fin

anci

al S

ervi

ces

Man

ufac

turi

ng

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

In Q1 2013 Salesforce became the largest CrM software provider and pushed SAP into the number 2 slot. Once viewed as a challenger to the established players, it has become the company that most others are looking to for direction. And a similar story can be said for Workday in the HCM market, already ranked by Forrester as the leader in this space.

Both firms have followed a hugely practical strategy. Don’t try and replace heavily invested core ErP systems in the Cloud, but rather work an ‘outside-in’ approach and develop from there. As the market matures and firms become more comfortable with the SaaS model, push the footprint. It is interesting that Workday now has a Finance Cloud as well, and is talking about its focus as the ‘Administration’ Cloud, not the ‘HCM’ Cloud.

And because these firms have started ‘outside-in’, they have high contact with employees, suppliers and customers.

Do Workday and Salesforce prove that Cloud is the route in for the young pretenders?

17

sour

ce: f

orbe

s 20

13


TablE 12 / worlDwIDe crm software sales bY VenDor, 2012

14.0%

12.9%

11.1%

6.3%

3.6%

3.1%

2.5%

2.4%

2.3%

2.2%

39.7%

2% 4% 6% 8% 10% 12% 14% 16% 18%

Salesforce.com

SaP

oracle

microsoft

ibm

adobe

nice Systems

verint Systems

amdocs

SaS

others

18


Eur

op

e

1Bn

– 5B

n

No

rth

Am

eric

a

5Bn

– 10

Bn

Aus

tral

asia

Mo

re t

han

10B

n

SAP’S ExPECTED CLouD PENETRATIoN BY gEogRAPHY

SAP’S ExPECTED CLouD PENETRATIoN BY SECToR

SAP’S ExPECTED CLouD PENETRATIoN BY CoMPANY SIzE ($Bn)

Cus

tom

er S

ervi

ces

Pub

lic S

ervi

ces

Life

Sci

ence

s

Fin

anci

al S

ervi

ces

Man

ufac

turi

ng

TablE 13 / sap’s expecteD clouD penetratIon bY geographY, sector anD companY sIze

So a core differentiation for all of them is a step change in the impact of the user interface. The established players may argue it doesn’t work any better, but you can’t deny it certainly looks and interacts better.

The enormous challenge for SAP is that success in Cloud inevitably means cannibalising its existing business. Salesforce and Workday are taking market share, not displacing their own business to win. There is no doubt that

SaaS will grow as a share of the applications landscape, the question is whether SAP can strike the right balance between enhancing its own Cloud offerings versus protecting its existing on-premise revenue streams.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Software firms have spoken about the functionality of their BI products for the

past 20 years, yet businesses have always struggled with the relevance of the solutions. By their very natures BI solutions are more business-centric than anything else sold by the large software vendors, and yet the consulting firms who implement them

TablE 14 / sap’s expecteD analYtIcs & bI penetratIon bY geographY, sector anD companY sIze

primarily send technology consultants to do the job. Now the final technology limitations (the ability to both replicate and process very high volumes of data in near real time, and the convergence of OLAP and OLTP) have gone, there are no excuses left for delivering solutions that do not provide business relevance.

The challenge SAP faces, along with all its competitors, is that even though it has the technology stack to win in this market, the relevance which will cause a client to buy primarily sits in its consulting partner ecosystem. Perhaps this is, in part, why SAP has stated it wishes to sell 40% of its software through the channel.

Technology is not BI’s problem, so cannot be its saviour

19


Eur

op

e

1Bn

– 5B

n

No

rth

Am

eric

a

5Bn

– 10

Bn

Aus

tral

asia

Mo

re t

han

10B

n

SAP’S ExPECTED ANALYTICS & BI PENETRATIoN BY gEogRAPHY

SAP’S ExPECTED ANALYTICS & BI PENETRATIoN BY SECToR

SAP’S ExPECTED ANALYTICS & BI PENETRATIoN BY CoMPANY SIzE ($Bn)

Cus

tom

er S

ervi

ces

Pub

lic S

ervi

ces

Life

Sci

ence

s

Fin

anci

al S

ervi

ces

Man

ufac

turi

ng

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


20

The statistics are mind blowing. Each day has 3.2 billion Facebook interactions, 16

billion texts, 2 billion blog posts, 500 million tweets, and so on. Obama apparently got elected because he was better at using Social Media. Yet most businesses would struggle to define Social Media’s impact. In marketing, some. In recruitment, a little. A huge

unmanageable mass of mostly disinteresting data. Apparently even 56% of customer tweets are completely ignored by the receiving companies. Yet the 10% sheer terror is the single rogue comment or remark that causes a leader, or a product, or a company to become undone.

Irrelevant? Probably not. Peripheral might be

a better word. Outside of recruitment and marketing, and some very niche industry segments, Social Media is more likely to be an extension of what takes place today. What companies are finding of more interest, is using Social Media to understand what the market says about them in the much more casual world of LinkedIn or Facebook.

Eur

op

e

1Bn

– 5B

n

No

rth

Am

eric

a

5Bn

– 10

Bn

Aus

tral

asia

Mo

re t

han

10B

n

SAP’S ExPECTED SoCIAL MEDIA PENETRATIoN BY gEogRAPHY

SAP’S ExPECTED SoCIAL MEDIA PENETRATIoN BY SECToR

SAP’S ExPECTED SoCIAL MEDIA PENETRATIoN BY CoMPANY SIzE ($Bn)

Cus

tom

er S

ervi

ces

Pub

lic S

ervi

ces

Life

Sci

ence

s

Fin

anci

al S

ervi

ces

Man

ufac

turi

ng

TablE 15 / sap’s expecteD socIal meDIa penetratIon bY geographY, sector anD companY sIze

Social Media; 90% boredom, 10% sheer terror, probably irrelevant

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

21

Examining the future role of SAP / To WhaT dESTinaTion?

To what destination?

In 1995 there was a battle between those who advocated ‘best of breed’, and those

who sold the ‘ErP’ vision. For the last 15 years it has felt like the ErP advocates won that battle. Back then there were 6-8 ErP providers which quickly whittled down to just SAP and Oracle in the large enterprise space. And SAP’s existing customer base, as demonstrated in this research briefing, is evidence that the ErP providers have indeed been winning the argument . . . Until now.

A new word seems to have found its way into technology parlance, which is ‘coexistence’. Initially used by the large ErP providers to explain why multiple software offerings from their own technology stable can, in fact, logically sit alongside each other. But

they may have unwittingly opened the door to the competition. It is hard to describe ‘coexistence’ as anything other than a new word to describe ‘best of breed’. Yet what has changed is the openness of the applications and the integration and middleware tools that allow us to stitch them together. The arguments over single application vs multiple applications become null and void when the integration is simple.

Two dominant drivers seem to be accelerating this trend:

• A greater percentage of application spend is going on ‘front office’ or operational systems, rather than back office. The unique nature of operational systems means that niche and specialised products are inevitably needed in an application platform. Coexistence is unavoidable in this world

• Cloud has reached large enterprises and is now encroaching into core ErP territory such as Finance, Procurement and Supply Chain. Companies are not going to wait until a full Cloud suite is ready, they want to leverage the flexibility and savings available now.

To what destination?


22

In a coexistent world, where does that leave SAP in Mobility, Cloud, Social Media, Analytics and so on. The simple answer is: it’s all about execution. Unlike the ErP wave of the past 15 years, these are all coexistent areas, and so the ‘buy it all from one vendor’ rationale disappears. Now SAP has a number of factors in its favour that suggests they will continue to succeed in this market:

• They have been savvy in their acquisitions, ensuring they have a decent set of products to take to market. It is likely this will continue

• They have a huge installed customer base, and so have plenty of places to take their new offerings

• Whilst the integrated ErP rationale no longer exists, a financial rationale to buy it all from SAP may. After all, if software companies are good at one thing, it is engineering a deal financially to work for the customer.

Perhaps SAP’s biggest inhibitor will be the cultural change necessary to win in this more nimble, more customer-centric and more solution-driven world.

Yet all of this is business as usual. Some revenue streams decline, some new ones appear. It is the nature of things. The really big question about the future of SAP is whether they can make HANA a game-changer. It is their ‘Apple’ opportunity.


What Apple achieved very successfully was the integration of hardware and software, such that the product you bought was both. And in your mind it was a ‘single product’. With Business Suite on HANA the application and database are as one; but combined it is a new concept with significant advantages. Now these are still emerging days for this solution, but if SAP can achieve the full potential of this concept, then SAP can be to businesses what Apple has been to consumers. And it is here that the greatest prize lies.

23

Examining the future role of SAP / Join ThE ConvErSaTion

24

This briefing is founded on the results of our research project, which involved interviewing Executives from SAP’s Large Enterprise client base. We would like you to join this conversation.

HCL will be conducting a continuation study to provide additional segmentation data and an extended, tailored view. Examining the

To register your interest in participating, please visit: www.futureofsap.com

Join the conversation

future of SAP at a micro-industry and even company level.

Your participation will not only help shape our analysis and conclusions, but will also allow you to benchmark your organizations individual SAP landscape and future focus with peers of a similar size and industry.

examining the future role of sap - hcl technologies · pdf fileexamining the future role of...

Documents