Catching up on SAP’s current strategy

Christian Klein has been the sole CEO of SAP for a good six months now. That is reason enough for a short assessment:

Consistency can be seen in the focus on the cloud business. Here, Klein has clearly continued the strategy of Bill McDermott, SAP CEO from 2010 through October 2019, which was characterized by the acquisition of major cloud providers such as SuccessFactors, Fieldglass, Hybris, and Concur. In addition, the McDermott era saw the launch of the new S/4HANA ERP generation, which also has a strong cloud orientation and is becoming increasingly popular with customers. The willingness to migrate to S/4HANA is high among SAP users, obviously due to the imminent end of standard maintenance, but also due to the fact that many companies use S/4HANA migration as a trigger to reorganize their processes, consolidate their ERP landscape, and cloudify the underlying IT infrastructure. Hardly any company has taken the end of maintenance as an opportunity to switch from SAP to another ERP provider. In a nutshell, with Cloud and S/4HANA, Klein has taken over two successful models from McDermott, which he keeps developing continually.

A break with the McDermott era is visible in the customer focus. Klein pursues a very clear strategy for SAP, which is to integrate all cloud and on-premises solutions at the data, process, and GUI levels. In doing so, he is responding to a long-standing demand from customers, who have been complaining about silo structures in the SAP applications they purchase.

While SAP has been pursuing a clear strategy in its core segment with S/4HANA and Cloud, the strategy appears less clear-cut in the important future market for customer relationship management (CRM) and customer experience (CX). This is illustrated by SAP’s decisions on C/4HANA and Qualtrics:

C/4HANA – At SAPPHIRE NOW 2020, the term C/4HANA was quietly laid to rest after having been announced with fanfares two years before, at SAPPHIRE NOW 2018. C/4HANA has now been renamed “SAP Customer Experience”, while the related products and names have not changed (Marketing Cloud, Sales Cloud, Commerce Cloud, Service Cloud, Customer Data Cloud).

Qualtrics is SAP’s second largest acquisition to date. It was made by SAP’s former CEO, Bill McDermott, in 2018, in order to improve the customer experience in the segment analyzing CX data of customers, employees, products, and brands. In July 2020, SAP’s current CEO, Michael Klein, announced his intention to take Qualtrics public, which came as a surprise, and which challenges the deep integration of Qualtrics solutions into other SAP products.

Both items of news give cause for justified skepticism about how sustainable and how serious SAP’s commitment is to the CRM/CX business. To dispel these doubts, SAP has repeatedly assured customers and partners that CX/CRM will remain an important and strategic business area. Two points may serve as proof of SAP’s seriousness about CX/CRM – Customer Data Platform (CDP) and Emarsys.

The acquisition of Emarsys, a provider of omni-channel management. The advantage of the solution is obviously that it is very data-centric and can follow customers across different channels. Emarsys thus fits very well SAP’s strategy of closer fusion of o-data (operational data) and x-data (customer experience data).

In addition, SAP has presented its ”SAP Customer Data Platform”. Here, all commerce, sales, and service interactions are to be supplemented with comprehensive contextual information in order to combine them with relevant marketing content. The CDP can be used as a central interface and data integration platform for SAP’s CX solutions.

The Customer Data Platform will play a key role for SAP by providing the basis for connecting customer data (CX data) with back-office data, giving SAP users a complete view of their business and customers. The latest initiatives (Industry Cloud and Business Networks) will also add data from LoBs (such as production, supply chain, etc.). With the Industry Cloud, SAP, together with partner companies, wants to develop highly verticalized extensions to the S/4HANA core. The Platform Business extends the Ariba business model to other networks (for example in logistics).


PAC’s View

In our opinion, SAP’s CX and verticalization initiatives are aimed at anchoring its own solutions more firmly in the core processes of companies – and here we are not talking about back-office processes, because that is where SAP is already deeply rooted in many places. SAP’s efforts are aimed at significantly expanding its footprint in companies’ application landscapes. Further detailed analysis can be found in our latest in-depth vendor profile which is now available.

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