How SAP is riding the rising tide of cloud

Less than a month into the job, Paul Marriott, SAP’s newly minted president for Asia-Pacific and Japan, is already charting the company’s strategy in a region where cloud adoption has accelerated in the past year.

Building on his previous role as chief operating officer of the region, where he was instrumental in building SAP’s future workforce and accelerating cloud growth, Marriott has set his eyes on key markets – including India and Southeast Asia – through various cloud deployment models.

At the same time, the technology veteran is driving the climate change agenda to help companies reduce their carbon footprint while pitching for the Rise with SAP programme, a business transformation service to help firms redesign processes for better business outcomes.

In an interview with Computer Weekly, Marriott, who has more than 25 years of experience in Asian economies, takes stock of SAP’s progress in driving its cloud business, the impact of the pandemic on enterprise resource planning (ERP) deployments, and offers his view on third-party maintenance providers.

When we last spoke in 2017, you mentioned that the cloud would make up a third of SAP’s business by 2020. Has that been the case and what are your priorities moving forward?

Marriott: In 2020, our cloud business did become a third of our business globally. Our cloud business in the Asia-Pacific region grew by 18%. The level of empathy and care for our customers was also higher than ever and we made sure that we supported customers in all industries.

There’s no doubt that the pandemic has created a number of opportunities. There’s a lot of focus around things like supply chain in this part of the world, with 60% of the world’s supply chain in Asia. That’s a huge opportunity for us and the disruption in the supply chain last year has driven a focus on digital transformation more than ever.

Our commerce business has also accelerated significantly, with front office engagement becoming a huge part of our business. We also saw significant traction around employee engagement, which leverages the Qualtrics platform that we acquired.

Going forward, we’ve announced Rise with SAP in late January based on this concept of business transformation as a service. We have a 50-year heritage around process excellence from an industry and packaged application perspective and we’ve invested heavily in our platforms.

So, where a customer wants to extend the process excellence in SAP from an industry or application perspective, we will help with that. It’s all cloud-based and we have made a lot of investments in the region to make sure we’ve got cloud readiness in every market.

In India, for example, we’ve announced that we would invest €55m to localise and offer customers a multi-cloud choice. It’s an interesting market because of what the government has been talking about with respect to things like data privacy, and so we’re making sure that we have local capability there. At the same time, we’re investing across the region to make sure we can support local customers with regulatory and data privacy considerations.

And lastly, we’ve had a big focus on climate change. There’s no doubt that in Asia, while we’ve got the biggest supply chain and manufacturing centre, we’ve also become a significant polluter, depending on which report you read.

We’re generating 17 billion tons of carbon in Asia from manufacturing and so there’s a huge opportunity for SAP to not just engage around digital transformation, but what I’d like to call the intelligent and sustainable enterprise, where you not only measure the top and bottom line, but also the green line. To that, we can provide transparency around your carbon footprint, and the circular process required to achieve carbon neutrality or carbon zero over time.

You mentioned that the pandemic has created opportunities. Our most recent IT priorities study found that ERP deployments have taken a backseat as organisations grapple with immediate challenges. Have the ERP deployment plans of SAP customers been affected as well?

Marriott: It fluctuates by industry – travel in particular was significantly affected, so there were customers that had constraints on their ability to invest.

What I would say is we’ve seen positive momentum around the digital transformation agenda, which is directly linked to the ERP and supply chain backbone. The interesting thing is how that backbone is combined with front office transformation.

Some retailers have had to create digital commerce channels, but what you find in every one of those discussions is a direct dependency on the supply side, because the most incredible customer experience can be destroyed if you can’t fulfill orders. You can prioritise the front office or back office, but you need to transform both to be truly successful.

To take an ERP environment forward, you can take a technical migration approach, and quite a lot of our customers were doing that before Covid-19 to remove technical debt so that they can start improving processes.

Interestingly, significantly more of our customers are now taking a more transformational step after realising that they’re constrained by the ERP platform in how they run their business.

It’s never a one-size-fits-all approach to cloud ERP migration – and I’m sure SAP knows that with different deployment options available for S/4 Hana. Could you talk about the cloud journey of SAP customers in this region?

Marriott: Your observations are spot on and this was, again, the intent of Rise with SAP which has different entry points. What we want to do is look at an SAP or a non-SAP environment and determine how to accelerate digital transformation. Now, ERP environments are very sophisticated platforms. If it’s a one-size-fits-all approach, we would have failed to cater for all customer requirements.

We have a single S/4 Hana platform with a single code base. Then, we deploy that code base in a number of different deployment models, including S/4 Hana Public Cloud, a fit-for-standard SaaS [software-as-a-service] deployment model that remains highly configurable for standard processes for which SAP has created best practices. We’ll do a fitment to see if customers fit that model, which can enable faster transformation with a lower TCO [total cost of ownership].

There are also customers with specialised needs. For them, we’ll provide a SaaS-like capability through S/4 Hana Private Cloud. They’ll get all the benefits of SaaS, along with the flexibility to enable specific business processes, but in a significantly more standardised way.

Through Rise with SAP, they also get a choice of hyperscalers, whether its Amazon Web Services, Microsoft Azure or Google Cloud, along with access to ecosystem partners that we’ve opened our architecture to.

Could you share more about the Selective Data Transition approach? Is that seen as a way to demonstrate quick wins for customers on their cloud journey?

Marriott: I tend to call that selective data migration, or sometimes you might hear it being referred to as blue field. You’ve got brownfield, which is a pure technical migration, and greenfield where you reimplement and recreate the business model and business processes. Selective data migration is halfway in between.

The beauty of it is that it allows you to drive standardisation in process improvement, while allowing you to bring heritage data from existing systems. We have a long-term SAP ECC6 customer in Japan that did exactly that. They moved to S/4 Hana Private Cloud and did selective data migration to preserve what they had in ECC6, with the benefits of process improvement.

This is an interesting model, and we have a set of services that deliver exactly that. Our ecosystem is also increasingly looking at services around blue field migration. It may not be right for every customer, but it’s certainly for those that want to preserve that heritage and get the transformation done quickly.

You talked about giving customers the choice of hyperscalers to deploy S/4 Hana. Do you see the absence of hyperscalers in some markets in Southeast Asia hindering customers that may want to move to cloud?

Marriott: That’s a great question. There’s no doubt that the hyperscalers are looking to continually increase their footprint. Southeast Asia is interesting because we have many customers comfortable with using Singapore as a location for their public cloud workloads.

Now, that doesn’t necessarily work for all customers and industries. With S/4 Hana Private Cloud, we offer elegant ways of delivering in a local market – even if there’s no hyperscaler – by leveraging existing datacentres, such as those owned by huge family conglomerates. For those organisations, we have a very bespoke capability that delivers the benefits of cloud, but locally domiciled in a country.

Meanwhile, the hyperscalers are getting pretty smart with what are essentially satellite nodes. So, even though they’re operating out of Singapore, they can put a satellite node in one of the Southeast Asian countries. Now, the important thing for customers in those countries is to understand how the data is being managed between the central node of Singapore and the satellite node in their country.

Again, if you look at Rise with SAP from a security and a data policy perspective, we have specific services through which we work with the customer to determine what is the right architecture to ensure they meet regulatory and data policies, while maximising the opportunity for standardisation and lowering TCO.

Could you share more about the thinking behind the decision to extend mainstream maintenance for core applications of SAP Business Suite 7 from 2025 to the end of 2027? Also, what is your response to the likes of Rimini Street which have been aggressive in tapping maintenance opportunities?

Marriott: We did that because customers wanted more time to migrate to S/4 Hana, and the most important thing for us is making sure our customers are successful and that we provide the highest quality of service to allow them to maximise their use of SAP. We want customers to get there based on value, and not because they’re forced to get there.

On third-party maintenance providers, the interesting thing is that we’re winning back customers that stayed on the SAP platform but took their maintenance to third parties. The reason they came back is because if you don’t have a direct relationship with SAP, you can’t drive innovation.

So, where customers have made a tactical decision to move to third parties for whatever financial reasons, we’re seeing them come back because they realise that to get that transformation opportunity, particularly with S/4 Hana, they need to be strategically engaged with SAP to drive innovation.

If you look at our results last year, and the growth we’ve got in cloud, we put more than 30,000 customers live through the pandemic with our solutions and support offerings. That growth is testament to what our end-to-end service offers our customers.