SAP bets future on cloud in central and eastern Europe

SAP’s turn to cloud services for the delivery of its business applications seems especially energetic in central and eastern Europe

This article can also be found in the Premium Editorial Download: CW Europe: CW Europe – February 2015 Edition

Users of SAP applications in Poland, central and eastern Europe could be forgiven for feeling dizzy because of the changes that have occurred in recent years, not only in the provider’s image and offer, but also in its approach to customers. The new SAP tools for knowledge management are arousing both interest and doubts.

For many years, SAP has been the leader of enterprise management applications – enterprise resource planning (ERP), customer relationship management (CRM), business intelligence (BI), supply chain management (SCM) – in the Polish market at least. However, for two years now, rapid changes have taken place in SAP’s communication in the market. Traditional messages about popular systems for business management have disappeared. Why?

“Entrepreneurs do not want to talk about ERP and CRM. Instead, they ask me if I’m able to help them to solve specific business problems. I note that they need good analytical systems. SAP cannot ignore these needs, especially because it has a good answer – that is its in-memory technology,” said Grzegorz Rogalinski, then CEO of SAP Poland, at the beginning of 2013. 

However, he soon disappeared from the position he had held for nearly 10 years.

“For years, the SAP brand has been synonymous with business applications. Today SAP means also transactional systems tailored to specific industry requirements, analytical platforms, applications with in-memory technology as their basis available from a desktop and mobile devices, database applications, platforms and mobile applications, as well as cloud services,” Kinga Piecuch, current CEO of SAP Polska, told customers and partners at the inauguration of her new position in the business.

With the departure of Rogalinski, SAP Poland entered a path of change. Yet in 2013 and 2014 the organisation seems to have been transformed, especially in sales, where employment has increased by more than 50%.

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“In Poland, business people approach technological innovations warily. Therefore, we need to work with them harder than ever to show the benefits of SAP’s new proposals and the benefits of their use,” says Simon Kaluza, managing director of SAP CEE.

“Currently, we focus on the development of sales in the utilities sector and consumer goods manufacturers. We also hope to increase sales in the public sector, though it means large companies with a state’s share rather than the public administration and local government,” explains Piecuch.

Today, very little is left from the old SAP image, to which customers have become accustomed over the years. Moreover, now they will have to get used to the new logo of this provider that will soon be announced. Not only in Poland, but throughout central and eastern Europe (CEE), SAP has transformed itself from a provider of on-premise business management applications to a supplier of cloud services and cloud tools for advanced analytics.

“Four years ago, SAP had no cloud customers in CEE. This technology was simply not available at that time. During the past few years a lot has changed, and now we have gathered global figures about our cloud customers – regional statistics are released only once a year and will be available at the end of January 2015,” says Tina Vidergar, integrated communication manager at SAP CEE. 

“In Europe, and even more in CEE, there is always a short delay in adopting new technologies, mostly due to localisation, different languages and legislation. Enterprises in CEE experienced an accelerated cloud adoption in 2014, with a big emphasis on HR solutions,” she adds.

The cloud promise and problems with adaptation

In 2013, European divisions of SAP provided revenues of €1bn from sales of cloud services. German corporate headquarters predicts that, in 2017, SAP will reach €3bn revenues from this source. At the beginning of 2014, Piecuch announced a projected 70% increase in cloud services. Following this plan, the company has prepared a Polish version of SAP Cloud Services for customers that supports customer relationship management.

“cloud CRM is one of the most interesting things for Polish companies. A similar trend is observed in other countries. In Poland, we are particularly counting on new customers who do not use SAP products. Nevertheless, we expect that existing customers will see the benefits of cloud CRM. Especially because this service can be easily integrated with business applications operating in the traditional model,” says Simon Kaluza.

In the first half of 2014, SAP Poland met its business target – its turnover increased by more than 70% compared with the first half of 2013. However, it is not certain if the company can repeat this result for the full year. At the end of the third quarter of 2014, the share price of SAP SE – its European parent, listed on the Frankfurt Stock Exchange – fell by nearly 5%. It turned out that for the year 2014, SAP SE operating profit is projected to be some €0.2bn-0.4bn less than expected.

“The main reason for the reduced profit forecast is that a large number of companies decided not to purchase a licence for the software. Instead, they chose technological services taken from the cloud over the internet,” explained Luka Mucic, chief financial officer and chief operating officer at SAP SE, in an official comment.

The effort of cloud services adaptation

SAP does not intend, however, to maintain services for customers who use traditional business applications or to turn back from orientation for development of cloud services sales.

“The revolution that cloud computing, big data, mobile applications and social media tools bring to businesses makes us create a new definition of business applications. The way SAP will respond to market trends will determine its position in the long term,” says Jakub Zurek, sales manager at BCC Data Centers, SAP's largest partner in Poland.

Throughout central and eastern Europe, SAP has transformed itself from a provider of on-premise business management applications to a supplier of cloud services and cloud tools for advanced analytics

How does SAP cope with convincing the market in Poland and CEE to switch to cloud computing services?

The experience of companies – SAP partners in business – shows that cloud hits the market. However, this is not an easy process. On the contrary, if a company opts for online services, it deploys them after consultation and reliable pre-conditioning work. Most resistance stems from concerns about data security.

“Our European datacentres are located in Walldorf [SAP’s HQ] and Amsterdam. From these places we provide our cloud services. European and especially German data security standards are so robust that they dispel the uncertainty often expressed by business people in Poland and CEE,” says Kaluza.

Those companies which use complex IT infrastructure, built for many years with a lot of interdependencies occurring between databases, disk resources and applications, complain about numerous difficulties in adapting cloud services. In such cases, the transfer of even only one system to the cloud is a large and costly challenge.

“Inhibitory and typical factors we meet are problems with the network infrastructure at the customer,” admits Zurek. “Properly constructed, simplified network infrastructure enables the scenarios in which readers and scanners operating in warehouses, hundreds of miles away from a datacentre, work and communicate quite well by high-speed internet with a cloud-based ERP system,” he adds.

“Migration to the cloud is not a single task. It is a process, sometimes a long and multi-stage one, which brings the company a big change and does not relate to the IT department only,” says Miroslaw Burnejko, senior consultant at cloud adoption firm Atende.

The first phase of migration is usually the consolidation of IT resources in the company. Success in this process relies on the proper introduction of a number of changes aimed at gradual reconstruction of IT infrastructure in a company. The desired outcome is a new organisation and streamlining of IT resources, resulting in a decrease in the cost of their use and an appearance of the orchestration effect.

Learning to use the new tools

So far, SAP cannot boast of too many implementations of its new products. Sokolow, one of the leaders in the Polish food industry, is the first major company in the CEE that has moved its IT resources on the SAP Hana platform, where they are supported by SAP Business Suite.

“The aim of this project was to simplify business management, optimise IT infrastructure costs and accelerate transactional data processing and analysis,” reports Sokolow CIO Bogdan Bilas.

Business applications (SAP ERP, SAP Business Objects) and data warehouse (SAP Business Warehouse, or SAP BW) were transferred to the SAP Hana platform and enhanced with new applications – SAP Business Planning and Consolidation and SAP Accounting and Cash Management.

“The use of in–memory technology makes it possible to work more efficiently with SAP systems that we have known for years. This is a new quality of their use,” admits Bilas.

The Hana platform is for Sokolow both a database and an analytical system, that uses in-memory technology to process and analyse large amounts of data in real time.

“The effect of implementation is a tenfold increase in the speed of data loading and a more than 100-fold acceleration of the process of generating reports from SAP Business Suite resources,” adds Bilas.

Sokolow has acquired an ability to create reports directly from Hana, which eliminates the need to create clustered indexes to tables. It has ultimately replaced traditional Sokolow databases, now placed in SAP Business Suite resources. The company already uses the new SAP services, but still learns to translate it into an additional competitive advantage.

“Compared with the previous business model supported by traditional IT tools, there is a qualitative change at Sokolow. IT specialists no longer need to optimise transactional and analytical systems, when there is a need to generate new detailed reports,” claims Andrzej Moskalik, director of the client services department at BCC, an SAP reseller. 

“The SAP online tools are simpler and more efficient. As a result of their deployment, there has been a reduction in administrative expenditure on optimisation of reporting processes. Also the service of personnel matters is easier,” he adds.

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