How SAP is riding on Asia’s growth story

German software giant SAP recorded its 19th consecutive quarter of growth during the second quarter this year, backed by a growing cloud business led by S/4 Hana, its flagship enterprise resource planning (ERP) software.

For nearly 30 years, the Asia-Pacific region has played a big part in contributing to SAP’s fortunes, with SAP Asia growing faster than SAP globally in recent years, according to Scott Russell, president of SAP Asia-Pacific and Japan.

At the SAP Sapphire conference earlier this year, the company signalled its intention to be an even bigger force in the enterprise software market with C/4 Hana, a cloud-based customer relationship management (CRM) that promises to offer a single view of a customer through tight integration with its ERP portfolio.

In an exclusive interview with Computer Weekly, Russell talks up SAP’s growth momentum in Asia-Pacific, what C/4 Hana means for its customers in the region and the blurring lines between back- and front-office software.

How is SAP doing in the Asia-Pacific region?

Russell: We’re in an economic region that continues to grow despite global political and economic headwinds. We are very confident about the adoption of technology by businesses to run better and simpler, and to expand domestically, regionally and globally. 

Our results as an organisation reflect that. In 2017, and again in the first half of 2018, SAP Asia is growing faster than SAP globally. If I take the second quarter, for example, our software and cloud revenue grew at 11%. Our cloud subscription and support grew at 52%. It was our 19th consecutive quarter of growth.

We feel proud about that, but I need to highlight that that’s just not a natural thing. A lot of companies continue to explore how they can leverage the latest digital innovation and what Industry 4.0 means to their country and business. They want to take competitive advantage of that in whatever industry that they are in to create new business models and enhance the way they operate. So, it’s a very active market, and we feel good about our role. But there’s always more to do.

We’ve heard a lot from SAP at the recent Sapphire Now conference, particularly around C/4 Hana. How do you translate that into something more palatable to the Asia-Pacific region?

Russell: Yeah, great question. Let me first of all say that as a region, we feel blessed that we have a strong brand.We’ve got 41,000 customers in the region, and next year is our 30th year of being an active part of Asia-Pacific, an instrumental part of the company and a key building block of our future growth.

There are a couple of dimensions that I see in what you heard at Sapphire. First, we’ve got a customer base that understands and sees SAP as a value-adding part of their business. Obviously, that’s historically been in core areas, whether it be in finance, logistics, HR or procurement.

We have a strong platform which means we’ve got a brand that we believe will allow SAP to go to the market and say “How do you leverage your existing technology investments, which quite often involves heavy components of SAP, and navigate the future?” There are two key dimensions out of what we announced at Sapphire that are really important to that. 

The first is C/4. I’ve been working either with or for SAP for the last 23 years, and I don’t think I’ve ever been more excited about a portfolio and capability, and the intent that we are taking to market with C/4. Why is that? With companies like CallidusCloud joining the SAP family, we now have a platform that allows you to manage sales performance, I would argue, better than anyone else in the market.

I’d like to think that we want to be humbly recognised as a strong cloud leader today, but more importantly, we’ve got an investment and roadmap that says we will continue to invest and support our customers to provide the best possible technology in the deployment method that they want.

But I think it’s uniquely geared to the scale of Asia, which is a very populous market. Being able to take solutions like this and make it local – and I’ll talk about how in a moment – is extremely relevant.

Our customer data cloud, Gigya, not only manages identities, but also the privacy and the security of those identities. It also allows customised and tailored go-to-market offerings that help enhance the customer experience, especially in markets like India, Indonesia and Singapore where e-commerce adoption is tremendous.

So, when I think about our technology and the relevance to the end-customer, I think we’ve got real relevance. The trick for us, and I think our unique offering and how are we are going to drive that and go to market, is in a couple of fronts. First, we are the only organisation, I feel, that can help deliver that end-to-end customer experience.

For example, Snow Peak, an outdoor gear retailer from Japan, is using our commerce platform to create a digital marketplace and manage their inventory. The real difficulty in delivering a good online experience with your customer is to be able to fulfil orders.

Snow Peak uses us to manage their supply chain and their financials, so they know exactly what their real-time profitability is for a product. They know their inventory levels and can manage their logistics.

I think the other thing that I would say is we embrace the openness of our platforms. So rather than ask our customers to run everything on SAP, we want our technology to seamlessly orchestrate with their existing technology environment, including in-house systems and acquired solutions.

With SAP, they can manage all of that in a much more orchestrated way through connections to our suite. It’s not a mandate. It’s not a pre-requisite. Instead, it’s about orchestrating within their environment so customers don’t have to change everything all at once.

In fact, it’s quite the opposite. They might start with finance, supply chain or logistics. But quite often they start from the customer experience, and that’s why C/4 is so important because we can help them at the front-end that ultimately leads to the enhancement of their supply chain at the back.

Suppliers like Salesforce.com tend to focus on front office applications, while SAP and Oracle are traditionally stronger at the back-end. At Sapphire, SAP executives talked about having a single view of the customer with C/4 Hana. Do you see the blurring of lines between the back office and the front office?

Russell: It’s a very astute question. I think organisations, no matter what industry they are in, expect technology partners to help them fulfil and enhance their customers’ experience. They also expect them to be able to automate their processes. I don’t think they expect companies such as SAP to say: “Well, you need to go here for front office and there for HR”.

They want an end-to-end solution based on their processes. So whether it’s hire-to-retire, audit-to-cash or procure-to-pay, you’ve got all these end-to-end processes that involve a consistent fuel of data. Companies want a holistic view of things, and I would argue one of the reasons why C/4 is so important is because it allows us to provide that end-to-end view of all aspects of a customer's business. We call it the intelligent enterprise.

There are two elements to why we believe that having a single view about a customer is so essential. First, to deliver the best possible experience to customers, you need to understand their behaviour. You need to understand the different interaction points, payment mechanisms and when a parcel is delivered, for example.

These different touch points need to be in concert. Now, historically, that’s been done from a front or back office application, but customers don’t care. What they want is a consistent experience and having a single view of a customer is essential for businesses to deliver that experience.

The second thing is historically, companies have had to face the challenge of moving data from a data platform to access data or perform online transaction processing. With SAP Data Hub, you can do real-time data matching, at a metadata level, without moving big volumes of data and incurring some latency. You can now get real-time insight about a customer, about a product, supplier, part or whatever that information is to give you that insight.

Historically, a single view of customer is talked about as having a single database. SAP is not saying that. SAP is saying that a single view of customer means accessing information about the customer, and in real-time at the time you need that information.

I’m sure many of your customers have asked you questions about C/4 right after Sapphire. Many of them, especially C4C (Cloud for Customer) customers, would like to know the pathway to C/4 Hana. What are you saying to them?

Russell: First, I try to explain what that C/4 comprises five different cloud platforms. They are all part of a suite and the roadmap is very much around orchestration of those platforms.

We also acknowledge that companies will say: “Well, I'm here today and I have some custom-built websites, mobile platforms and other technologies that I use for my marketing. I’ve got some others. How do I navigate?”

So quite often the first question they ask is how they can get started. Our answer is always: “Well, what’s the customer experience problem that is most important to solve?” And from there, we’ll work backwards. 

It’s important that these solutions are not seen as a big bundle that customers should get. In fact, it’s quite the opposite. They are niche, have the ability to orchestrate with existing technologies, but are also the building blocks of an orchestrated platform for managing the customer experience holistically.

And that’s why I don’t use the word CRM very much because I think that’s what the competition does. They talk about CRM. What we talk about is customer experience. How do we make customer experience the most wonderful it can be, and then how can our technology help enable that for a business?

SAP has been strong in selling ERP suites, and the people you talk to within organisations tend not to be marketers or business managers who make decisions about CRM software. How are you making sure that SAP has right people to engage a different audience with what you have in C/4?

Russell: Good question. First of all, I think it’s really important, in any organisation, that you have a clear aligned statement of intent and then execution against that intent.

Our chairman spoke on stage at Sapphire that in the history of SAP, C/4 Hana is the biggest R&D (research and development) investment that we will make in the company’s history. That’s a significant statement, not only of where we are at, but where we are heading.

Second, our executive board made a commitment to the financial markets that we would single out C/4 Hana in our quarterly earnings, because we want to be visible and accountable to growth in this strategic area.

Along with the commitment we’ve made, we have brought onboard incredible people from Callidus, Gigya and Hybris, and we have a strong CRM practice with C4C. We’ve got a really strong, competent, experienced, and knowledgeable team that understands the front office and customer experience. And in some of those cases, they’re market leaders in their respectively dimensions.

The difficult and important thing we need to do is to navigate the individual journey for every SAP customer. We are not selling products, but instead helping them solve their business problem of improving their customers’ experience. And then we look at the best way to do that through our portfolio, which gives us an entire suite of technologies, whether it is on the innovation side with SAP Leonardo, or the front, mid and back office.

I’m sure your partner network is just as important. What are you doing to equip your partners with the skills to support your efforts?

Russell: It’s a journey that never ends. In Asia-Pacific and Japan, we have close to 3,000 partners that are vibrant to our business and play an active role advocating, supporting and implementing SAP solutions. The onus is on us to constantly educate them and share information at a detailed and directional level. So a lot of time is spent on roadmaps. We’ve really enhanced the way that we develop and share product roadmaps on both product and geographic levels.

On a product level, we help customers understand what we have today and what’s coming next quarter and next year. At a detailed level, specifically for C/4, we’re investing heavily with our partners to help them educate their own teams about these technologies so they can showcase and bring the technology to life for our customers.

At Sapphire last year, I spoke with Paul Marriott who made a bold statement that SAP wants to be a cloud leader by 2020. What has SAP been doing to meet that goal?

Russell: I don’t want to create a new headline. I believe we are already there, but I would humbly say that there’s so much more to do, and let me explain. Our cloud growth in the market in Q2 and in prior quarters has been over 50%, so we are growing strongly.

Globally, we have 160 million users at any given day logging into an SAP cloud platform. We even have examples in markets such as Australia and New Zealand where cloud revenue has now exceeded software. They were the first market to reach that threshold. 

We’re seeing proof points about our cloud leadership and the importance, not only to our customers, but also the relevance to our business. Further to that, our collaboration with hyper-scale cloud companies, such as Microsoft, Amazon Web Services, Google and IBM, has allowed us to scale our cloud infrastructure across the region.

The journey is not over. I’d like to think that we want to be humbly recognised as a strong cloud leader today, but more importantly, we’ve got an investment and roadmap that says we will continue to invest and support our customers to provide the best possible technology in the deployment method that they want.

I think that’s really important because it’s not just about cloud growth or being number one in cloud. It’s about allowing our customers to use and adopt the technology that best meets their needs.