Much has happened in the SAP world in the past few months
that were covered by the requisite number of announcements – and a good deal of
analysis, including mine. SAP has
· Released its first release of S/4HANA for
Customer Management
·
Acquired CallidusCloud, a software company that
focuses on sales enablement
While these three topics seem to be very different, combined
they give a good insight into SAP’s strategy, and how the ERP world – sorry,
the S/4 world, and the customer facing world are going to shape up.
So, let’s have a brief look at these three announcements separately,
and then connect a few dots.
S/4HANA for Customer Management
I have covered the migration of SAP CRM into S/4HANA a
couple of times. S/4HANA for Customer Management is the ‘customer orientated’ part of S/4HANA
and shall offer the core service- and sales functionalities of SAP CRM, using a
unified data model. It is supposed to
focus on what SAP calls the ‘heavy lifting customer processes’ and to support
comprehensive core processes, thereby providing one central customer database.
In other words this means that S/4HANA for Customer
Management as part of S/4HANA will have a strong focus on (business) transaction
processing and enabling the logistics that comes with fulfilment.
One could say that it becomes a transaction engine.
Keep that thought in mind.
CallidusCloud Acquisition
CallidusCloud provides leading solutions for sales performance
management, CPQ, Contract Lifecycle Management, and more. This portfolio nicely
plugs a few holes in the SAP Hybris portfolio and offers SAP options or at least
another view on how to address issues tackled by existing products in another
way.
I am especially looking at the CPQ side here. SAP is
traditionally strong on the variant configuration side but lacked a strong
cloud based CPQ engine. The current SAP Hybris CPQ is, after all, an on premise
solution and highly geared towards complex solution configuration. As such, and
in particular with its deep ERP integration it surely covers some bases that
CallidusCloud’s CPQ does not reach – yet.
But then SAP moves into the cloud – and successfully so, as
the Q1/2018
financial results announcement proves.
On top of this, CallidusCloud CPQ comes with an integrated
Contract Lifecycle Management system that helps facilitating the sales process
of products with complex contract negotiations.
New ERP Licensing Model
With this new licensing model SAP reacted to the years long
controversy about the indirect access topic. I haven’t covered this significant
announcement before; hence I will write a bit more about it here, as it is also
a crucial part for the connecting of dots that I talked about above.
The underlying problem was – strongly simplified – that an
increasing number of SAP ERP customers did not opt for SAP software when it
came to choosing CRM solutions, e-commerce packages, or other pieces of enterprise
software that surround their ERP backbone and exchange data with it. Of course,
these packages needed to be, and were, integrated into the ERP back end in
order to enable seamless processes across the value chain.
So far, so good. Unluckily the users of the third party
applications do regularly not have users in the ERP system. SAP argued that
they are still using the ERP system, even if the data flows via a technical
user.
Customers do not want to license additional ERP users for
the users of the third party applications, as they apparently do not use the
ERP system, but just send data back and forth.
Problem. Big problem. And one that was ruled in SAP’s favour
in the Diageo
lawsuit in early 2017.
Still not a ruling that SAP could really use to play
hardball. So, something needed to change.
SAP elegantly solved, or rather mitigated, this issue by
putting it into a bigger context: Outcome based pricing.
Instead of users, the new pricing model is built around
pricing the creation of business documents and there, in particular the line
items.
The interesting aspect here is that not the mere possibility
to create value is priced (users) but the actual value creation (business
documents are orders, service requests, opportunities, etc.).
Add the thought that not all business documents are created
equal and that there needs to be some scale pricing, one reaches a matrix that
can be adapted easily enough to be future proof.
Lastly, an outcome based pricing model fits neatly into SAP’s
narrative of delivering outcomes and, in a broader sense, the SaaS story which
after all has a usage and results based promise at its core.
My PoV and Advice
Putting these three topics together, SAP’s story about the
digital core becomes more clear.
The digital core is S/4HANA that takes care of business
transactions and delivers intelligent insights to power (more) transactions.
Everything else, workforce engagement, spend management, supply chain, IoT, and
customer engagement/experience surrounds it.
The new licensing model is actually the glue that connects
the dots.
So, what does this mean?
Several things:
1.
One can look at S/4HANA as mutating into a
transaction engine. The SAP Hybris Revenue Cloud is well geared towards
creating correct invoices, based on created ‘documents’.
2.
SAP Hybris CPQ is on its way to retirement. It
is an engine and not really cloud enabled. For variant configuration it bolts
on the digital core. And configuration is not a business document in my books.
The order, that holds the BOM that is generated by configuration, is.
3.
Callidus is not yet strong in variant
configuration but can be bolted on the digital core, too, in order to support
variant configuration. SAP needs only one engine. Callidus is intended to be
this engine. In case there is a continued need to have a separate variant
configuration capability there is still In Mind.
4.
There will be continued efforts to put all
engagement functionalities – customer, supplier, employee – into cloud based
applications that surround the digital core.
5.
As a side effect, life might become easier for ISV
partners, as there is no indirect access risk anymore.
I think that this pricing model is a very smart move by SAP.
It will now be crucial to deliver a calculation tool that helps customers
identify whether it is better to adopt this model or to stay on their existing
pricing for a little longer. Customers most certainly will want to know what
this new model means for them, specifically.
Regarding indirect access, which is a topic that affects
other vendors as much as it did affect SAP, well, the ball is now squarely in
their court. It will be interesting to see how they react.
Last, but not least, it is on SAP to refine the narrative in
a way that less grey areas remain and that strategy and its execution is clear
to customers.
Of course I might be wrong with my view on SAP’s strategy –
but I doubt it. Happy to get corrected, though.
Any opinion?
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