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Deloitte SAP Industry Cloud apps aim to fill ERP gaps

The head of Deloitte's $4 billion SAP practice explains the consultancy's role in SAP's new industry applications and how Kinetic Microservices can extend S/4HANA Cloud.

SAP, which boasts about serving 25 industry sectors with the broadest coverage of any ERP vendor, has begun in recent years to move those vertical applications to the cloud. It employs a modular approach, bolting industry apps onto the back-office ERP "core" to create a product line called SAP Industry Cloud.

SAP's industry cloud initiative dates back to 2014, but in the past two years the vendor has shifted into overdrive, using SAP Cloud Platform and S/4HANA Cloud, the SaaS version of its newest ERP, as the delivery vehicle. At this year's Sapphire Now conference, it announced Rise with SAP for Industries, a new offering from its S/4HANA Cloud deployment service.

System integrators (SIs) such as Accenture, Capgemini, Deloitte and EY are essential to the SAP Industry Cloud effort. Typically, they bring industry expertise that complements SAP's, tie together applications and workflows and develop AI- and analytics-heavy apps that take advantage of Business Technology Platform, SAP's collection of emerging technologies for the vaunted "intelligent enterprise."

Last November, Deloitte released industry software for the automotive, consumer goods, life sciences and retail sectors. Its Kinetic Microservices, cloud applications that apply machine learning and robotic process automation to critical business processes like inventory optimization, risk sensing and supply chain logistics, are key components.

Darwin Deano plays a key role in the Deloitte SAP Industry Cloud partnership. As global SAP offering leader, he oversees Deloitte's entire SAP practice, a $4 billion business with 27,000 employees.

In this Q&A, Deano explains the part Deloitte plays in SAP Industry Cloud and the role of SAP Cloud Platform and S/4HANA. It has been edited for length and clarity.

What's new about the SAP Industry Cloud offerings announced at Sapphire?

Darwin Deano: In general, [there is] greater emphasis on industry-specific value, because as SAP drives their core ERP -- S/4HANA -- toward SaaS, the ability to drive unique, client-specific competitive advantage, remains more and more outside the core ERP. That's where SAP Business Technology Platform really plays a critical role in provisioning these industry cloud apps that the partner ecosystem is mobilized to do.

Can you give examples of the development work and services that Deloitte adds to these SAP industry offerings?

Darwin Deano, Deloitte Global SAP Offering LeaderDarwin Deano

Deano: SAP is normally just part of a broader ecosystem. The back-office processes are typically dominated by SAP, but it is not the only component.

We have 70-plus Kinetic Microservices, or apps, that we have built largely on the SAP Business Technology Platform, as well as some of the hyperscaler platform and service capabilities. On average, we see two to three of them deployed, or we create a customer-specific app that was inspired by any one of them, or a completely client-specific app that we need to develop to supplement the standard SAP capabilities.

From an automation perspective, we have 300-plus SAP-specific bots in our automation storefront with an average of about eight to 10 bots typically deployed.

Let's say inventory is the priority for a project. Does Deloitte have an inventory optimization app that goes beyond what SAP has?

Deano: We have this app called Reimagined Inventory that would take the inventory data, compare it against industry benchmarks, identify the potential opportunities for optimizing and reducing inventory, and provide repeatable insights so you could do a pulse check to see how you're doing. That kind of app does not come standard with S/4, in large part because a lot of the information is not necessarily maintained within S/4.

SIs and ERP vendors have focused on workflows and business process management, with bots handling work that cuts across modules. Is that a lot of what Deloitte does for the SAP Industry Cloud?

Deano: That's definitely part of it. Any out-of-the-box SAP UX focuses mainly on the SAP components. To drive orchestration across the full ecosystem, including SAP, [requires] a layer on top of it, whether that's something we develop with Business Technology Platform, combined with something from SAP Process Insights, or we leverage something like ServiceNow.

If you do anything in 2021, it is a very heterogeneous landscape [that requires] the ability to orchestrate work and the future of work. And then you layer the bots on top of that.

Where do the gaps tend to be in S/4HANA Cloud for an industry like retail or process manufacturing? What kinds of functions does Deloitte add?

Deano: A company that we acquired called Keytree had an app [that's] specific to retail and called Keytree In-store Technology. It enhances customer engagement, cross sell and upsell with a front-end app and resources at the store location. SAP does not go that far. That's why this app has become a standard for any of our retail engagements. Because it is a modular capability, it can be deployed on top of SAP ECC as well.

SAP Cloud Platform seems to be the mechanism SAP wants people to use to extend cloud and on-premises ERP. What's the role of SAP Cloud Platform in what Deloitte does?

Deano: We've long told SAP that because you're closing down ERP and making it more SaaS, your ability to give clients relief with SAP Cloud Platform for deploying cloud apps and integrating the full ecosystem with SAP is super critical.

I would argue that if you were to embark on an SAP journey and you didn't include SAP Cloud Platform and Business Technology Platform, it's incomplete, because you [will still need] the same functionality, orchestration, workflow, UX, HANA enterprise, custom apps, integration and automation … that is already on SCP and BTP. You [would] need to compensate for that somehow either by doing too much customization and increasing technical debt on your ERP or using other components where you need to reinvent the wheel and integrate with SAP.

SAP "weaponizes" the partner ecosystem

How critical is Deloitte's industry experience in SAP's being able to offer industry clouds?

Deano: Very critical. What SAP has done over the years, and now increasingly more so, is really embraced and weaponized the partner ecosystem. Think about what happened in the past year with the pandemic: supply chains becoming more complicated, a chip shortage leading to higher commodity costs, a lumber shortage.

Instead of carrying that burden on your own as SAP, to keep pace with everything that's happening in the world, mobilize your home partner ecosystem which is facing this day in and day out and let them innovate on top of your platform, to deliver functionality that will be required to cope and survive and thrive.

That in essence is what industry cloud is all about. All the partners are publishing apps that are on BTP, which means they can plug and play to any ERP, whether it's S/4 or ECC. That means that they're disposable as well. So, when this threat disappears or evolves, I could just unplug that API, plug in different apps connected to the same API, and voila.

SAP's ability to dominate this next era, when S/4 or ERP shrinks to a very small footprint because of SaaS, and their ability to dominate the value conversation will depend on their ability to weaponize their partner ecosystem.

Do the APIs and plug-and-play capability work outside SAP?

Deano: Yes. We did an analysis of the API capabilities of the major ERP vendors, and by far, the most mature API granularity and availability is SAP. You could build something for SAP and decide to use that application for others. It's easier to do that than the other way around because of the granularity that they go through in publishing APIs.

A lot of people, especially the SAP veterans, don't appreciate that all the way back to, I would say, R/3 4.0, you had the ability to expose everything within SAP as an API. It's historically been that long -- more than 20 years -- that the whole underlying data structure was built for API integration.

How do Kinetic Microservices fit into SAP Industry Cloud?

Deano: Kinetic Microservices are modular, cloud-enabled apps that deliver discrete natural value above and beyond ERP. We have 70-plus of them today with another 10-plus planned in 2021.

We did an analysis. Today, if one were so inclined, at least 70% of the processes in the traditional, end-to-end, wall-to-wall SAP scope can be executed automatically. A lot of organizations will never go that far. We'll have an automation trust issue. There will be compliance considerations. But that's how capable the software is.

Regarding S/4HANA Cloud vs. on-premises S/4HANA: Why would a client choose one over the other to build industry applications?

Deano: Let's kill one myth right off the bat. S/4 public cloud [S/4HANA Cloud], S/4 on premise and S/4 private cloud are the three main variants and come from the same code base. If you think about all the decades of ERP knowledge and leading practices, the functionality is all there.

Now, how much [functionality] is exposed is one of the big questions, and SAP is fixing that aggressively. S/4 public cloud traditionally has had minimal exposure.

S/4HANA Cloud Private Edition and S/4 on premise have the full functionality available. S/4 public cloud has some functionality locked due to the cloud-certification process. SAP is driving to unlock more functionality aggressively, but there will remain some gaps in the next 18-24 months. The next release will reduce the difference between S/4 public cloud and on prem even further.

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