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Although it had no blockbuster product releases, like SAP S/4HANA, or major company acquisitions, 2016 was a productive and intriguing year for SAP. This was manifested in a number of new releases, acquisitions, partnerships and enhancements to core platforms – the SAP S/4HANA ERP system, HANA in-memory database platform and HANA Cloud Platform. It certainly appears that SAP is building on the foundations of its strategy to provide the digital core technology for businesses to undergo a digital transformation, and this will, no doubt, continue.
In this Q&A, Steve Shute, COO of SAP North America, talks about SAP's market momentum in 2016, the extent of SAP S/4HANA adoption and where the company is headed in 2017. Shute has been with SAP since 2014, after an executive stint at Allscripts and several years at IBM in various sales and marketing roles. At SAP, he is responsible for running day-to-day operations, which includes everything from top-line revenue to bottom-line profitability.
How would you characterize 2016 for SAP?
Steve Shute: SAP's market strategy is spot on, and it's gaining momentum. We continued our focus of helping customers to digitize, and the collections of assets, both organic and through the acquisitions that we've done to the tune of over $50 billion in the last few years, is shaping up nicely to help our customers provide the set of capabilities that they require to digitize their organizations. The backbone of that is HANA, and S/4HANA being the digital core.
How is SAP S/4HANA doing right now? Is the market momentum growing?
Shute: In the last quarter alone, to date, we have over 4,100 customers signed up for S/4HANA, and it's not a question of 'if,' it's a question of 'when' for existing customers.
For net new customers, the set of capabilities that we have right now is affirming the strategy of what we want to accomplish. This is everything from how they transform their workforce in new and innovative ways, to how they handle the supply chain in real time, to how they change, ultimately, their customer experience in this digital world, to how do they handle their physical and digital assets. So we're focused on best-of-breed of technologies in all of these areas, and making sure that the integration all comes back together on behalf of customers.
What are some of the ways that SAP will help customers get to the digital transformation of their businesses in 2017?
Shute: When we talk to CEOs, most of them are concerned, not only with their customers, but the customer's customer, and the supplier's supplier. It's really looking end-to-end on how to digitize, so we're sitting down with them to go through things like design thinking and innovating around their business models, reimaging their processes, and then putting in a roadmap for them to make sense of where to start. For some, it's a big bang; for some, it's incremental, depending on where they are. What's really exciting to me is how the collection of technologies that we have come together, both individually, as best-of-breeds, but also that integration really matters.
HANA Cloud Platform is an interesting example of how SAP appears to be extending its platforms. Will we see more customers and partners taking advantage of this?
Shute: HANA Cloud Platform is exciting because it's the integration that's going on top of the platform, not just from SAP, but from our customers themselves. We're going to have more and more of our ecosystem building on top of HCP.
For example, a lot of our customers have programs with the federal government where they get credit for hiring veterans. So Ernst & Young developed an application that extends SuccessFactors to automate that crediting process. A very laborious manual process today is getting automated, and it's not SAP doing that, it's a third party developing on top of the platform. So we can expect to see continued innovation like that.
SAP has focused a lot of effort on applications and services for the small and medium-sized business (SMB) market. How will this continue next year?
Shute: I'm personally putting a lot more focus on the SMB market because I think it's underserved today. We're revitalizing our ecosystem to help serve that market, but we're also putting much more coverage on that market to really help ensure both the existing and net new customers are taken care of. So there's a big focus on general business.
We're also revitalizing Business ByDesign for our customers of less than 1,500 seats. So, from an ERP perspective, we're putting much more functionality into that offering to serve that market. This serves as another major opportunity for SAP from a market share and market growth perspective.
Internet of things (IoT) is another area that's getting a lot of attention. What are some of the specific ways that SAP is helping customers to incorporate or build IoT applications?
Shute: A lot of line-of-business executives are very tech savvy, and they're looking to create new business models, with the help of SAP, to take advantage of and monetize things like IoT.
I was at a major generator company, and I happen to be one of their customers myself, and I mentioned that I travelled a lot, and my wife is busy with the kids. If we're gone for a day or two, and the generator goes out, I could lose a lot of food. So I said to them, it would be great if they could monitor that box; I'd pay a fee for them to monitor that box, and there are different business models that they could employ. One could be they charge every customer a fee for an insurance policy; so if it goes down, they can go out and fix it or do it proactively before it goes down.
Then we talked about predictive maintenance, which is one of the most common use cases now for IoT. It's important to know not just that the machine's about to go down, but that you have the right person with the right certifications and the right skills show up at the right time to fix the machine. And the right parts have to show up at the right location at the right time with the right specs. So we got into the importance of integration as they begin to embark upon IoT as a result of that conversation. That's the importance of integration, it's not just about predictive maintenance itself, it's about the parts and the people making sure that the box gets fixed.
What should companies begin thinking about in 2017?
Shute: First, I would say digitize or run the risk of being disrupted. Have a much bigger focus on the end customer when you think about your business models, your business processes and what you need to achieve. At SAP, we have what I call an embarrassment of riches as far as the portfolio, but it's really about helping the end customer realize the potential for their organization to be successful, so let us help you digitize.
Second, I really think that you need to understand HANA, not just for HANA's sake, but for understanding the capabilities of HANA and HCP, and things like Vora, Altiscale. Understanding how to monetize and take advantage of your data, I think, is going to be critical, as well, so look for big developments around those and pulling those assets together.
I expect growth in all segments frankly, and all product lines, so I think the company's never been stronger and we're positioned for great things.
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