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SAP leadership changes and S/4HANA were top 2019 SAP stories

The resignation of CEO Bill McDermott and veteran executives was the top SAP story of 2019, along with the company's push for S/4HANA migrations, intelligent enterprise adoption and Qualtrics integration.

SAP ended the decade with one of the most unsettled years in its 47-year existence.

The year began with layoffs, as the German enterprise giant restructured its workforce in March to the tune of 4,400 fewer employees. This was just the first shoe to drop in a year of organizational turmoil. In April, several prominent members of the SAP leadership ranks left for different pastures. The biggest shoe dropped in October with the abrupt departure of longtime CEO Bill McDermott. He was replaced by co-CEOs Jennifer Morgan and Christian Klein.

Bill McDermottBill McDermott

In 2019, the saga of S/4HANA migrations that has dogged the company for several years continued. The clock is running to get customers to move to the "next-generation ERP" system before 2025, when SAP's support for legacy ERP systems will end. However, it appears that the migrations to S/4HANA continue to lag.

Here's a look back at some of the most prominent issues that characterized 2019 for SAP.

SAP leadership changes

The first indication that it might be an interesting year for SAP came in March when the company announced the layoffs of 4,400 employees. The layoffs appeared to be particularly significant for SAP because they included veterans of HANA development and the ABAP programming language which has formed the foundation of HANA. This raised questions about SAP's commitment to the future of its signature in-memory database platform. The layoffs also hit SAP leadership, as longtime executive Bjoern Goerke was cashiered from his role as CTO.

Jennifer MorganJennifer Morgan

SAP leadership had a major shift in April as several executives left the company, led by cloud business head Rob Enslin, who later surfaced at Google. SAP stayed in-house by promoting veterans Jennifer Morgan, Adaire Fox-Martin and Juergen Mueller. The SAP leadership changes in April led many observers to question the future direction of the company, but the general feeling was that SAP's deep bench would keep the company stable.

"The fact is, particularly at SAP, there's a lot of structural organization underneath any individual leader, which keeps that organization moving forward," analyst Joshua Greenbaum of Enterprise Applications Consulting said at the time. "Some people are saying this is going to have a huge impact across the board and have a direct impact on customers, but I just don't see it."

Christian KleinChristian Klein

The deep bench will be put to the test. In October, CEO Bill McDermott, who had led the company for nine years, abruptly resigned. McDermott, who served as the prominent public face of the company, was replaced by Morgan and Klein, who assumed the roles of co-CEO. But the direction under the new SAP leadership remains to be seen.

"It makes sense to pass the baton at this moment, when there's a transition in place to the cloud internally," Greenbaum said. "So it's a good time to freshen up the scene with the two new co-CEOs and it was a good moment for [McDermott] to step out."

S/4HANA migration debate continues

The questions of if, when and how to migrate to SAP S/4HANA have become perennial issues in the last few years for SAP customers. SAP has been touting the transformative nature of the "next-generation" ERP since it debuted in 2015, but the number of customers actually making the move continues to lag. SAP S/4HANA promises to transform existing business processes and develop new business models by adding intelligence that enables benefits such as real-time decision making and predictive analytics.

The willingness of SAP customers to move to S/4HANA is debatable. In June, a survey from Rimini Street, a firm that provides third-party support services for SAP and Oracle ERP systems, indicated that almost 80% of SAP customers plan to stay on SAP ECC at least until the 2025 deadline. The report showed that SAP customers want to control their own fate rather than be forced into an S/4HANA migration, according to Hari Candadai, Rimini Street global vice president of product marketing.

"SAP customers are now taking control of their roadmaps and are disconnecting, or want to disconnect, from SAP's planned 2025 end of support to their flagship ECC product line," Candadai said at the time.

Another survey conducted in December 2018 by ASUG (Americas SAP User Group) showed that more than half of the ASUG members who responded, 56%, said they plan to move to S/4HANA but have not taken concrete steps in that process yet.

"There's a general sense that they want to do it, they're planning for it, they're gathering data and information, and they're looking for use cases that drive a business case," Geoff Scott, ASUG CEO, said at the time about the respondents.

Many in the SAP ecosphere say the question of an S/4HANA migration has moved from "if" to "when." Some, like Chris Carter, CEO of Approyo, a Wisconsin-based SAP partner, believe that S/4HANA migration fears are unfounded and that customers delaying the move are in danger of missing out on the advantages that they will gain from S/4HANA.

"The S/4HANA migration is going to happen and must happen," Carter said at the time. "It's not only because of 2025, it's because of the innovation that SAP is putting into the products, and that partners are putting into the products and the tools."

For many, however, the lack of a compelling business case is the largest impediment to an S/4HANA migration. In order to make the case, SAP customers need to see an S/4HANA migration as part of a larger effort to transform business processes, according to experts. This can involve developing a strategy around a company's SAP landscape, including cloud products like Ariba, Concur and SuccessFactors, said Len Riley, commercial advisory practice leader at UpperEdge, a Boston-based IT advisory firm.

Once companies decide that they are going to move to S/4HANA, they will need strong leadership and project management skills to manage the process successfully. Vinci Energies provided a case in point, as the Paris based energy company completed a nine-month project to deploy S/4HANA. The company has begun to realize the benefits of the advanced but simplified financial model that the S/4HANA core.

"We are currently running about 10 billion euros and more than 700 legal entities," Dominique Tessaro, Vinci Energies' CIO, said at the time. "All modules are running on a single SAP S/4HANA instance and client."

The search for the intelligent enterprise

Related to SAP's efforts to move customers to S/4HANA is the concept of the SAP intelligent enterprise. Although SAP positions S/4HANA as the digital core of the intelligent enterprise, there continues to be a lack of understanding as to what the term really means.

In SAP's vision, the intelligent enterprise is more than just an implementation of a technology or technologies, but requires a transformative shift in the organization's culture and processes. This means bringing together operational data, or "O" data, and experiential data, or "X" data, to enable companies to analyze data in new ways and reach decisions that may not have been possible before.

"The intelligent enterprise is about, 'How do I run my organization in a way that is capable of responding to the outside world and leverages everything I have available?'" said Geoff Maxwell, program manager at SAP Transformation Office.

Still, defining the SAP intelligent enterprise remains elusive because the circumstances and reason for implementing it are unique to each organization, according to Paul Saunders, senior director and analyst at Gartner.

"What makes one organization an intelligent enterprise is not what makes another an intelligent enterprise," Saunders said. "That's where SAP can't dictate what an intelligent enterprise is [and] needs to play a role in helping organizations become an intelligent enterprise."

However, organizations will need to step up efforts to get to the intelligent enterprise -- whatever their definition -- in order to keep up with the pace of change in business and technology, said Steve Niesman, CEO of Itelligence, an SAP reseller that provides implementation and managed services for SAP systems.

When O's and X's meet

The SAP intelligent enterprise depends on the integration of O data with X data, which was the main reason SAP spent $8 billion on Qualtrics in 2018. How and why this integration will happen was a main concern of SAP in 2019.

At the Sapphire conference in May, former CEO McDermott and Qualtrics CEO Ryan Smith stressed the need for companies to provide an exceptional customer experience in the era of smartphones and social media.

"Today organizations are disproportionally rewarded when they deliver great experiences," Smith said. "And are absolutely punished when they don't."

However, beyond a few interesting use cases, there was no sign yet that SAP customers were jumping headlong into the X and O marriage. The idea may be valid, and potentially valuable, but much like the SAP intelligent enterprise, organizations seem to be approaching Qualtrics-centered integrations cautiously.

"If SAP can change people's mindsets, if they can show CIOs that this does more than just the back office, then [companies] can bring in their CEO and show it is an end-to-end platform and worth investing in," Isaac Sacolick, president and CIO of consultancy StarCIO, said at the time.

After a tumultuous 2019, that's likely top of SAP's list for 2020.

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