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SAP is intent on delivering S/4HANA ERP in the cloud and will infuse it with machine learning and artificial intelligence.
The company debuted the "next-generation intelligent" SAP S/4HANA Cloud at its Capital Markets Day event held at the New York Stock Exchange on Feb. 9.
SAP S/4HANA Cloud is designed for enterprises of more than 1,500 employees and meets the increasing need for ERP delivered in the cloud, Sven Denecken, SAP's senior vice president of product marketing for S/4HANA, said after the event.
SAP S/4HANA Cloud enables customers to meet their digital transformation needs and provides a platform to act on insights in real time, he said.
"The benefits of having real-time data accessible from an in-memory platform has been there for a while, but we see the market shifting more and accepting cloud more in certain industries and in certain regions," Denecken said. "The consumption model of the cloud and the benefits of the cloud are now combining with this modern suite."
SAP S/4HANA Cloud's intelligence derives from machine learning capabilities delivered in new technology called SAP Clea, a digital assistant called CoPilot and contextual analytics, Denecken said.
It's also designed to be ideal for a two-tier ERP deployment model, which should drive adoption. This usually involves a headquarters corporate entity that runs a full business suite, like SAP ECC or S/4HANA, while implementing SAP S/4HANA Cloud at the division or subsidiary level.
"They're often looking at cloud only because they want to minimize the effort of IT in the subsidiary," Denecken said. "The beauty of S/4HANA Cloud is that it comes with the same data semantic -- it's one code line, it's the same objects in the headquarters, as well [as] in the subsidiaries."
The cloud delivery model is one way that S/4HANA Cloud is transforming ERP, Denecken continued, but it also includes "next-generation intelligence" technologies that will change the way businesses view and consume ERP.
"There are a lot of technology advances -- contextual analytics, machine learning and AI [artificial intelligence] -- that are in S/4HANA Cloud all over the place," he said. "Why? Because it's not just a Ph.D. concept with machine learning anymore -- it's getting real." For example, he said, AI and machine learning can optimize cash-management processes enough to allow a "zero touch" approach that only requires users to look at deviations.
Platform play makes sense
SAP is wise to integrate S/4HANA business applications with the SAP HANA platform as a whole, according to Robert Mahowald, IDC's group vice president of applications and cloud software, who attended the Capital Markets Day event.
"They had plenty of customers come in to talk about digital transformation journeys. More and more, it seems though that there's a discussion of how customers were going to be using the applications that SAP has finally gotten around to building and replatforming some of the acquired properties to give us a code line for that on top of HANA," Mahowald said.
It makes sense for SAP to push this as a platform much in the same way that Salesforce does, in that anything you do with Salesforce makes you a platform user.
"All those application adjacencies, like the mods, objects and stuff that you build, sit alongside your SAP application because you build them and test and run from the platform," he said.
Building intelligence into the ERP is the way to go, Mahowald said, adding that it's still early to see exactly what forms it will take, but machine learning promises to improve processes such as logistics where, for example, it can help avoid mistakes in routing. " I think we're going to get much more advanced as we get more intelligence."
The key is having everything on one platform, he said.
"There's a notion that the industry is coalescing around 'intelligent apps' or 'i-apps,' and the notion is that all of these applications get smarter, but because they're linked to a central platform," Mahowald said. "And to some extent, SAP only gains that capability if all the applications live on a common database and platform tier; the intelligence, the processing, the syntactical parsing all happens on the platform, and that's what makes the applications better."
Plans are good; execution is the question
SAP has made a good effort so far on the technology front, but needs to execute its plan effectively to be successful, according to Holger Mueller, principal analyst and vice president at Constellation Research Inc.
In the two years since the product's release, almost all of the S/4HANA adoption has been with on-premises implementations, but this may change with SAP S/4HANA Cloud, Mueller said. One key will be a strong, dedicated cloud sales team.
"They need to get someone out there who can only sell S/4HANA Cloud and focus on that," he said. "So, this is an overdue move, given that they could see the cloud S/4HANA was not really being adopted."
SAP has an advantage in having a strong product value proposition, with the contextual analytics, digital assistant, machine learning capabilities and Fiori user experience, Mueller said. However, he noted that SAP did not go into many details on the specifics of the Clea machine learning technology, which he said is something to keep an eye on in the next year not only for S/4HANA, but for the entire SAP product portfolio.
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