How SAP is going to simplify its ERP
Chris Pennell, Lead Analyst, Public Sector
It is fair to say that the public sector’s view of enterprise resource planning (ERP) is one of a platform supporting a set of tightly knitted solutions that tends to be customized to suit individual enterprise needs, in turn requiring a complex array of maintenance and licensing agreements. But the disruptive forces of cloud provide buyers with a chance to reconsider this preconception. Vendors must now puzzle over how buyers can carry on consuming best-of-breed services that allow for customization while satisfying their increasing demand for flexibility that cloud-based services purport to bring.
SAP provided more insight into how it would address this issue at its annual event, Sapphire Now. Though it reaffirmed that HANA would continue to be the core path for its customers’ migration to the cloud, it recognizes that it needs to make the journey simpler. SAP will need to articulate clearly the value that such a platform can bring to public sector customers and what this means in terms of licensing and support.
The public sector is a strategic industry
It is easy to miss (or ignore) changes to the enterprise technology road map when you have significant recurring revenue streams derived from a wide-ranging installed customer base. However, even the companies that have profited most from the “old” model must now acknowledge that the disaggregating impact of “as a service” and cloud platforms are starting to change consumption patterns in a meaningful way. ERP vendors such as SAP have therefore had to adapt. Their challenge is in how to take the installed base with them without cannibalizing existing revenue streams.
It has been clear for some time that for SAP this meant HANA, but it has not been clear what this means in terms of practicalities for existing and new SAP users in the public sector, or how SAP intends to enable a clean and simple transition to HANA.
This transition, it turns out, will be enabled under SAP’s Industry Cloud, a model built around collaboration and innovation supported by simplified user interfaces. Customers would be able to choose between public, managed, and hybrid cloud infrastructure, with applications designed to appeal to specific audiences.
Taking an industry approach is not new or unique; it is very much the current preferred route to market cloud services, with several competitors having already adopted similar approaches.
Key to acceptance and uptake for SAP will be its ability to convince customers that HANA can provide a platform not only for its traditional services, but to enable new, as yet undefined business applications, some of which the public sector enterprise might want to offer as a shared service. At the same time, it needs to convince customers that it is peeling back the layers of complexity and making the process more intuitive and simple.
SAP’s approach to its product portfolio has led to a burgeoning set of platforms, creating unnecessary complexity. The theme of simplicity that ran through Sapphire Now therefore resonates internally as well as externally.
Externally, SAP’s opening gambit in its drive for simplicity is to push Fiori and Screen Personas, which it will now provide for free. Although neither is new, the fact that they are not charged for separately will be attractive. Fiori’s increasing coverage of SAP’s processes, 300 of which and counting, is likely to make it attractive to customers looking for simple plug-and-play services. Our view, though, is that most government users are likely to consider Screen Personas first, as this is optimized for specialized or customized transactions and optimized for the desktop environment.
Making the user experience simpler is only the first step. There is still some way to go to simplify the range of platforms and application stacks that is needed to simplify SAP’s product portfolio. Simple Finance provides customers with an insight into the likely direction of travel. Building on HANA’s in-memory database in HANA Enterprise Cloud – SAP’s managed cloud as-a-service offering – Simple Finance does not replace the existing SAP Business Suite of finance applications; rather, it is aimed at providing users with a simplified view across these applications while also allowing customers to connect to other applications.
Simplifying “as a service”
Simplification will also be applied to the increasing set of software-as-a-service (SaaS) offerings, such as SuccessFactors, which provides HR capabilities, and over time these will be consolidated onto the HANA Cloud Platform – SAP’s multi-tenant platform-as-a-service (PaaS) offering.
Another area that could hold considerable interest for public sector users of SAP services is Ariba, SAP’s subscription-based vendor management platform. SAP is expanding the range of partnerships, the first of which is the trial tie-up with eBay as part of the Ariba Network Spot Buy services. The partnership fits with the overall direction of facilitating controlled and filtered access to public and third-party content across various markets, while offering procurement professionals access to more dynamic market places compared to traditional catalogues.
For buyers, the service helps them keep spending below certain pre-defined thresholds, while providing greater transparency into spend activity.
HANA is clearly the driving force behind SAP’s product road map. The focus on simplification combined with managed or multi-tenant cloud services such as Ariba will be attractive, but as buyers move away from wanting heavily customized solutions to wanting increased flexibility, SAP will have to do more to demonstrate that its platform can provide public sector enterprises with the solution.
SAP faces increasing competition, and it needs to build out its customer reference points to demonstrate its ability to counter the likes of Salesforce.com. It also needs to do more to develop its licensing models and ensure that it has a robust sell-through model and that it can articulate the benefits for public sector enterprises clearly.