SAP is a multinational software firm headquartered in Walldorf, a town in Germany. It started in 1972 as a private partnership, and during the course of nearly five decades, morphed into a €27+ billion, publicly traded company with offices in 180 countries and over 425,000 customers worldwide.
The enterprise software giant is headed by CEO and COO Christian Klein, who leads SAP’s transformation into an intelligent enterprise by focussing on key areas such as business process simplification, global IT, product and services quality, and digital innovation adoption. Klein began his career at SAP in 1999 as a student. He held different positions in Active Global Support Operations and Services Operations, and served as Chief Financial Officer of SAP SuccessFactors.
At a recent media event at the SAP Sapphire Now technology conference, Klein discussed the way forward through the pandemic, SAP’s cloud platforms and Business Network, his outlook for 2022, and a range of other topics.
You’ve spoken to customers over the last 15 months of the COVID pandemic. How are they coming through the global crisis?
Over the last 14 months, there’s been a really big change in how many enterprises run their business, including after the pandemic.
First, we had so many enterprises who had to completely change their business model overnight, like going from traditional sales to SAP Commerce Cloud sales. We architected the supply chain to enable home delivery, offering you payment terms and optimising cash flow. Technology is the enabler to do that. Because of the crisis, we’re seeing more resiliency.
Second, supply chains. We saw the disruptions in the Suez Canal, for example. We saw disruptions with the semiconductor shortage and it’s disrupting business and manufacturing of many products. This is why we came up with the idea 12 months ago to architect the Business Network, the world’s largest business network where we bring all parties together: buyers, suppliers, manufacturers, and logistics providers, to make sure that we have real-time transparency across the supply chain.
Last but not least, sustainability. It was there before the crisis; it’s also our biggest challenge after the crisis, to fight climate change, and this is what we want to enable our customers to do as well. Because you can’t actually act on something when you can’t measure it. This is why we infuse and embed sustainability as a key driver into all of our products.
What is some of that caution on IT spending that has been impacting SAP? And what are some of the market challenges you see going into the second half of 2021?
Two points on that. First, after the outbreak of the pandemic, right away I had a few concerns about the ability to deliver IT projects in almost a completely remote way. But over the last months and quarters, we have proven, together with our partners, that we are very resilient. You don’t always have to be on-site to make IT projects a success.
The second point, especially in Asia, we have many customers who said: “There are so many supply chain disruptions. I have to change my business model. I need to go to SAP Commerce Cloud.” For some of these customers, we found solutions in days, switching from traditional sites to SAP Commerce Cloud. We also onboarded them onto our Business Network to ensure that despite disruptions and country lockdowns, they can still find the logistics provider who can, for example, transport the ingredients for the vaccine from Asia to the United States, or to Europe.
This is how we showed how well the technology works, and this is why I’m super confident that the demand for more technology and transformation is increasing even during the pandemic and after it. Because many customers realise you can master these challenges only with technology and with a partner like SAP, who’s really transforming their business.
When will top-line growth become the number one priority again? What do you think about Salesforce CEO Marc Benioff’s recent comments about potentially overtaking SAP?
First of all, when it comes to integration, I want to be very clear. That helps our top line, big time. Because in the end, we are a business software company. You don’t buy Ariba, you don’t buy SuccessFactors. In the end, you want to provide a seamless experience for your end users in procurement and in HR. When the solutions talk to each other, and from hire to retire you can have this beautiful experience with delightful HR services, also with data format applications. Because HR is not an island in a company.
The same is true for finance and supply chain. When you can connect the supply chain to an SAP Commerce Cloud shop, and you can do inventory checks real time, and you can tell the consumer: “Hey, this shoe is in stock, we’re gonna deliver this to you tomorrow” without doing three- or four-day background checks on how to deliver now, that’s actually a different trading capability. So in the creation is the foundation and that happens on our platform. With the platform and ecosystem joining, they can then extend core applications but now they’re doing it in the cloud in a modular way.
To the Salesforce question, we have a few competitors who like to talk about SAP in terms of earnings. I take this as a compliment because when I learned that if you talk so much about other competitors, there must be something about that competitor. Otherwise you wouldn’t waste your time on such talk. You would rather discuss the strengths of your own company.
But if they talk about SAP, that’s actually a good sign. Talking about us, I can only say that CX Works and SAP Commerce Cloud were some of our fastest growing businesses in the previous quarters. Talking about our numbers, we had a fantastic Q1. We saw the highest new cloud growth in five years. We had the highest operating profit ever in Q1. We let the numbers speak for themselves.
How do you see the larger geopolitical tensions impacting cybersecurity? Is it making the IT sector extra cautious?
Cybersecurity is probably one of the biggest challenges of the tech sector, and when you see the latest news, what happened with successful attacks, it shows that everyone needs to stay really focused on that topic. This is why we at SAP, we really put millions – I would almost say hundreds of millions in cybersecurity – to really make sure that our firewalls are the best in the industry, because we have mission-critical data from our customers. This is the data of our customers and it’s our obligation to protect them in the best way.
Together with our partners, we’re constantly building even better firewalls around this data, which really goes across the stack. We’re putting in a lot of effort at SAP in checking these firewalls almost every hour to see how effective our controls are. So we take this super seriously because we also owe this to our customers, especially when they are actually giving us their data to move to the cloud.
Do you see more adoption of automation technologies like robotic process automation (RPA) from a large-scale perspective? What are some of the potential challenges you see for clients adopting RPA?
RPA is definitely the technology for which we see the highest adoption rate when it comes to the automation of business processes. Because it doesn’t take so much effort to really automate a single workflow. Just to give you a feel, I look at the adoption numbers every month and actually 60% of our customers already have RPA scenarios embedded in the workflow of SAP. So RPA has definitely seen a very high adoption rate. There was a recent study, and next to Microsoft, SAP was actually leading in the RPA sector.
Machine learning is the next level, and this takes a bit more effort. You have to have the right algorithms. The data model needs to be high-quality because if you don’t have good data, no matter what, the algorithms will not provide the right business outcomes when it comes to predictive analytics or other automation scenarios. We also distinguish between lightweight machine learning scenarios where we can say: “Hey, you get an immediate benefit without deep learning of the algorithm.”
Because not every customer can really afford to hire a bunch of data scientists.
About SAP’s new cloud strategy, what percentage of your products are on the cloud? Which products have not yet moved to the cloud and will be doing so in the future?
The answer is pretty simple. Everything outside of ERP is already in the cloud. Of course we are taking all customers with us; we are still providing firewall on-premise customers in Customer Management, in procurement, in HR. We are providing legal updates, we are offering maintenance and support, and of course, we are keen on helping them move to the cloud.
We’re completely focused on the cloud in the ERP space. We actually also don’t want to leave one single customer behind.
Could you talk about the position of Qualtrics within SAP moving forward?
Qualtrics is key after the pandemic for many of our customers, because I saw it also within SAP. In times like these, you cannot over-communicate. When I’m sitting and watching how this enterprise has to operate, I need to feel the pulse. First of all, with my customers: What do they need? I cannot wait for the next customer survey in six months. I need it now. I need to get feedback.
How are services delivering in times of the pandemic? Can they continue with their project? How is sales doing? Do they get the support? How is engineering? To get real-time feedback, we infuse them with Qualtrics. When I wake up in the morning, I want to see the sentiment of my customers.
The same is true for employees. As much as I liked the perspective of my dear board colleagues, it’s better to have data and to get real-time feedback from the employees. So we always watch that almost on a weekly basis.
You don’t want to have this separated; you want to have it embedded in your business operations. This is why we did a lot of work on integration and we are selling this bundled solution now to our customers.
What are you most optimistic about in 2021 for the rest of the year and looking into 2022?
2020 was a year with a lot of change in the market due to the pandemic, and also within SAP. For 2021, indeed, there is reason to be optimistic. First, technology is a key enabler for the changes in many industries. It gives us optimism for the remainder of the year, and the years to come with the Business Network and with sustainability.
Look, what gives me optimism and excitement is when we talk about sustainability. This is where we can also help our society, where we can also help to fight climate change. That’s the biggest challenge.
There’s so much excitement on the CEO level, but our engineers are also excited because they feel “Hey, with the code we are producing, we are helping the world become a better place and improve people’s lives.” That’s what creates a lot of excitement. This is where I smiled and said: this is SAP, this is our community, and this is how we should do certain things.