SAP’s traditional on-premises customers are making “phenomenal” commitments to the cloud as they gain more confidence in the cloud’s capabilities and realize that sticking with the IT model of the past is just too risky.
In a 1:1 Zoom interview last week (you can see the full video here), SAP board member and head of global product engineering Thomas Saueressig said the company’s ability to offer end-to-end digital solutions with deeply embedded AI plus enhanced security and many industry-specific applications have convinced even cloud-resistant customers to take the plunge.
Describing SAP’s modular S/4HANA Cloud ERP suite as a “force multiplier” with revenue growth of 75% last quarter, Saueressig said customers across every industry — even those that until recently were skeptical about the cloud — are buying into the cloud’s potential and value.
“We feel that exactly this wave type of wave is coming,” Saueressig said in our interview. “Our customers are very actively moving big-time to our cloud solutions.”
A major factor driving those conversions, he said, is the RISE “business transformation as a service” offering that is designed to allow customers to plan out their own cloud journeys, beginning with their business transformation strategies and evolving business models and then coalescing around their unique choices of cloud solutions to address their specific needs.
“This is a very big movement, and RISE is, I would argue, the most successful launch we’ve had. If you think about our cloud ERP revenue growth in the past two years, it’s phenomenal, quite frankly.”
I think that’s a fair statement. Throughout 2022, revenue growth for S/4HANA Cloud was at or near 100%, and in Q1 of this year it was 77%. You can get the full details in my late-April analysis, SAP Q1 Cloud ERP Revenue Soars 77%; Total Cloud Growth 24% as well as my outlook for Q2 in SAP Q2 Earnings Preview: Christian Klein’s 5 Cloud-Growth Engines.
Citing go-lives with AMD and new deals with BMW, Nestle, and Bayer, Saueressig cited the momentum as “phenomenal” and said it cuts across “all industries and all sizes of customers.” Again, to get the full context behind Saueressig’s confidence, please check out the full 20-minute video interview here.
Saueressig described in some detail the twin benefits of going with modern cloud ERP: first, the lengthy range of interconnected and complementary cloud services offered to customers via the RISE program; and second, the speed at which these new implementations can happen. Gone are the days, he said, of back-breaking and budget-busting five-year, eight-figure, and even nine-figure deals that also crushed more than a few careers.
Instead, he said, customers are now expecting great results in five months — and as an example, Saueressig cited a Porsche venture that required less than three months to go from final plan to full production for S/4HANA Cloud and also Manufacturing Cloud.
The venture is led by Porsche and Schuler and is aimed at helping consumers spec out and purchase high-end vehicles designed to their unique requirements. The customers, Saueressig said, were attracted by S/4HANA Cloud’s ability to address the need for solutions to be intelligent, sustainable, networked, and collaborative.
Called Smart Press Shop, the Porsche-Schuler joint venture had plans to build a new and completely modern factory and selected SAP for S/4HANA Cloud and also SAP Digital Manufacturing. From final plan to successful implementation, Smart Press Shop had those apps up and running and less than three months, Saueressig said.
That’s a very impressive timetable, but even more striking is the number of IT workers needed to oversee the new plant: two!
“It’s purely digital — there’s no paper at all — it’s a dark factory,” Saueressig said.
“So yes it works end to end, and we now embrace even new AI capabilities like visual inspection to further drive up the level of quality and business outcomes together with our customers.”
From his role as the head of global product engineering for all of SAP, Saueressig is responsible for ensuring SAP’s solutions are designed to deliver that seamless end-to-end approach with an increasing level of focus on industry-specific solutions. On top of that, as Saueressig describes in the video, sustainability features and capabilities are built into every SAP application.
Later this week, when SAP releases Q2 numbers on July 20, we’ll see if broad customer demand continues to reflect the ambitious and optimistic outlook expressed by Saueressig as SAP completes its makeover into a high-growth business-innovation engine in the cloud.
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