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Business News/ Industry / Infotech/  SAP: The road beyond ERP
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SAP: The road beyond ERP

SAP, the German ERP software company, has successfully made inroads into cloud computing and digital solutions

SAP, a €20.8-billion company, has about 8,000 employees in India.Premium
SAP, a €20.8-billion company, has about 8,000 employees in India.

German multinational corporation SAP SE may be best known as an enterprise resource planning (ERP) software firm but senior executives insist that it has successfully moved beyond ERP to providing cloud computing and digital solutions as well.

“Until about 2010, 70% of our revenue globally was from ERP. At the end of 2015, only about 30% of our revenue was from ERP and 70% was non-ERP," Deb Deep Sengupta, president and managing director, India subcontinent region, SAP, said in an interview.

Sengupta acknowledged that while “the benefits of ERP became visible in large enterprises, there was this perception that for a smaller company, SAP’s technology is very hard to adopt and very expensive too". To address the issue, SAP India introduced many best practices from the implementations it had done in countries such as Brazil and Latin America. “We created some packages for micro-verticals (small, specialized industry segments) and created an ecosystem of implementation partners that did not exist earlier," Sengupta said.

SAP India also started working with agencies “that do nation-building" such as the railways, utility companies, ports and airports. “We also worked a lot with the defence and home ministries," Sengupta added.

In 2010, SAP launched its High-performance Analytic Appliance (HANA) software platform, which enables data processing in real or near-real time for “quick business insights and improved decision-making". HANA can be deployed on premise or on the cloud, a model whereby firms do not spend upfront on licensing and equipment but pay on a per-use basis.

SAP has also spent billions of dollars on acquiring firms whose solutions are cloud-centric. Some examples include Hybris, SuccessFactors, Ariba, Concur and Fieldglass. These, Sengupta said, have helped SAP rise to the world No. 2 spot in terms of revenue from cloud computing applications in 2015. “Globally, we now have over 200 million users on the cloud."

Even the core ERP, now christened ‘S/4HANA’ has been completely re-tooled. “In less than a year since its launch in 2015, we have deployed this solution in more than 2,700 companies. It is available on the cloud and on-premise. You can also deploy it in a hybrid model," Sengupta said.

The €20.8-billion company, which has about 8,000 employees in India, does not give a break-up of its India revenue, but Dataquest—a Cyber Media (India) Ltd publication—pegged the company’s India revenue at Rs10,705 crore in fiscal 2015-16.

SAP dominates the ERP software market in India; Dataquest reporting its market share at about 47%. Its product portfolio includes analytics, customer relationship management (CRM), expense management, human capital management and business-to-business commerce.

The key verticals for SAP in India, according to Sengupta, are manufacturing, consumer goods, professional services and public services. Banking, financial services and insurance is another rapidly-growing vertical for the company, even though competitor Oracle Corp. leads in this space.

For Sengupta, “digital is not just about the front end; it’s an integrated thing. It’s about the experience, which we’ll provide". He observed that while digital firms are building an offline presence, physical ones are going digital too, known as the ‘phygital’ trend.

Sengupta cited the examples of US sportswear brand Under Armour and the multi-brand digital marketplace of the Tata group in India, Tata CLiQ, as examples of companies going phygital.

To cater to this need, SAP announced the launch of the SAP Digital Boardroom in October 2015. According to Sengupta, the boardroom is a “digital approach that aims to contextualize and simplify performance reporting across all areas of business in real time". Built on the SAP Cloud for Analytics Solution, the SAP Digital Boardroom incorporates “fully automated business intelligence capabilities that aim to dramatically improve the quality and speed of reporting as well as collaboration in real time".

SAP is also providing cutting-edge technology solutions to its clients. For instance, it has around 100 engineers working on machine learning, and that team is constantly expanding, said a 1 December 2016 report by research firm Market Realist. SAP is hoping to leverage machine learning to strengthen its cloud-based human resources suite SuccessFactors.

Besides machine learning, SAP has also stepped up its investments to drive blockchain innovation. Blockchain is the technology that underlies cryptocurrencies such as Bitcoin and Zcash.

If SAP succeeds in its machine learning efforts, it could reduce competition for its products and pave the way for more revenue, the Market Realist report said. But it also cautioned that SAP’s aggressive push into machine learning would put the firm on a collision course with Alphabet Inc. (parent of Google Inc.), which is also heavily into artificial intelligence research.

The Internet of Things (IoT) is another area of focus for SAP; it announced an investment of €2 billion over five years in the IoT segment. As part of this plan, SAP acquired Plat.One—an IoT services provider—last September.

To be sure, SAP will have its fair share of challenges in the coming years, especially in cloud computing, said analysts. For one, SAP does not have its own data centre in India yet. Sengupta pointed out that SAP is tying up with local partners for cloud services in India, but analysts remained sceptical.

“The growth has been easy for SAP in India when it came to the top 100 enterprises and then another 300-odd large companies, but the joy ride ends now," said Sanchit Vir Gogia, chief analyst and CEO of Greyhound Research. He pointed out that Indian firms are wary about data residing in a foreign country.

Gogia added that SAP has not found many takers for its “expensive" HANA. Though some enterprises have “technically bought HANA licences", there are only a few of implementations in the country, as not all ERP modules are ready yet on HANA. “Another reason for the lukewarm response to HANA is the lack of skill sets on HANA in India," Gogia noted.

The upcoming goods and services tax (GST) regime, which would need ERP to be modified or upgraded for compliance, could also pose a challenge for SAP, Gogia said. “While SAP is mandating its clients to buy S/4HANA licences if they want to migrate their existing SAP solution to a GST-compatible version, other vendors are offering to supply the GST patch for free," Gogia noted, warning that firms may shift their custom to other vendors as they embrace GST.

The competition is undoubtedly stiff with the likes of Amazon Web Services (AWS), CenturyLink, Google, IBM, Microsoft, Oracle and Salesforce offering public cloud platforms. “AWS and Microsoft lead the pack among global public cloud platform providers for enterprise developers. IBM and Google offer competitive options. Oracle, Salesforce, CenturyLink and SAP lag behind," according to a 29 August 2106 report by Forrester analysts Dave Bartoletti and John R. Rymer.

“Among the megacloud providers, SAP is a challenger," the report said. The analysts pointed out that while the HANA cloud platform’s greatest strength is in shielding developers from all infrastructure configuration tasks when working with SAP business suites, companies “must determine whether the platform is a good choice to also build and deploy applications that are independent of SAP’s business suites" since the HANA cloud platform “offers only a limited set of application development and delivery functions".

SAP, according to analysts, is yet to step up to the full range of language run times, databases, and analytics services of the leaders, although SAP recently released an IoT service to all customers.

“As a new entrant in the market, SAP’s partner roster for HANA cloud platform is small, as is adoption of its platform," the report concluded.

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ABOUT THE AUTHOR
Leslie D'Monte
Leslie D'Monte specialises in technology and science writing. He is passionate about digital transformation and deeptech topics including artificial intelligence (AI), big data analytics, the Internet of Things (IoT), blockchain, crypto, metaverses, quantum computing, genetics, fintech, electric vehicles, solar power and autonomous vehicles. Leslie is a Massachusetts Institute of Technology (MIT) Knight Science Journalism Fellow (2010-11), author of 'AI Rising: India's Artificial Intelligence Growth Story', co-host of the 'AI Rising' podcast, and runs the 'Tech Talk' newsletter. In his other avatar, he curates tech events and moderates panels.
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Published: 16 Jan 2017, 12:42 AM IST
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