Our continued efforts focus on gauging progress in 2022—and the outlook and opportunities in 2023—for members' key areas of interest. ASUG recently talked with Lou Meshulam, Head of Cloud for SAP North America, about the SAP cloud-first commitments, where SAP and its customers are on the cloud maturity spectrum, what customers can expect in the next year, and beyond.

The following is an edited version of the entire interview.

Question: In your view, what were the highlights and the significant milestones for SAP and its cloud strategy and technologies in 2022?

Answer: Great way to start. Let me first mention the SAP 50th anniversary. It's an exciting milestone for SAP and a testament to our relationships with our customers and partners. At the same time, we're starting to hit our stride as we transition to the cloud.

Two things from this year stand out to me: the tremendous growth we've had in our cloud business and the innovation we continue to deliver.

In Q3, we saw cloud revenue growth of 38% (25% at constant currencies). We are building a big base; growing that 38% is remarkable. And, for the first time—and this is going to be the standard from now on—cloud revenue was our largest generating item across our P&L during the first quarter. When we decided to become a cloud-first company, we knew that it was going to be a major investment and it was going to take some time. As we’ve gone through this transformation, our software business has continued to get smaller, and now, we’ve reached a tipping point in cloud growth and operating profit. In 2023, we’ll deliver on both.

One thing the pandemic taught us is that digital transformation is essential. Our customers are looking for ways to compete and grow; we’ve become the foundation. Our customers expect us to innovate, and we are continuing to do that—not just with, but certainly in our platform. Whether AI, machine learning, predictive analytics, RPA, low-code, and no-code solutions, there’s a lot of investment in innovation. Our customers can take advantage of that.

Q: Other than the statistics you just mentioned, how would you assess North American customer awareness and adoption of cloud technology in this past year?

A: We talk a lot about the end-to-end customer journey and the value we can bring to our customers. That's really the North Star for SAP. The only way customers can fully realize that value is to deploy and utilize our solutions. So, it’s about much more than awareness and adoption. That is an important part of a much larger transformational journey.

Our focus is on the customer getting value out of their investment. We need to earn that business every time. We must put SAP’s strengths, resources, and assets behind the customer—driving consumption, adoption, business value, and positive business outcomes.

Q: There's been a lot of SAP messaging to say, "We are a cloud-first company and cloud-first organization." Do you see that customers now believe in that identity and associate SAP as a cloud-first organization?

A: Absolutely; our customers see us as a cloud company. We have come a long way, and I think our customers would agree. There is still progress to be made, but this is a journey. When I started 16 years ago, we were an ERP on-premise company. If you think about where we've come from, just in the time that I have been with SAP, and the customer meetings I have now, the conversations are very different. Customers are not asking if we can take them to the cloud. It’s about how we can support their digital transformation.

Our teams and customers fully understand that we need to be a cloud-first company, not just for our business’s sake but customer’s benefit. Our customers want agility, and they want to drive business value, they want continuous innovation. In the on-prem world, it's increasingly challenging to get that. Things are changing so rapidly in our customers’ environments that they need to be agile to survive in today's environment. We want our customers not just to survive but succeed. So, our technology is designed to support the agility our customers need today and the innovation that will propel them into the future.

Q: What have been some of the largest business challenges you've seen among customers that they address and overcome with SAP Cloud solutions?

A: There are a lot of challenges our customers must face, and we are, of course, not immune to those challenges either. Inflation comes to mind immediately. Supply chain disruption. Labor shortages. Climate change. All the political unrest. There's been massive disruption that our customers needed to navigate through.

Just take a couple of these examples, like the labor shortage. Everyone knew that there would be a labor shortage, but how the pandemic magnified its impact, with so many folks not coming back to the labor market, was unexpected. So we're helping our customers, through our Human Experience Management (HXM) solutions and AI, to figure out what they need as well as manage hybrid work models, supply chain, and workforce planning.

Supply chain has also been a significant focus area this year among our customers. Our solutions are ideally suited to help support our customers in all the supply chain challenges they face. It's all about visibility and connecting. Our customers need to see where the issues are as they develop to make informed decisions rapidly. That's really what our software provides. The end-to-end supply chain solutions we have are unmatched. There are a lot of niche and point-to-point solutions out there, but no one can do what SAP does across the entire supply chain.

Q: Is there any unfinished business in terms of the cloud strategy or technology platforms as the year ends?

A: There's always unfinished business and more innovation that we want to drive. If you talk to our head of global development, there's no shortage of innovations that our customers want to see and that we’re working to deliver. This year, we’ve innovated across our entire cloud portfolio. Regarding where we're spending our time developing and where innovation will come from, Industry Cloud is undoubtedly at the top of the list. As we build out our foundation, that's where our customers want to go. A lot of continued work will happen with industry solutions.

You’ll also see continued development on the Business Technology Platform to make ensure that our customers utilize all our capabilities and the foundation we have in place. You can only have great applications with a great foundation. One new offering on top of that foundation that we just announced at TechEd in November is SAP Build. It’s a low-code solution tied into SAP BTP designed to help companies fill the gaps from the developer shortage by putting the power in the hands of business users. This is just one way we’re working to ensure SAP solutions continue evolving with our customers' needs.

Q: What is one thing you are particularly proud of regarding the cloud and the SAP customer base this year?

A: What I'm most proud of in the last year is how we've worked with our customers. In these complex times, I’m proud of how we've been able to stand with our customers, shoulder to shoulder. I'm proud of how we keep customers at the center of our world.

When I started at SAP, I thought we had a strange mission statement for a software company: 'To help the world run better and improve people's lives.' It seemed a bit out there. But as I have come to live at SAP and it’s become my work family, I see every day that we're committed to making a difference in people's lives.

As you know, I'm based in Chicago. One thing I'm personally proud of that we've done this year is how we doubled down on our investment in the community. We formed two partnerships: one with The BASE Chicago and the second with Discovery Partners Institute (DPI).

The BASE Chicago is an organization that engages youth in underserved communities, particularly on the West Side, around sports and STEM education. We've been able to strike up a partnership with The BASE and have hired a number of folks into SAP through this connection. We found some incredible talent in places that are too often overlooked, and we are all the better for it.

The other partnership, with Discovery Partners Institute, is all about opening up tech careers to underserved communities. DPI is currently training its first cohort of 20 apprentices in basic technical skills. As DPI’s inaugural partner, in January, SAP will welcome these apprentices as interns with the goal of full-time employment in 2024.

While I am always proud of how we work with our customers, I am also especially proud of how we're making a difference in our communities across North America.

Q: Let’s switch gears to look ahead to 2023. What can ASUG members expect to see from SAP in terms of the cloud?

A: There are a number of things that stand out. You can absolutely expect a focus on customer lifetime value (CLTV). CLTV is our ultimate success metric because it encompasses everything we want to achieve in a Cloud-first world: exceptional experience, empowered talent, accountable leaders, a vibrant ecosystem, and a differentiated value proposition. It is all about customer value and customer success.

Rapid innovation will continue. We are continuing to invest in the cloud platform and ways in which we can further enable our customers to leverage predictive analytics, AI, and machine learning. The SAP Business Network is continuing to grow and evolve. SAP is the de facto standard on business networks. The networks are game-changing as customers are looking to get more connected and increase visibility in their supply chains. We will continue to build on that success and expand our footprint.

Sustainability also remains important to our customers and us. Our customers know that this journey to operate sustainably is a marathon with no finish line. Some are looking to quickly regain compliance with rapidly changing regulations, while others want to optimize their ESG data management and performance. In nearly every case, these are multi-year digital transformations to become intelligent, sustainable enterprises. We’ll continue to work with our customers every step of the way.

Almost 90% of global commerce touches SAP systems. Much of the data needed for holistic corporate sustainability management lives in those systems. So we recognize both the opportunity and responsibility to deliver digital solutions that enable our customers to manage their strategy and the planet’s limited resources, contribute to an inclusive economy, and shape a sustainable future.

Q: Are there particular industries or markets on which the Customer Success team and Cloud Strategy team are mainly focused on for 2023?

A: We want to help every business become an intelligent, sustainable enterprise. There really isn't a certain vertical or set of verticals that we're prioritizing. Every vertical is critically important to us, and each industry has its own unique challenges. We bring our industry expertise to each company and focus on what’s most important to them.

Q: What are the key pieces of advice you'd offer to ASUG members regarding what they need to know, be aware of, and understand related to SAP and its cloud strategy and technology platforms?

A: The main thing I want every customer to understand is that it is essential to have one unified technology platform. That’s the foundation. SAP BTP is that trusted foundation that combines advanced capabilities and enables customers to build on our solutions through app development, data and analytics, integration, artificial intelligence, and more. Through leveraging SAP BTP, customers can significantly expand the value of the SAP landscape. We have 14,000 customers on SAP BTP, but the degree to which they use it varies. There’s a lot of value to unlock here.

IDC recently did a study where they interviewed SAP BTP customers about their experiences with the platform. They heard from these organizations that they achieved significant value by using SAP BTP with their SAP ecosystems. They have not established more cost-effective and efficient SAP environments and capture more value through automation, integration, and increased functionality. There's so much value inherent in the platform.

One other element that is a critical part of any successful cloud strategy is close collaboration. So many resources are available at SAP to partner with our customers on their journeys and help drive the outcomes they're looking to achieve. We and our extensive ecosystem of partners are here for our customers, and we want to be fully engaged in every part of our customers’ transformations. I want to make sure our customers are tapping into that, and where there’s room for us to offer more support and get further engaged, we strengthen our collaboration.

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