As SAP continues its heavy focus on Midmarket customers in the Americas—and secures RISE with SAP, SAP S/4HANA Cloud, SAP Business Technology Platform (BTP), and other solution growth in that sector—ASUG caught up with a key high-energy SAP leader in the space.
In this wide-ranging interview, Greg Petraetis, SVP and Managing Director of Midmarket and Partner Ecosystem, North America, revisits previous topics of conversation and covers new ground, including North America as the “net new customer engine,” SAP growth-driving solutions, and remarkable innovations by customers.
This is an edited version of the complete interview.
Question: This discussion is a bit of a look-back and look-forward. What were the technology and solution highlights, and the major business and strategy achievements for SAP, in the midmarket sector in 2022?
Answer: It's all about the cloud. Across the company, we've seen double-digit growth in the cloud year-over-year. With SAP S/4HANA Cloud, our cloud backlog has more than doubled as of last year's earnings, so real progress and momentum are happening within the organization. When we spoke last year (2021), we talked a lot about RISE with SAP, which remains a huge priority for this market. If you look at the statistics, 65% of the RISE deals that were done this year were done in the Midmarket.
Q: What’s the midmarket telling you it needs?
A: Our customers value a concierge process that’s frictionless, ready-to-use, and built on proven industry best practices. Our customers want to take a fit-to-standard approach to their business. They don't want heavy customization or heavy configuration. They want value, ease, and speed.
They don't necessarily have huge IT teams to make all of that happen, so they're looking to us for help. For the industries that are ready right now for public cloud, we (along with our partners) are sharing with our customers what that roadmap looks like.
We will continue to invest very heavily in the marketing, sales, and support of that product because customers see value right away; we can deliver the initial scope within 30 days or less. We can decrease implementation costs pretty dramatically. We're giving our customers 40% to 60% faster time-to-value. We've seen that's holding true.
Q: Can you talk about certain customers or industries?
A: Yes. One of the fast-growing industries where we are seeing a lot of interest is life sciences.
The biggest challenge we’re seeing in the midmarket is how to scale quickly. SAP S/4HANA Cloud, public edition is a ready-to-run solution. Because of how SAP S/4HANA Cloud, public edition is implemented, customers are able to get up and running, digitize their business processes, and get visibility into the business—in finance, manufacturing, distribution, and customer service—that they didn't have before. The end result is that they've been able to push out products to their customers much more quickly, in a way that supports business growth, and they’re able to do that profitably.
I'm excited about the public cloud and its potential with our customers. A lot of the customers that we're talking to—both net-new to SAP as well as legacy ECC customers—want to take our 50 years of experience and use it to get to a simple, clean, sustainable environment to back their business.
Q: What progress points are you most proud of when you reflect on 2022?
A: There are so many things, but mostly it’s the work we are doing with our customers and our incredible ecosystem of partners.
First, many midmarket customers are making their first major systems decision, are going through their first major digital transformation effort, or have yet to buy from SAP. With different points in departure—whether it’s ERP, human capital management, Intelligent Spend, or whatever the case may be—we have the pleasure of helping them where they need to go. They're joining the SAP family in droves, and I'm excited about that.
Next, it’s the work we can do with our amazing ecosystem. Our customers are buying for big reasons: for our industry credentials, IP, subject matter expertise, applications, platform, and portfolio. They're investing in the information infrastructure that they need to support the growth of their business and the applications engineered on top of it. They're buying into the three and a half million people surrounding this company: the community of customers, partners, and the people who will be there to help them innovate in the cloud. This incredible ecosystem—and the dialogue we can help facilitate—is one of the hallmarks of how we do business.
Last year when we met, I talked about the ACV partnership and the importance of the Think Tank connections. We're continuing with these conversations, and we’re extending the conversation into new venues. A good example is our Partner Advisory Council, where we bring our partners in to help share, collaborate around issues, ideas, thinking, and best practices, and get feedback on what’s working and how we can do business better. As our portfolio becomes broader, our partners are collaborating, tapping one another’s strengths, and working together for the success of our customers. We firmly believe it's not SAP and the ecosystem; SAP is part of an ecosystem.
We are pioneering some new routes to market with our Strategic Initiatives Team. With one of every three opportunities backed by an investment firm, it’s an important avenue for growth. A few months ago, we had a summit where we brought in the operating partners from investment firms, our implementation partners, and technical advisors with SAP to figure out how to scale our approach for investment-backed firms and create more repeatable success for those companies within the ecosystem.
We're starting to see incredible traction and scale with investment-backed companies— and that summit helped set the stage for that interaction. They turn to SAP because they want a system they can never outgrow, and SAP has the solutions to do just that. We're catching them throughout their transitions from being innovators to being disruptors, category leaders, and global leaders.
Q: What are the customer voices saying to you as far as their challenges in 2022 and bridging into 2023?
A: Midmarket organizations are no different than large enterprises with a lot of the challenges they’re seeing.
They're placing an emphasis on digitization, innovation, and efficiency, especially in the face of supply-chain pressures.
They’re also thinking about worker and knowledge gaps and investing in talent management, upskilling, and software that supports automation and greater employee efficiency to increase engagement. It’s everything from hiring to retirement because, in midmarket companies, their human capital is a very important asset for them. It's all about the people.
Of course, some near-term economic factors—inflation, recession, more expensive capital—are top of mind for them, as well.
Q: Is the prospect of a recession coming up as a concern? Are customers really highlighting that?
A: Yes, and from my view, it hasn’t hampered investment in technology.
Customers are looking at digital investments and making thoughtful decisions about when and where they’ll invest. In certain industries in the Midmarket, our business is growing astronomically year-over-year, and technology is a big part of that agenda. Net-net, our customers are willing to spend a dollar if they can get five in return, but they're very discriminating about where and how they spend. The good news is that we have the solutions to keep up with these challenges.
Q: Are customers also asking for and wanting to understand more about SAP Business Technology Platform, more about SAP Signavio, more about the larger portfolio of solutions—CRM, HXM, etc.?
A: Absolutely.
Anything with customer relationship management—namely, finding ways to engage, service, and market with their customers—is critical for our customers.
At the same time, they know human capital management is critical to the success and growth of their business. They want to recruit the right people, onboard and enable them quickly, have ways to manage their progress and performance, and optimize their total rewards packages. Our SuccessFactors suite and the modular approach we can take into addressing those needs as they evolve for those companies is a really attractive offering for them. They can address each one of those needs discreetly or take a full-suite approach.
Operating partners at private equity firms really like Signavio because it helps them understand the perspective benefits of new technology and quantify the benefit of it. They also love the business process intelligence information it gives them because they can see the promise they've invested in because people are using the technology the way it's supposed to be used. It’s an incredibly powerful tool.
We’ve also seen huge interest in BTP. BTP is an extensibility framework that can not only help integrate and support other technology standards but also can develop on top of that platform (or have our community developing on top of that platform) so that customers are always on the leading edge of innovation. BTP, combined with what our partners are developing, is a clear differentiator in our customer technology stack.
Q: Now it's prediction time. What are your predictions of progress, improvement, and obstacles for the Midmarket sector and Midmarket companies in North America in 2023?
A: We've been in partnership with our customers for 50 years, and we’ve seen our customers through some really major transformational moments. Right now, people say we’re in an impending recession; I say we’re actually in a recession, and we're helping them through the next phase of their business. What's clear is that we've got a really incredible ecosystem of employees, partners, and customers helping other organizations weather the economic storm. Together, we are looking at this as an opportunity to double down so that they come out of this thing pound-for-pound stronger when the recession is over.
One of the constants during these moments is that our customers continue to seek us out as a trusted advisor to help with their business. We're being seen as a strategic partner to get them where they want to go faster. The majority of our customers will go live with our solutions in seven to nine months. They don't even need to wait a year to start moving in the direction they want to go.
As far as what success will look like when I come back next year: I will tell you all about the new customers that we've signed during 2023, that they've gone live, and that they're successful on SAP. We'll let the results speak for themselves.