For SAP users to scale and accelerate cloud migration strategies while simultaneously ensuring the success of their SAP S/4HANA implementations, it is crucial for SAP to continuously educate and engage the entire customer ecosystem, equipping them with global best practices and the right expertise to complete their journeys.
As Head of S/4HANA Business and Market Development at SAP, focused on SAP S/4HANA Cloud, public edition, Marcus Venth plays a key role in this on-going customer evolution. More than two decades into his career at SAP, and with previous leadership roles in cloud consulting, customer engagement solutions, and S/4HANA global business development divisions for SAP North America, Venth says that he’s committed to both serving installed-base customers and bringing new customers into the SAP ecosystem.
Amid recent developments within the SAP S/4HANA Cloud portfolio, and with the new SAP S/4HANA release 2023 planned for October, ASUG sat down with Venth to discuss the state of the SAP customer ecosystem and developments ahead.
This interview has been edited and condensed.
ASUG: As our members weigh their future innovation paths, questions remain about making the move to SAP S/4HANA. What factors matter? What makes a customer a better fit for SAP S/4HANA Cloud, private edition, than SAP S/4HANA Cloud, public edition, for example?
Marcus Venth: When it comes to installed base customers, we see the majority going down the path of private cloud, for the simple reason of maximizing their investments in their current ERP solution as the move to the new environment. Private cloud allows configurations, customizations, and historical data to be carried over into the new environment, managed by SAP. Further, they can upgrade on their timeline. Within private cloud, customers have a path to a clean core, while allowing SAP to deliver innovations such as AI and Sustainability Solutions.
While we help customers determine the best path for them (public or private cloud), we do see the benefits of moving straight to public cloud in a few of areas. Number one: there are a few industries, where the market largely demands a public cloud ERP solution regardless of size, such as the professional service industry.
Number two: when we're dealing with subsidiaries, divestitures, incubations, and scenarios like that (commonly referred to as a two-tier ERP), we see a lot of interest in public cloud because they can install and implement it very quickly. It's standardized, easy-to-use, easily configured, and meets all the needs of these smaller entities.
Finally, there are small and mid-sized SAP ERP customers that may be falling behind in the application lifecycle; maybe they’re in an older release and are at such a point in the journey that converting to private cloud is more onerous than moving straight to the standardization public cloud. Maybe the configuration doesn't meet the requirements anymore, or they have a lot of technical baggage. In these instances, I’m confident that these customers would benefit from and enjoy SAP S/4HANA Cloud, public edition.
When it comes to new customers, there's obviously an important decision that needs to be made. A lot of innovation is being delivered in public cloud, and with updates every six months, we can deliver innovation more quickly. That’s very attractive for many customers. In this instance, I would challenge them to answer, “Why not public cloud?” In the early stages of engagement, we take new customers through the discovery process with the [SAP Digital Discovery Assessment] DDA tool which helps us understand their business requirements against what we have to offer in our Cloud ERP portfolio and gives us an unbiased recommendation whether they should go public cloud or private cloud.
ASUG: What customer examples come to mind for you in considering this public or private cloud innovation path?
Venth: The automobile industry is in the middle of a transformation. Everything’s being turned upside down with electrification, battery technology, hydrogen technology and connected vehicles. And with that, there's a lot of startup activity and interest from these car companies to invest in new technologies. One German automotive customer, over the past few years, has implemented six deployments of public cloud that they've used for acquisitions and incubations ; all of these are great examples because they don’t necessarily want to impose their original equipment manufacturer (OEM) footprint of a highly customized ERP on these smaller subsidiaries.
Another example is the subsidiary of a large US automotive company which makes electric delivery vans. They wanted to tap into the resources within their headquarters who would have familiarity with SAP processes, terminology and technology, but operate in a separate system that allows them to be more autonomous. They don't like to think of themselves as what we call two-tier ERP; they’re an independent SAP customer, with the support of the rest of the company and the skillsets that the company brings to help them get ramped up more quickly.
On the flip side and on the smaller side, we have an established SAP customer in the mining parts supply industry in Australia, with 200 employees that was running SAP ECC. That's a substantial system to be managing on your own, in a company of that size. They eventually moved to the public cloud a few years ago, greatly simplifying their IT operations while getting faster innovations
ASUG: Some of the main reasons we see our members move to S/4HANA are the more modern capabilities, greater self-service, and embedded analytics—all these tools smaller companies use. Can you talk about that motivation for progressing to S/4HANA: finding a system that allows for a certain amount of flexibility and that can empower smaller companies while reducing the complexity of the landscape in which they have to operate?
Venth: Specific to SAP S/4HANA Cloud, public edition, it can depend on who we talk to at the customer. When we talk to CIOs, they like the restriction of not being able to commit the sins of the past — meaning code modifications, or heavy customizations. They like the structure that a public cloud solution provides and also the cloud qualities—with updates on a fixed schedule, always being up to date. In a sense, there’s this idea of it being self-healing. If one customer logs a ticket, and we recognize there's an issue, we fix it for everybody. At the same time, we provide enough flexibility in the form of the extensibility —either side by side or in the stack—that lets them build their own IP or their own breakthroughs when it makes sense, as long as they do it to build competitive differentiation. Customers with a cloud mindset embrace standardization, especially with more commoditized processes like accounts payable or accounts receivable . Instead, they focus on building enhancements only in the areas where they need to build out their competitive differentiation.
When customers move from an ECC system to public cloud, they will adopt a more standardized solution. That’s the nature of public cloud. They're not going to have all the same configuration options, nor is there a tool-based migration approach. We have great tools that allow us to deploy the best practices pre-configuration, but it requires the customer to follow a fit-to-standard approach which we've laid out in the SAP Activate methodology.
ASUG: Our members are experiencing an SAP technology talent gap, an absence of skilled talent to operate their different systems. How does a shift to public cloud shift close that tech talent gap, or address the lack of qualified skilled IT talent needed to operate more heavily customized environments?
Venth: In the past, we might have had three different ways of doing something and we would have consultants who would go in and help decide which approach to use. That required a lot of knowledge about the different options and an understanding of the pros and cons. In the public cloud, we’ve already determined the one best way to do it. There's one way and we're delivering the baseline configuration within the application. So, when you activate a scope item, the foundational configuration is automatically activated, and you're only tinkering with a configuration where you want to deviate from that standard. Public cloud is a solution that essentially runs out of the box. This addresses some issues of the skills gap because the system setup becomes more prescriptive.
However, you need consultants to handle the organizational change management and the governance that will be needed to follow the fit-to-standard approach. Here, the skill set shift. What is needed are consultants that are usually less technical, but have the business expertise to help customers adopt that standard solution and apply the right change management across their business.
On the innovation side, there are no-code, low-code-type development tools that are part of the offering. SAP Build Apps or Process Automation allow you to build automations or entire applications without any code. It’s simply dragging and dropping fields and creating some business logic that shows how the information is going to flow.
Reports that previously required a lot of customization to build by a developer can very easily be built on the fly within the application, and allow the users to filter and slice-and-dice the data. This is the concept of the citizen developer versus the true developer because the citizen developer can use those no-code, low-code apps to build out these applications without coding skills.
So, all in all, between the way the technology is moving from an innovation perspective coupled with how it is delivered in the cloud, customers are becoming much less reliant on consultants with extensive and niche technical expertise.
ASUG: You mentioned process automation. We've also been hearing a lot about AI modeling. Can you share more about some of the modern capabilities in S/4HANA Cloud, public edition, and what’s been most appealing for customers considering the transition from a standpoint of wanting to embrace innovations?
Venth: When we talk about these different technologies, the idea is that it's not about one vs the other. It’s about stringing them together to help improve the overall efficiency of the business process. For example, if a situation requires human intervention, we have situation handling technology that would recognize a specific event or situation and then draws the attention of a human to intervene. Secondly, we have fully automated processes where the machine is doing the majority of the work. Some of those capabilities are embedded within the application itself and use machine learning and other such technologies. In other cases, the customer plays a more active role in building their own automations using SAP Process Automation tools.
As we look forward to leveraging generative AI, we see several use cases where it can help companies interact with the outside. It’s still early days in terms of the overall evolution of how generative AI will be embedded into software applications. An example of its use within ERP is, having AI examine inbound dispute emails where a customer is disputing an invoice. AI can parse that information, recognize the tone of the email and process and categorize it appropriately and enter it into the application as a dispute record. It can then also automatically respond to the customer with a resolution in natural language.
We also deploy AI to help people interact with the application. We have a scenario now with “Just Ask” in SAP Analytics Cloud (AC), where a casual user can ask a question, such as “Show me the revenue over the last year by region,” and the system will then generate a report. We will see continuous innovation how users interact with our applications and there will be more to follow on this soon.
ASUG: What’s your role with regard to engaging the SAP partner ecosystem?
Venth: I am a part of the solution management team for SAP Cloud ERP. We define the overall Go-to Market and Commercial structure. My team helps the sales and partner ecosystem understand the messaging and the commercial terms for public cloud. We also help our partners and sales teams tailor the message according to the customer segment, such as new mid-market accounts, or existing installed base accounts.
Most of our time is helping audiences understand the value of a public cloud in the context of their specific business situation. In the public cloud arena, our partners are also an extension of SAP, so it is critical that we work with our partner teams, and the partners themselves to help them understand the value proposition. We want to instill the confidence they need to invest in their own qualified partner packages that helps make the implementations predictable.
ASUG: When working with customers who may not fully grasp what public cloud is or the capabilities it can provide, where do you see gaps in understanding or misconceptions?
Venth: Often, I hear two perspectives. On one hand, customers may think this is only for financials. They are under the misconception that public cloud can’t address a much broader scope. We have customers in the Industrial Manufacturing and High-Tech space that are running end-to-end, order-to-cash, manufacturing and procurement processes in their ERP applications. There is an extensive breadth of the capabilities that S/4HANA public cloud offers.
The other perspective comes from customers that expect the public cloud to be the same as their on-premise ERP. They don’t understanding that public cloud is more standardized and simplified which enables a faster implementation at lower cost.
We want customers to appreciate the benefits of taking ERP into the cloud, always being up to date with updates on a fixed schedule. With public cloud, we're updating every six months. Customers are buying into that innovation cycle. While they don’t have to activate these innovations the moment we deliver them, the capabilities are always at their fingertips.