As SAP seeks to secure its long-term success by driving net new name acquisition, the company’s executive leaders continue to emphasize the importance of increasing SAP S/4HANA Public Cloud adoption, and of connecting midmarket customers to SAP Cloud ERP solutions.
Indeed, just last week, SAP announced that the price for annual maintenance for on-premises license holders will increase in 2024 in accordance with local country CPI adjustments and its standard contract provisions, at a rate of 3% for U.S. customers and 2.8% for Canadian customers. For example, if a customer's maintenance amount in the United States is $1,000, the increase would be $30 to $1,030 (or $30 for every $1,000 in on-premises maintenance). SAP will be sending a formal communication to each customer impacted in the next few months.
Earlier this year, in March, to heighten its focus on cloud migration, SAP leadership announced a new SAP S/4HANA Public Cloud & Midmarket (S/4HPC MM) organization, to be led by president and chief revenue officer Bernd Brandl. In his new role, Brandl is responsible for driving SAP S/4HANA Public Cloud revenue and profitability, with an emphasis on driving new customer acquisition and reviving dormant accounts across the midmarket segment.
Brandl joined SAP in 1997 as a sales representative, becoming a member of the SAP Germany Management Board in 2003. After holding several executive positions in Industry Sales, and founding the first Database & Technology, Business Analytics, and Mobile Solutions division within Germany, he was appointed Managing Director for SAP Switzerland in 2014. From there, he transitioned to lead Digital Core Sales for the Middle- and Eastern Europe (MEE). In 2020, Brandl became the leader for Digital Supply Chain sales globally before assuming the leadership for S/4HPC MM earlier this year.
In announcing his appointment, SAP’s Scott Russell—Head of Customer Success, and a member of the SAP SE Executive Board—said that Brandl “innately understands the power of Cloud ERP and the potential it offers customers to transform their business, grow and differentiate from competitors.” Speaking with ASUG in a late June interview, Brandl reflected that, “You could say I was with Cloud ERP from its first hour at SAP.”
Below, in the second part of our two-part interview (read part one here), ASUG asks Brandl about his perspective on meeting the needs of midmarket customers, embedding AI in SAP S/4HANA Public Cloud, and more.
This interview has been edited and condensed.
Q. Reducing technical debt and giving customers the ability to consume new innovations more rapidly, cloud migration also represents a mindset shift for many customers. How have you seen midmarket customers’ attitudes toward digital transformation evolve in recent years?
A. What do customers need? Customers need a solution that takes care of their daily business, be that finance or manufacturing. At the same time, they want technology that is state-of-the-art, from artificial intelligence to machine learning. They want to use those technologies and use them very effectively. We shouldn’t ever underestimate the ability of the midmarket companies to be innovative and agile. They're very good at what they do. But the world is changing quickly, and so they need innovation within their systems without always having to write their own programs.
They want SAP S/4HANA Public Cloud to ship to them very quickly what they need, and they want to have an open system, with APIs in niche areas where SAP is not active to enhance those systems, which we provide. They want, in other areas of the company that are important but not necessarily part of an S/4 ERP system—such as SAP Batch Release Hub for Life Sciences, at pharmacy companies—additional solutions from us that seamlessly integrate.
The Western Sugar Cooperative, which started on SAP R/2 over 30 years ago, went completely greenfield with SAP S/4HANA Public Cloud, which has been very successful. We always have discussion of lift-and-shift, greenfield, and brownfield implementations. Midmarket often goes greenfield, which makes sense; in large enterprise environments, it’s not so easy to do, and so I understand when some of them go brownfield.
MOD Pizza, Grupo Segura, and other net-new customers we’ve gained in recent quarters have all gone greenfield. With SAP S/4HANA Public Cloud it makes no sense not going greenfield, in my view. If you have a customized system and add-ons, it’s the best way to go, because we often see systems that have become overly customized; getting rid of what you no longer need is never a bad idea when switching to a new ERP system.
Q. Some larger customers start with a “technical” transformation and “lift and shift” their SAP ERP Central Component systems to the cloud. More midmarket customers take a greenfield approach. What do those customers need to understand about that greenfield approach to succeed?
A. It’s honestly not that complicated for those customers to understand. They are very agile, and their team members are used to moving quickly. When we talk with our customers about greenfield approaches, they adapt to it and are not afraid of it. In addition, they like the public cloud approach. It’s not an upgrade. It’s a migration. And so, they certainly take the knowledge that we have, but with S/4HANA Public Cloud, we’re not taking months to implement it. It can be completed quickly and in a cost-effective way. Why shouldn’t you set up your system in this new environment if you can do it without investing a tremendous amount of money and time?
Q. What are you hearing from midmarket customers more broadly in recent months? Beyond agility and scalability, what does this sector require to succeed in today’s challenging business environment?
A. What these customers need, above all else, is risk and cost reduction. They need expansion plans; they want to grow. They need operational efficiency and excellence, visibility, and transparency, and this is why they need a standardized, easy-to-use software solution that is also agile and gives them innovation on a daily, monthly, and half-yearly basis. The system is supporting their business, and not the other way around.
Q. SAP S/4HANA Cloud is incorporating emerging technologies, such as generative artificial intelligence (AI) and machine learning (ML), through features such as SAP AI Business Services and a collaboration with Microsoft. What does this new direction mean for SAP S/4HANA cloud customers, present and prospective, and are there any particular implications for midmarket?
A. The implications are more or less the same for midmarket customers as for large enterprise customers. Our approach is that we are delivering the market-leading ERP system to our customers, with industry-specific functionality. And, moreover, we base all this on state-of-the-art technology, like AI and machine learning, that we use to enhance our business processes.
From a pure technology perspective, we want customers to be able to do whatever they want with this system. And all of this is based on a market-leading business technology platform. SAP has always had business processes within ERP based on very good technology. This was the BASIS system, it was NetWeaver, and now it’s SAP Business Technology Platform and HANA. Without good technology that you use to run your processes, you won't be happy. And midmarket customers will use this new technology very quickly. Machine learning has been in use for midmarket customers for decades, I would say. They are very fast.
AI could help us to make better decisions, execute them faster and optimize processes. But it’s still an open question, to me, what our society will allow AI to do for us, overall. I’m interested in AI, because I used AI 30 years ago in my PhD work. And yet a lot of what we call AI today is what I would call machine learning. The question is: at the end of the day, will this society allow AI to independently drive important decisions that significantly influence the lives of people and society?
As far as Digital Supply Chain goes, AI will help us to make good decisions faster and drive our businesses to more effectively eliminate a lot of risks that we see today, in principle. We can use it to check decisions. There’s a variety of areas, and it’s both unbelievably fast and absolutely failure resistant.
Q. Looking ahead, what is your one-year plan for S/4HPC MM? What do you hope the organization will have accomplished in that time?
A. It’s very easy. As of today, my major focus is ensuring that we are customer-first. I am looking into each and every customer implementing, running, or planning to purchase our system, to ensure that they get what they expect, that they will be successful, and that they will become great references for SAP. If I manage to do so, then I will fulfill the expectations of my management and complete the initial plan I have made.
Based off that, I will build a resilient plan as to how we should develop the business in the future. The opportunities, especially in the midmarket, and also with S/4HANA Public Cloud, in the midmarket but also for large enterprise customers, are really huge. In five years, we are after being the dominant ERP player with S/4HANA Public Cloud in the midmarket sector. That’s what I’m after. And I think that, with our knowledge that we have regarding industry, ERP, and technology, we will make it a reality.
I’m not starting at zero. We already have a significant number of customers. We have teams set up locally. How can you optimize? How can you repair and prepare the organization for a larger number of customer-intensive businesses? I’m talking a lot to the partners about what they think about it, what they need from us to be successful, how we can enable them, and so on. What enhancements must be completed?
I have the support of the SAP board and all SAP colleagues to get this done; together with our customers and partners, we see a very bright future for this product. I repeated myself often throughout this interview, but I think that the S/4HANA Public Cloud fits well the needs of our customers, which is what makes me optimistic. The public cloud approach will shape the future. And SAP has the knowledge and the right people in place to make it successful.