SAP has made a concerted effort to transition to a cloud-first company, but moving its largely on-premises customer base to the cloud has been complex. The first versions of S/4HANA Cloud, for example, were more limited in functionality when compared with on-premises S/4HANA.
S/4HANA Cloud has steadily increased its functionality, but according to Thomas Saueressig, head of product engineering at SAP, a strict one-to-one comparison of functionality between on-premises and cloud versions of S/4HANA is inadequate. The cloud offers opportunities to incorporate new technology like AI that can help customers re-imagine business models.
Saueressig, a 20-year SAP veteran, has played an integral role in overseeing the transition of SAP's products from on-premises to the cloud. He recently spoke about SAP's product development and S/4HANA Cloud roadmap, as well as the challenges that SAP customers face when making the move to the cloud.
As you look at the future roadmap for the product development for S/4HANA Cloud, how much of the functionality of Business Suite will eventually get rewritten for the multi-tenant SaaS version versus the on-premises S/4HANA?
Thomas Saueressig: S/4HANA Cloud is the flagship product for us, especially because it fits so nicely to this time. Who would have thought that after the COVID-19 pandemic, we would have a war in Ukraine? We see inflation rising, we see supply chain challenges, and climate change is certainly present more than ever, which means that when we talk about new normal, it's not about virtual work -- it's about constant crisis management. And that's exactly the scope for S/4HANA Cloud. How can companies deal with business model transformations and business transformation? How can companies overcome the supply chain challenges and get more resilient -- and, quite frankly, also work on the sustainability dimensions along the entire ESG [environmental, social and governance framework]?
For us, it's not about having a one-for-one match of what we had in the past in the new world. The cloud gives us a tremendous amount of new opportunities, which we want to harvest, and that means we actually re-imagine business processes.
Just think about AI. In the on-premises world and the old business model, you could not really train AI models because you only had one data set for one customer. Now we talk about having hundreds of thousands of customers, which we can leverage to optimize our AI capabilities, and we want to embed that natively in the applications. So certainly we don't want to rebuild just what we had in the past -- we want to do it in a new way and take the advantages of the cloud capabilities.
Have SAP customers expressed reluctance in moving to the multi-tenant version of S/4HANA Cloud because it usually requires a change to their business processes and they have to be willing to rethink how they do business?
Saueressig: This is a very important notion. If companies really choose the software-as-a-service multi-tenant version, then they sign up for standardized business processes, so there is no point in modifications anymore. This means if a customer embraces this SaaS model, it has to be a greenfield implementation -- it cannot be a press-the-button conversion model.
What we see now is a very mixed picture. On one side, we see customers who are already going on that journey -- we see a lot of customers with subsidiaries that use S/4HANA public cloud already, or they have new business organizations that start with the public cloud to gain the speed to accelerate. But also, we see customers with 20 years of projects, implementations and modifications to the system, and for them, the first step is actually private cloud because they get the benefits of cloud capabilities and some advantages of the commercial model. It's the easiest step into the cloud for them because the business model redesign for our installed base is a longer-term period in order to get to standard.
But quite frankly, all net-new customers go to the public cloud right away because they want these new capabilities with cloud, and it's very important as we grow our market share quarter by quarter that we see a huge increase of net-new names, which we have with our public cloud version. We have this amazing installed base with tens of thousands of customers that we have in Business Suite and with S/4HANA on premises that we can take to the cloud in the private cloud scenario. This is differentiating us because we can offer the right deployment model for the customer. We also see in some countries that there's still a very active demand for on-premises software, and we can still offer that with our architecture and how we build the product.
But to be very clear, public cloud is exactly where we're going and where we see the market going.
Is there going to be a little more convergence in the functionality, where the multi-tenant version of S/4HANA gets more of the features that are in the on-premises version?
Saueressig: Absolutely, and we already have capabilities that are only available in the public cloud and not available in the private cloud or on-premises versions. For example, there is embedded AI, which we cannot offer for on-premises. Another example is the idea of universal and parallel accounting that's already available in the public cloud, which will be available at some point in the private and on-premises versions, but maybe not for years later. So the speed of what we can do in the public cloud is why companies want to sign up to have this continuous innovation drive.
Some customers are looking to Rise with SAP as a way to get a private cloud through single-tenant S/4HANA Cloud -- the version of this is called private edition -- but not as a way to make the bigger leap to the multi-tenant SaaS S/4HANA Cloud. What percentage of companies that sign on with Rise with SAP are actually adopting the multi-tenant S/4HANA Cloud versus the private cloud version?
Saueressig: I would need to look into the details for the numbers on the breakdown. Let's take Accenture as a good example, which is a good implementation partner, but also a customer. Accenture just signed up to Rise, and for the first step, we will take their systems and bring them to the private cloud. Then, four years from now, they want to be in a full public cloud SaaS model.
In the SaaS world, there's no modification of that standard software -- and that's very important that there's configurability but no modification, and the customers need to get to this point. That's one reason why we embed SAP Signavio -- business process intelligence -- to help our customers optimize the processes on the continuous business transformation journey, but also to definitively make the case for what the standard opportunity would be. Because we can, in a very fact-based way, analyze the processes and benchmark them to thousands of other customers and to the standard, even the future standard releases, to see what's the quantifiable value that they will achieve. That also helps the transformation conversations for our customers, and that's the reason why the Rise private edition is a strength -- because we can convert our installed base into cloud.
Editor's note: This interview has been condensed and edited for clarity.
David Essex is an industry editor in the Enterprise Software and Services Media Group at TechTarget.
Jim O'Donnell is a TechTarget news writer who covers ERP and other enterprise applications for SearchSAP and SearchERP.