SAP is leading the transition to the cloud world with its solutions, its channels and its customers. As an enterprise applications vendor SAP continues to offer its traditional on premise product suite while it has a definite roadmap for ‘born-in-cloud’ partners. Marcelo Giampietro, Chief Operating Officer, SAP Global Channels and General Business who was on an India visit spoke exclusively to ChannelWorld on the company’s cloud blueprint, technology outlook and partner strategy.
How has SAP changed transformed its channel engagement recently? Do you see a change in the outlook of channels?
There is more change expected not only because of the changing technology at all times. But there is significant alteration in the life of channels from the economics perspective due to ‘on premise to cloud’ transition. Most channels make money from on premise model through selling, implementation, maintenance etc. But the cloud business is more related with creation of IP. It will not be easy for most channels to jump from the implementation world to the IP world as that space requires different skills, people and mindset.
Cloud is decreasing the entry barrier to the market evoking more competition – local (even in India) and global. More competition induces margin pressures on global players like SAP and our competitors to pursue smarter Go-to-Market (GTM) and pushes partners to acquire net new customers especially in cloud.
The low entry barrier for new players and tech giants buying cloud companies is a ‘good and confusing’ sign for technology market.
True. Some of those partners will never understand cloud. They will die eventually if they will not migrate because of different economics. But a huge percentage of them will succeed in the cloud world with a different DNA as channel companies. Partners need to have capacity to enable their customers to consume more cloud solutions in the long term.
This concurrent shift is good as cloud opens a new world for partners though some of them will never understand cloud. We are helping traditional partners to transform into new types of partners while keeping the on premise business. Cloud is generating some conversions of the old models for new ISV cloud partners. SAP has right investments in cloud that starts with knowledge transfer to help partners develop IP. But monetizing the new product is a big challenge for many partners. SAP team facilitates the monetization with revenue sharing methodology to push their IP commercially.
Most cloud vendors compel channels to move their on premise customers to cloud. Is Cloud the ‘foot in the door’ for SAP channels?
The SAP strategy provides solutions with both versions - cloud and on premise model as ‘one size does not fit all’ for customers. We don’t see the enterprises migrating the core IT to cloud in the coming months or maybe years. SMBs are adopting cloud faster due to lower capex investments than enterprises. We will see in five or maybe ten years (very difficult to predict) a hybrid environment of on premise and cloud.
SAP will continue its Industry flavor of ‘micro vertical’ GTM in the cloud world too. Partners cannot survive the second conversation if they don’t exhibit industry knowledge with the customer in the first talk. Customers don’t buy technology today but they purchase solutions linked to their business outcomes.
Cloud’s low entry barrier and economy of scale will compel channels to drift away from on premise model, says Marcelo Giampietro, COO, SAP Global Channels and General Business.
Let’s talk about SAP HANA launched last year. Is it the real catalyst for cloud?
HANA is the main pillar of our cloud strategy. S/4HANA suite is opening many different conversations with the traditional and new customers. More than 90% of the net new names (ERP customers) for SAP are adopting S4/HANA.
HANA is the core engine for platform conversations on App development and IP creation. I don’t believe partners will survive in the cloud world without IP creation. SAP and its competitors will provide 80% of the solution while the last mile will be developed by partners on platforms like HANA.
Do the channels realize HANA requires a mindset shift from the on premise model? Is more education needed?
I believe partners have embraced SAP’s HANA strategy with 70% of all S4/HANA sold till date through partners. That indicates partners have good understanding from both sides - commercial and implementation - of the equation. There have been zero collisions between SAP partners for S4/HANA implementation at the customer end since the launch in May 2015.
Out of 17000 partners globally, 3000 partners sell SAP applications while the rest implement solutions and/or deliver services. We are moving the traditional education to digital enablement with numerous titles, free content (videos, articles and everything) available for partners. And we are investing in a solution center for high touch enablement for complex solutions.
Besides Cloud, what silver linings do you foresee for channels for long term and profitable business?
In certain markets of APJ, many small enterprises are skipping on premise to move directly from mobile devices towards cloud. Also start-ups are adapting cloud faster due to minimal legacy infra. IP creation is facilitating the big data conversation for partners to take advantage of this trend. IoT is happening from idea to realization in US, UK, France and Germany to name a few.
A SAP partner in Europe grew from 4 to 32 people team within eighteen months. They never sold a single SAP license but invested in developing IP on HANA – which is opening an entirely new business for partners. Some partners are hiring a different set of professionals like phycologists, physicians, data scientists because IP creation is very particular in nature.
Why should loyal channels of SAP continue their alliance? Any new initiatives to accelerate their business?
We are winning together as SAP is the only provider with a clear partner strategy for cloud. All our competitors often go direct to the customer with cloud. More than 80% of SAP net new customers are through partners.
More than ninety percent revenues originating from our ERP product – when I joined SAP seven years ago- contributes less than 50% today. Though we still dominate that space, partners are interested in taking advantage of this large and varied portfolio beyond ERP.
SAP allows partners to exchange their MDF by knowledge in terms of digital marketing. Through Partner benefit catalogue, partners can exchange MDF for 35 set of services in digital marketing. The learning room concept enables different partners in a specific domain to interact and exchange information. SAP’s Global PartnerEdge program is simpler with incentives for partners to target SMEs, acquire net new customer’s etcetera.
To be honest, we expected to transform traditional on prem partners faster to cloud. It will take little more time but it is headed in the right direction.