How Sap Helps Enterprises Along the Path to Growth Through Digital Transformation
Carl: Welcome to the Connected Enterprise podcast, where our guests share how they stay connected in their business lives. I'm your host, Carl Lewis from Vision33, and my guest today is Rainer Zinow from SAP.
Carl: Rainer, please tell us about yourself and your role at SAP.
Rainer: Thanks for having me. My responsibility at SAP is overseeing product management for our mid-market products: SAP Business One and SAP Business ByDesign. I’ve been at SAP for nearly 30 years, so hopefully, I can answer most of your questions.
Carl: A lot is happening with industry trends – AI, IOT, machine learning, etc. How are SAP's small business customers taking advantage of these technologies in this convoluted SMB space?
Rainer: Many small or midsized enterprises understand they need a digital agenda and to transition into the world of the digital economy. Also, most enterprises understand that companies that execute a digital strategy grow faster than those that don’t. A simple example: companies realized in the last few years that they need to be more accessible to customers, so they introduced capabilities like web shops.
Rainer: At SAP, we tell our customers the steps in that direction, and we document how companies are moving along the path of the digital transformation. Starting with simple things, like setting up electronic communication with their banks, establishing a multichannel environment, and then leveraging new analytical capabilities. We also say, "Here are the first artificial intelligence scenarios.” We’re not trying to scare anyone; we offer down-to-earth options to start.
Rainer: The customer can scan the supplier invoice and send us the image. Then we send back the technical representation of that supplier invoice. We don't want anybody holding the physical invoice in their right hand and doing data entry with their left hand. We try to make it tangible for companies, both small and mid-sized enterprises, to embark on this digital transformation journey.
Carl: Companies learning from other companies is excellent. There's a lot of trust when someone who's done it talks to someone who hasn’t, and SAP is facilitating some of that conversation.
Rainer: If you go through SAP’s success story library, you'll find a lot of companies that have done something on the ByDesign side. We recently worked with a very old winery in Germany. They put sensors in their vineyards to determine how much rain and sun they got and what their weather and temperatures were. They said their consumers are interested in learning more about the wine they’re drinking, so they put an NFC chip behind the label of the bottle.
Rainer: The NFC chips aren't that expensive, and how they work is that when they bring the grapes in from the vineyard, they create a batch. When they fill the wine bottles, they have the batch information and a link to the data they collected in the vineyard. Customers choose a bottle, take out their phones, read the NFC identifier, and see where the wine was “grown” and the temperature, rain, etc. it experienced. It seems so down to earth, but it’s advanced technology.
Carl: Rewarding, too.
Rainer: Absolutely. I told them that the infrastructure wouldn't be cheap – and it wasn't – but they said they could charge more because consumers are willing to pay more for that service. A company in the dairy industry does the same thing for milk bottles because more consumers want to talk to the cow! Ok, maybe not, but they want to know where their milk comes from.
Carl: A lot of this new technology in the digital marketplace was born in the cloud. It's in the DNA of these concepts. How can Business One, which wasn't born in the cloud, take advantage of these technologies?
Rainer: Unfortunately, this doesn't fall off the sky. It means hard engineering work because you're right, Business One is built on a robust microsoft.net technology. When we built it, the cloud was something in the sky, and it may rain. If you’d have said, "Hey, Rainer, what's the relationship between an architecture and cloud?", I would have had a lot of question marks on my face.
Rainer: A lot of these new technologies, especially machine learning, IOT, and Blockchain, are consumable via web services, so we’ll strategically invest them. Business One now has a web service interface layer called the Service Layer. The Service Layer is the promise that you can access everything in your Business One system via Web services also. That way, you can marry an IOT web service with your Business One on-premise implementation. I did that by writing small extensions, and Finn Backer and his team built a lot of examples there. These tiny programs consume on the Business One web service from the Service Layer and bring them together with web services from other offerings like an IOT scenario or Blockchain.
Rainer: Investing to allow the Business One architecture to work in the world of web services was essential. You'll see many new capabilities with the upcoming Version 10 release. We're shipping that in November, so partners, learn about the web Service Layer of Business One. It's the ticket to the future and future-proofing Business One for 10 to 15 years.
Carl: That means it’s closely tied to the HANA database.
Rainer: It is. A lot of partners ask, "Rainer, for maximum reach, what do I do with my customers on the SQL service?" I don't have a final answer yet, so stay tuned. We’re compiling our Business One 2020 strategy, which we’ll disclose in November or early December. We need more discussion on HANA, but it's a given because it has millions of merits and is the best platform we can think of. It's the majority of net new sales off Business One. We’re talking about a thousand net new names every quarter, so B1 is an amazing growth engine for SAP. The majority happen on HANA, but I think about all our 60,000 install-based customers and how to get them to B1 Version 10 to consume the Service Layer. Because the digital agenda is on their mind, and the prerequisite to be part of the digital transformation journey is the Service Layer.
Carl: Rainer, what’s the biggest challenge for small businesses as they seek to use these new technologies?
Rainer: The biggest challenge is the first step. So many companies say, "We know this is probably a five-year journey, and here are the first pragmatic steps, but then what?" My recommendation to all small companies is, "You don't need McKinsey for this. Start by browsing through the reference library of Business One."
Rainer: We have the upcoming Business One Conference, where we’ll talk about what this transformation journey looks like. Pick a low-hanging fruit. For some companies, it may be a web shop scenario. For others, if they’re a service-centric business, it might be setting up a mini call center. Use the web services-based infrastructure. Link it with our B1 backend.
Rainer: We're also introducing the web client with B1 Version 10. In that, you can access specific functionality – field-relevant capabilities from the sales side, the Java client, the web client to accomplish that, and others. Do a timebox. Say, "In three months, I’ll have my first scenario available for my employees, my customers, my suppliers," and then pick one topic. Don't pick 10. Pick one. Do it. Learn it. Be proud of the first results and then plan the next steps.
Carl: It sounds like you’re thinking of ways Business One customers can more easily deploy these digital solutions.
Rainer: Finn Backer and his team are working day in and day out with partners and customers to say, "This is a journey. We’d like to make the first step together; here are some ideas." The partners can put a price tag on the first steps, and customers see it doesn't cost a fortune and that Business One is a great starting point. And the first step is not, "I need to rip out B1 and get something else."
Rainer: I've talked to other partners who say they’re using SAP offering with B1 Cloud more often. There was also a change in the market. When I had this discussion two years ago, partners said, "Why are you getting into this market? We can provide the infrastructure for our customer." Smaller partners today say, "We need a cloud-based offering for Business One. With the web client, I get a good visual appeal to show customers, but I don't have the bandwidth to set up a cloud operations team." So, they welcome SAP's cloud offering in Europe, the US/North America, and recently in Latin America. They say, "The market is shifting fast and demanding cloud-based solutions," and we enable our partners to have a rock-solid answer the market.
Carl: What about the personal side of life? What do you see now compared to three or four years ago when our communication was email? Is there a shift to social media and similar things for routine communication?
Rainer: Maybe less for routine communication, but a company that doesn’t have a website or allow its customers to interact via electronic document interchange is close to dead. (And I only exaggerate a little bit!) My colleague Paulo Almeida helps our partners get their act together on their online digital presence. He's doing a hell of a job, and partners have learned how beneficial it is for their name to pop up if you search for a B1 capability.
Rainer: Many partners said, "Paulo got on our nerves when he said, 'Where's your Twitter feed? Where's your LinkedIn profile? Where's your Facebook page? Where's your Instagram account?'" But then they said, "You wouldn’t believe how many business opportunities we get. We didn't know they existed!" For one-to-one communication, I still use email. Some colleagues opened WhatsApp channels. I see colleagues get a bit overwhelmed, and now that they have an inbox with LinkedIn, their email account, and WhatsApp, it's difficult. I decided that anyone who wants to communicate with me should do it via email, but companies must be accessible, so the more channels they have open, the better.
Carl: Rainer, you work closely with a lot of SAP partners. What's the most challenging part of collaborating with third parties outside your corporation?
Rainer: We talk about transitioning to the cloud, which is easier said than done – it often means disrupting a well-oiled business engine. You asked what’s changed in the last three or four years. I spent time with Gartner Group and IDC, which collect data about companies’ buying preferences. IDC said two years ago, the buying preference for an on-premise solution was predominant at companies with fewer than 200 employees. Essentially, businesses with fewer than 200 employees said, "My data is only safe if it's on a server under my desk or in my server room."
Rainer: In 2018, that number dropped to 100 employees, and the latest data shows that the preference is at 50 employees. The means, for a Business One partner, more companies will say, "I like your approach with Business One, but I need it in the cloud environment." For partners, this means they can't resell hardware anymore, so their portfolio changes. They now sell something as a service, on a subscription basis.
Rainer: Some partners are kind enough to share their financial results, and the partners who make the highest profits are the ones with their own IP in the solution, so they build an extension they can sell. The ones who only resell need to revisit their business strategy. Having their own IP is a mission-critical thing.
Carl: Are there ways SAP has automated working with partners?
Rainer: We've done it a lot. For example, the PartnerEdge program. When I need information about a product or references, I log on to PartnerEdge and find that information. Especially in the Business One world: 90% of commercial business transactions between SAP and the partners happen via the web shop, so they're in the interest of both the SAP partners and SAP.
Rainer: We've automated processes as much as we can, so we’re in good shape. The partners appreciate it because they don't need to reach out to their local product expert or channel manager – they go to PartnerEdge. They get answers, and if the customer says, "I need two more Business One licenses or three more users," they can do that online without touching the phone.
Carl: So it's working well.
Rainer: We’re at a run rate of a thousand net new customers every quarter. If you only rely on the phone or email, you're close to dead.
Carl: It can sustain that growth, that's for sure.
Rainer: We’re excited about cloud and digital transformation, of course, but when I see how robust business is, I'm 100% committed to the future of Business One. I’ll be at the Biz.ONE Conference to talk about moving forward, but Business One is at the center of what we’re doing in the mid-market.
Carl: We look forward to seeing you at the Business One conference – I’ll be there as well, speaking. Rainer, I appreciate you being part of the Connected Enterprise podcast, and I'm positive others will find your words interesting and valuable. It's my goal to keep these sessions short. John Kennedy said, "Every accomplishment starts with the decision to try," so I hope these Connected Enterprise sessions help our customers and people all around the world to try. Until next time, stay connected.