German multinational corporation SAP SE, best known as an enterprise resource planning (ERP) software firm is going through a self-evolution in which it is moving beyond ERP. The focus on cloud computing, Internet of Things (IoT) and digital solutions are gradually picking up. Three years ago, SAP forecasted that its cloud revenue will surpass on-prem revenue in 2018 and according to company’s top executive, SAP will achieve that target this year. “In 2015, we predicted that in 2018 revenue from cloud will pass our on-prem revenue. I am fully confident that what was forecasted, will happen in 2018,” said Bernd Leukert, Member of Executive Board of SAP SE in an exclusive interview with Mohd Ujaley.
SAP is working for digital transformation of Palm tree. At what level is this project and how are you achieving this?
Recently, we met a customer who has millions of hectare of palm tree field. They said that they can recognize big bush fire in the field but sometimes they are unable to detect small bush fire. Those small bush fire not only damage the trees but has potential to create big bush fire. So, they collaborated with us to use technology to address the challenge. We took drones and fly it over the field to take pictures. Those pictures were processed with the help of software. If software detects significant color variations like yellow or red, then an alert goes out and somebody is physically sent to check the area.
So far, they have been managing this with the help of primitive methods but we told them that SAP can do it more intelligently. Aerial photography is one of the method but with the help of temperature meter and sensors, we can transfer the information to our cloud platform to monitor the time-series of the temperature and alerts can go out in real time if significant variation is found. There is lot of fascinating use cases where technology can help a lot. We have build the prototype, demonstrated it to customer and now we are in the process of building an agriculture consortium. Palm tree is one example but same could be applied to other agriculture products and services. So, we had the conversation with the customer and told that we would like to build it as a standard product to be used by agriculture sector. One of the customer will chair the consortium and all the participants will invest, share risk and benefits including SAP.
India is also focusing on agriculture technology. Have you engaged with any government organization here?
We are collaborating with Niti Ayog. We know the importance of agriculture in India. Use of technology for Palm tree is one example but same can be applied for improving farmers, dairy milk producers and livestock. Also, you know that in India, the biggest problem is not the unemployment but the under-employment. So, even agriculture is 50% of GDP but it contributes only 17% to GDP. So, if India wants to increase productivity, technology can help. Indian farmers can use software to get right yields. What I like is that this perfectly supports our vision which says that “make the world run better”. If technology can help to safe the harvest of agriculture, this perfectly fit into our motto of helping world run better.
Last time when we met, you emphasized on the growth of cloud. What are your observations on the evolution of cloud in the last two to three years?
What we discussed last time was more around the prediction into the cloud. We met two years ago. That movement into the cloud have even accelerated. So, when we talk about investment and new use cases, I would say the default is cloud. Then there are dedicated areas where the business still stays on-prem like aerospace and defense. But for majority of the business in terms of investment and new consumption pattern the default platform is the cloud. In 2015, we predicted that in 2018 revenue from cloud will pass our on-prem revenue. I am fully confident that what was forecasted in 2015, will happen in 2018.
Has the intent of enterprises or governments to adopt cloud changed in last couple of years?
Yes, it has. I think in the beginning, it was pure movement for efficiency gain. For having their own data center, companies have to investment in hardware, software, infrastructure and they have to hire people to manage them, but with cloud it was not needed, that was the beginning of the adoption of cloud and that is still true. But in the meantime, more and more use cases are coming, in which new business model and top line growth is only possible in the cloud. Why cloud? Because there is a possibility to connect devices and different data sources to one platform to mine the data in real time to significantly changed the way things were done in the past. For example, the work that we are doing for digital transformation of Palm tree is smoothly happening because we are leveraging cloud technology. So, if you analyze, you will find that cloud started with the efficiency gain, released company from Capex towards Opex and now it is also a driver for new business models.
So, why nobody is abandoning on-prem? Many a times executives from the same technology company go to the same CIO to pitch the exact product but of two flavors – cloud and on-prem.
Even, we have not abandoned it. If a customer wants to have on-prem solution, they get on-prem solution from us. We have defined a dedicated buying standards. For example, if you are the head of human resource (HR), we will talk about our HR solutions and our investment road map into the future of HR technology. We will not split that conversation into on-prem and cloud. We will explain the values, benefits and how future may look like but the decision to have a type of solution lies with customers.
There are different shades of the cloud – from public to private to hybrid, do you see some architectural change happening in the cloud market?
I consider availability and compatibility will become the differentiators of the cloud for the data center. It is not just about a building having compute, storage and network facility. It has to be software driven which can bring economy of scale for businesses. I personally feel that there will be some companies which will lead this space. For example in US, it is Amazon Web Services (AWS), Google, Microsoft Azure and in China, they have Alibaba and Huawei. Over a period of time, you will see small companies would not be able to compete in this space and they may rely on these big firms for data centers but these companies will have to offer exceptional values.
Take an example of SAP, we are running our own data center. We buy hardware, machine and hire people to run our data centers. Trust me this is not an Art or Science. If a company do it more professionally and businesses can benefit from their economy of scale, I am sure enterprise will explore those options rather than setting their own data centers across the world. At SAP, we will continue to run our data centers. We are not willing to completely depend on others but instead of having data centers all of over the world with different flavors of hardware, if we can in source complete building block of proven software driven infrastructure and benefit from that, we will explore it. I personally feel that this will happen over the next two to three years.
To end this heterogeneity, I believe SAP signed a partnership with Google. What both of you are bringing to the table and at what level the engagement is currently?
We started officially talking about this partnership in March 2017. Actually, when we analyzed the market, we found that it is always best that you partner and join if there are more complementary asset and minimal competition. That’s how we partnered with Google. Google has massively invested in artificial intelligence (AI) and machine learning. They have massive library with huge investment in underline infrastructure. Instead of CPU, they have GPU. Under this partnership, we have agreed that we can use it. On the other hand, SAP brings industry experience and access to enterprise customers. This will help Google in reaching out to enterprise customers. They are already big in consumer space, this will add further value to their portfolio. If we combine, SAP go-to-market, business process and industry experience with Google technology, they perfectly complement each other.
If you speak to SAP customers, they appreciate your services and products but they all have some views on the challenge of vendor locking with SAP. Is there anything that you are doing to address this?
I am the strong believer in the openness. You can say that with the move to the cloud, you have the higher risk of vendor locking. But we are significantly investing in container technology to address this challenge. In future, we will be able to package the software, with related operation system in a container and deploy it to any data center including the on-prem data centers. Whether, it will be economically healthy or viable to have it in on-prem, that is the decision customer will have to make. But I am the strong believer in the openness and we strongly support our developer to create platform having the possibility and giving the customer a flexibility to move if they want.
What investment SAP is making in future of data processing technology?
We have invested significantly in new way of processing the data – this will change the way data is captured, processed and stored. In the past, there were process in which people were seating with system. One process happens after other. The structural data were stored in relation data base, once you press the save button, data was committed to data base, and the next process starts. What new we have done is that we have launched data hub. Now, the data will be created all over the places. It will be distributed data creation specially with the mobile devices, machines and sensors. Like what happens with music streaming, you do not store, you just listen it, we will see data streaming now.
In these streams, we have incorporated a whole menu of operation, one operators can quickly give dashboard and the other distribute the data based on some rules. So, now we will go massively in distributed data creation, distributed data storage as well as new era of data processing. We fundamentally believe that it will solve the dilemma that many customer has today. They have different data sources and data systems which gives different meta and data definition even if they talk about the same customer. Modern day enterprises cannot rely on predefined meta data in the contextually structure which was the philosophy of the past. In future, in data hub, we will be able to create different meta with different definitions, but we can understand that we are talking about the same customer and same company. If you combine this with the partnership with Google on machine learning, it will create a complete new era of intelligent analytics or the trusted the analytics.
SAP is betting big on SAP Leonardo. Few centers including one in India have been opened. What value it brings to the market and what role system integrators (SIs) have in it?
We established SAP Leonardo brand because we felt that we have the capability, platform and technology like machine learning and blockchain and ability to connect them with help of Internet of Things (IoT) but we needed a brand to tell the market and partners. Since, its launched the SAP Leonardo brand has helped us in showcasing our capabilities. As far as SIs are concerned, we have engaged with all the big one’s – Deloitte, Capgemini, Accenture, IBM among others – to take their SAP practices and even we have regular meeting with them to build innovation on our technology not our competitors.
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