Cloud Wars analyzes SAP's biggest 2020 challenge
Cloud Wars analyzes SAP's biggest 2020 challenge

SAP’s New Co-CEOs Bet the Company on ‘Experience Management’

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(Fourth in a series exploring the primary challenge facing each of the Cloud Wars Top 10 vendors going into 2020.)


Speaking to financial analysts in mid-November very shortly after becoming co-CEO of SAP, Jennifer Morgan opened her remarks about SAP’s product strategy by saying, “Let me start with Qualtrics.”

That commitment to Qualtrics and its market-leading capabilities in the red-hot new category of experience management was a watershed moment for SAP for a number of reasons. A few of them:

  • The company’s been looking to extend its brand promise beyond ERP for several years.
  • Iconic CEO Bill McDermott, who drove the $8-billion Qualtrics acquisition and championed it as the new “crown jewel” of SAP, had just announced his plans to leave SAP at the end of 2019.
  • While Morgan’s meteoric rise within SAP was built largely on her prowess as a superb sales executive, her presentation to the financial analysts would be her first chance to lay out the broad strategy that she and co-CEO Christian Klein had pulled together.
  • The company was facing and continues to face enormous competitive pressure from just about every enterprise-software company in the market because of its broad presence.
  • Outside of SAP and Qualtrics, the world of “experience management” was pretty much uncharted territory.

Morgan and Klein were both highly impressive throughout that Capital Markets Day event, and appear to have won the confidence of the investor community for at least the short term.

But by calling out Qualtrics and experience management as the future of the company—a strategy initially proposed and strongly endorsed by McDermott—SAP’s new co-CEOs have committed their company to pursue a course in a fast-changing marketplace that’s radically different from what SAP’s done for the past 40 years.

So here in 2020, the big challenge for SAP is this: can it convince a marketplace that’s been conditioned for decades to think in terms of ERP-HCM-ERP that experience management is the new model for the new digital economy?

And can they simultaneously persuade the marketplace that SAP’s unique ability to deliver both the customer-driven experience data from Qualtrics plus the operations-driven data from its iconic ERP applications is the ideal combination for the digital future?

Morgan’s not wasting any time in putting the strategy she and Klein developed into practice. As I analyzed several weeks ago in SAP Says HCM Is Dead—Can Qualtrics Transform it to HXM?, Morgan and company have declared that the new realities of talent-centric business require an entirely new approach that will sweep aside traditional HCM.

“The days of transactional HCM are over,” said SAP co-CEO Jennifer Morgan at the company’s meeting last week with financial analysts… “The traditional definition of HR has changed, and there’s a new category: Human Experience Management,” Morgan said. “It’s no longer simply about capturing and tracking employee events as they move through the life-cycle of employment.” 

Instead, she went on, the experience revolution that’s sweeping the business world for both customers and employees is creating an entirely new way of engaging with, retaining, grooming and ultimately delighting employees. 

“It’s really about anticipating and creating and managing great experiences across all of your employees’ life cycles,” Morgan continued. “People are demanding a very different experience at work, and employees are really setting the tone for the culture. 

“This is becoming the competitive differentiator.”

That bold move is, to my way of thinking, a much-needed fresh approach to helping companies large and small deal with the intensifying need for world-class talent. 

And surely experience management will be a perfect fit within SAP’s fast-growing CX business, now under the leadership of former Salesforce executive Bob Stutz. (For the full story on that, please see Attention Salesforce: SAP CX Revenue Surges 75%, Key Exec Jumps Ship.)

But what about the classic world of ERP, long SAP’s core business? Will this “experience management” approach play in the Newtonian world of supply chains, logistics, procurement, inventory, and finance?

Morgan and SAP are fully convinced that it will form a perfect match. It will do so, ultimately, by fusing the formerly disparate dynamics of the supply chain and the demand chain. ERP systems can gain greater visibility into what the customer side wants and needs, and in turn can provide greater insights to traditional operations leaders.

If you doubt that, then please explain why CRM kingpin Marc Benioff of Salesforce suddenly become intensely interested in the manufacturing business. (See Salesforce Invades SAP: Links Sales + ERP Data for Manufacturing.)

In that coming-out party with financial analysts back in November, Morgan and Klein delivered two powerful overarching messages to the market. First, that they are going to wipe out a lot of the departmental and political silos that have grown up within SAP. And second, that they’re going to put much more emphasis on customer success. 

As I see it, their parallel decision to make experience management the new value driver for the company will be a big winner for SAP’s customers—and for SAP itself.

Cloud Wars: Outlook 2020

The Top 10’s Biggest Challenges

1. Microsoft — Can it sustain a reputation for reliability for the Azure cloud?
2. Amazon — Can it win vs. Oracle Autonomous DB? AND vs. Microsoft Azure?
3. Salesforce — Can Marc Benioff win the battle to redefine CRM?
4. SAP — Can it sell the marketplace on Experience Management / HXM?
5. Oracle — coming soon
6. Google — coming soon
7. IBM — coming soon
8. Workday — coming soon
9. ServiceNow — coming soon
10. TBD

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