SAP’s Huge Bet On Industry Cloud Could Be Game-Changer against Oracle, Salesforce

Christian Klein
Christian Klein

SAP’s Huge Bet On Industry Cloud Could Be Game-Changer against Oracle, Salesforce

CLOUD WARS RANKING

#5

CEO

Christian Klein

QUARTERLY CLOUD REVENUE
AS OF NOV. 30, 2020

$2.36 billion

In 2020, SAP has been through a year with more gyrations and drama than most companies confront in decades.

But in 2021 as SAP turns 49 years old, it will need to sweep aside all of that midlife-crisis drama and fully regain the confidence of its customers as the unquestioned innovation powerhouse that can propel those businesses ambitiously and successfully into the global digital economy.

Hey, every person and ever company encounters some hard times. And for SAP, 2020 will be a year to forget—and not just because of the pandemic.

 

  • Toward the end of 2019, longtime CEO Bill McDermott resigned to join ServiceNow, and SAP immediately appointed co-CEOs Christian Klein and Jennifer Morgan.
  • But as 2020 started and the pandemic slammed the worldwide global economy, SAP pushed Morgan out and abandoned the co-CEO model it had just deployed and defended, with Klein taking full control as CEO.
  • At the end of Q1 as the world was rocked by COVID-19, SAP said it could not offer near-term financial guidance but was confident its long-term growth plan was still achievable.
  • While second-quarter results were pretty good, at the end of Q3 SAP stunned the business world by announcing it was pulling back on its growth plans. The markets responded swiftly and savagely, slashing $35 billion out of SAP’s market cap in a single day.

 

As we explore SAP’s prospects for 2021, bear in mind this comment on the Q3 earnings call from 40-year-old CEO Klein—because it represents SAP’s very best hope as it enters a year as critical as any has been in its storied history: “As the CEO of SAP, I firmly believe that prioritizing sustainable value creation has to be our very top priority. Therefore we will not try to trade the success of our customers and the significant growth potential of SAP against short-term margin maximization.”

SAP’s Opportunities

SAP

It would be hard to overestimate the impact SAP’s applications have on the daily operations of the global economy. Across every industry and region of the world, SAP’s applications and solutions touch, by some estimated, about 70% of the transactions in the global economy. From cars to construction and from banking to baseball, SAP for decades orchestrated the operations of hundreds of thousands of companies all over the world.

Its knowledge of and relationships within the world’s largest companies are unrivaled, to the point where for decades the term “mission critical” was almost synonymous with SAP.

The $164-Billion Question

So the big question—and I don’t mean one of those old-fashioned “$64,000 questions” but more along the lines of a $64-billion or even $164-billion question—is this: can SAP seamlessly guide all of those on-premises customers and their mission-critical workloads into the cloud? Can SAP extend into the next 50 years the remarkable achievements of its first half-century?

That’s an opportunity that Christian Klein is fully committed to pursuing, and one that he’s recently said SAP will begin to pursue more aggressively. From my recent analysis headlined SAP: After Brutal Q3, Will it Stumble Again or Bounce Back Boldly?, here’s Klein’s assessment of that massive opportunity:

One analyst asked Klein, “What’s the right KPI for us to look at during this transition point around that cloud revenue?” And Klein immediately said it will be the volume of customers that make that accelerated move to the cloud. “As you know, we have slightly more than 30,000 classic ERP customers,” Klein said, with many of those 30,000 customers running more than one SAP system. “And we have 15,000 customers for S/4HANA with, as I said, close to 3,000 of them in the cloud. So  that means another 12,000 basically that have licensed S/4HANA on-premise. In the next couple of years, we want to move many thousands of those customers. And then, of course, also net-new customers to our core ERP cloud solutions. So we intend to give you in the future absolutely regular recurring updates as part of the earnings process on those numbers and the progress that we have achieved across the different deployment forms. That should give you the confidence that we are arriving fully in the cloud come 2025.”

42,000 On-Prem ERP Customers: Ready for Cloud?

So that’s 30,000 “classic ERP” customers plus 12,000 more using the modern on-premises version called S/4HANA—that’s 42,000 large organizations for which SAP has the inside track on being their personal sherpas into the cloud. And not just for ERP—for every one of those 42,000 that SAP can usher into the cloud, Klein and company will also have a prime chance to get those businesses to also choose SAP for cloud HCM, cloud CX, analytics, data-management and other solutions essential for digital business in the 2020’s.

And that adds up to many, many tens of billions in potential revenue for years to come as the cloud’s subscription model thrives on recurring revenue.

Can SAP Also Lead the Way with Industry-Specific Solutions?

In the past several months, SAP has begun to speak with great enthusiasm about its new Industry Cloud and the potential the company has to expand ambitiously beyond its huge base of horizontal LOB applications into vertical-market solutions.

In fact, in a mid-July piece called SAP’s Secret Weapon: Month-Old Industry Cloud Already ‘Growth Driver’, I wrote, “As noted above, the Industry Cloud (a suite of applications featuring AI-driven industry-specific solutions) has only been on the market for about a month. So for it to be listed by CEO Klein among the company’s “growth drivers” that will surely receive significant investments, the Industry Cloud must be showing enormous potential in the early going.”

It’s also a red-hot category that other members of the Cloud Wars Top 10—led by Google Cloud as well as Microsoft and most recently Oracle—are very eager to jump into as businesses accelerate not only their moves to but dependence upon the cloud.

Additional Opportunities

Nobody knows more than SAP about how big global corporations operate. So in addition to the general move of ERP workloads to the cloud, and the rise of the industry cloud, there’s also big potential for SAP in:

 

  • its CX or customer-experience business, where it can bring to bear data and insights from ERP to understand customers more fully and from every dimension;
  • data analytics;
  • its Business Network that digitally interconnects companies in adjacent markets and complementary businesses;
  • the financial windfall coming from the future Qualtrics IPO; and
  • its new Digital Supply Chain business.

SAP’s Challenges

SAP

In July—only 4-5 months ago!—SAP was cruising along with a cloud business growing at 21% and a market cap that had handily surpassed that of archrival Oracle while nearly reaching $200 billion. But one thing we’ve found here in the bizarro world of 2020 is that the pace of change has accelerated beyond what most of us could have imagined. So some combination of (a) the ongoing impact of COVID-19 in delaying big software decisions, and (b) of SAP’s own decision to allow its big ERP customers to glide with little or no sense of urgency to the cloud led to Klein having to pull back on some short- and intermediate-term growth projections.

Lots of Questions for Klein

So $35 in market-cap value was erased in a single day, and the inevitable questions about Klein began to surface:

 

  • What should he have done differently?
  • How did he not see this coming?
  • Maybe chairman Hasso Plattner should not have abandoned the co-CEO model?
  • Can Klein re-establish long-term trust in SAP?
  • Is SAP’s business model right for these cloud-first times?
  • Can SAP fend off high-caliber competitors such as Oracle, Salesforce, and Workday?

 

All very reasonable questions—and all to which Klein probably has very reasonable answers.

But the critical issue for SAP as we are about to turn the chronological corner into 2021 is time. Klein must find a way to preserve the deep, foundation-level trust that customers have established with SAP over the decades, and he must ensure them that Q3 was a bug and not a feature. And he has to do that very quickly.

He’s got to be able to demonstrate to customers that their peers have agreed to begin accelerating the move of major ERP workloads to the cloud. And he has to that very quickly.

He’s got to be able to demonstrate some quick and high-profile wins with the Industry Cloud for two reasons: first, because he’s already touted it as a growth engine and *everyone* looking at SAP is going to be probing to find the growth stories; and second, because there’s a big appetite among customers for such vertical-industry expertise and solutions—and if SAP doesn’t show the urgency in exploiting that potential, then we can all rest assured that Google Cloud and Oracle and Microsoft will most certainly do so.

And Klein must be able to deliver on SAP’s promises to have its broad portfolio of acquired cloud solutions—from SuccessFactors to Concur to Ariba to Qualtrics to Emarsys and others—all on the same platform and same data model so that customers don’t have to continue the heavy work of integration.

I want to close out this section on SAP’s Challenges by noting that while some say adversity builds character, I don’t think that’s quite right. Rather, I believe that adversity reveals character. And 40-year-old Christian Klein, in the face of some intense adversity late last month on the Q3 earnings call, revealed a character that was strong, in control, confident, and unwavering. He didn’t blame or lash out at others, he didn’t moan about bad luck, and he didn’t try to hide from the inescapable challenge of having to explain why the world should believe that what happened in Q3 was a blip, not a trend.

We’ll get into this in more detail in the upcoming section on SAP’s Leadership, but I wanted to round out this discussion of challenges by saying I believe Klein will be more than able to overcome them.

SAP

SAP’s Opportunities

It would be hard to overestimate the impact SAP’s applications have on the daily operations of the global economy. Across every industry and region of the world, SAP’s applications and solutions touch, by some estimated, about 70% of the transactions in the global economy. From cars to construction and from banking to baseball, SAP for decades orchestrated the operations of hundreds of thousands of companies all over the world.

Its knowledge of and relationships within the world’s largest companies are unrivaled, to the point where for decades the term “mission critical” was almost synonymous with SAP.

The $164-Billion Question

So the big question—and I don’t mean one of those old-fashioned “$64,000 questions” but more along the lines of a $64-billion or even $164-billion question—is this: can SAP seamlessly guide all of those on-premises customers and their mission-critical workloads into the cloud? Can SAP extend into the next 50 years the remarkable achievements of its first half-century?

That’s an opportunity that Christian Klein is fully committed to pursuing, and one that he’s recently said SAP will begin to pursue more aggressively. From my recent analysis headlined SAP: After Brutal Q3, Will it Stumble Again or Bounce Back Boldly?, here’s Klein’s assessment of that massive opportunity:

One analyst asked Klein, “What’s the right KPI for us to look at during this transition point around that cloud revenue?” And Klein immediately said it will be the volume of customers that make that accelerated move to the cloud. “As you know, we have slightly more than 30,000 classic ERP customers,” Klein said, with many of those 30,000 customers running more than one SAP system. “And we have 15,000 customers for S/4HANA with, as I said, close to 3,000 of them in the cloud. So  that means another 12,000 basically that have licensed S/4HANA on-premise. In the next couple of years, we want to move many thousands of those customers. And then, of course, also net-new customers to our core ERP cloud solutions. So we intend to give you in the future absolutely regular recurring updates as part of the earnings process on those numbers and the progress that we have achieved across the different deployment forms. That should give you the confidence that we are arriving fully in the cloud come 2025.”

42,000 On-Prem ERP Customers: Ready for Cloud?

So that’s 30,000 “classic ERP” customers plus 12,000 more using the modern on-premises version called S/4HANA—that’s 42,000 large organizations for which SAP has the inside track on being their personal sherpas into the cloud. And not just for ERP—for every one of those 42,000 that SAP can usher into the cloud, Klein and company will also have a prime chance to get those businesses to also choose SAP for cloud HCM, cloud CX, analytics, data-management and other solutions essential for digital business in the 2020’s.

And that adds up to many, many tens of billions in potential revenue for years to come as the cloud’s subscription model thrives on recurring revenue.

Can SAP Also Lead the Way with Industry-Specific Solutions?

In the past several months, SAP has begun to speak with great enthusiasm about its new Industry Cloud and the potential the company has to expand ambitiously beyond its huge base of horizontal LOB applications into vertical-market solutions.

In fact, in a mid-July piece called SAP’s Secret Weapon: Month-Old Industry Cloud Already ‘Growth Driver’, I wrote, “As noted above, the Industry Cloud (a suite of applications featuring AI-driven industry-specific solutions) has only been on the market for about a month. So for it to be listed by CEO Klein among the company’s “growth drivers” that will surely receive significant investments, the Industry Cloud must be showing enormous potential in the early going.”

It’s also a red-hot category that other members of the Cloud Wars Top 10—led by Google Cloud as well as Microsoft and most recently Oracle—are very eager to jump into as businesses accelerate not only their moves to but dependence upon the cloud.

Additional Opportunities

Nobody knows more than SAP about how big global corporations operate. So in addition to the general move of ERP workloads to the cloud, and the rise of the industry cloud, there’s also big potential for SAP in:

 

  • its CX or customer-experience business, where it can bring to bear data and insights from ERP to understand customers more fully and from every dimension;
  • data analytics;
  • its Business Network that digitally interconnects companies in adjacent markets and complementary businesses;
  • the financial windfall coming from the future Qualtrics IPO; and
  • its new Digital Supply Chain business.

SAP’s Challenges

In July—only 4-5 months ago!—SAP was cruising along with a cloud business growing at 21% and a market cap that had handily surpassed that of archrival Oracle while nearly reaching $200 billion. But one thing we’ve found here in the bizarro world of 2020 is that the pace of change has accelerated beyond what most of us could have imagined. So some combination of (a) the ongoing impact of COVID-19 in delaying big software decisions, and (b) of SAP’s own decision to allow its big ERP customers to glide with little or no sense of urgency to the cloud led to Klein having to pull back on some short- and intermediate-term growth projections.

Lots of Questions for Klein

So $35 in market-cap value was erased in a single day, and the inevitable questions about Klein began to surface:

SAP
  • What should he have done differently?
  • How did he not see this coming?
  • Maybe chairman Hasso Plattner should not have abandoned the co-CEO model?
  • Can Klein re-establish long-term trust in SAP?
  • Is SAP’s business model right for these cloud-first times?
  • Can SAP fend off high-caliber competitors such as Oracle, Salesforce, and Workday?

 

All very reasonable questions—and all to which Klein probably has very reasonable answers.

But the critical issue for SAP as we are about to turn the chronological corner into 2021 is time. Klein must find a way to preserve the deep, foundation-level trust that customers have established with SAP over the decades, and he must ensure them that Q3 was a bug and not a feature. And he has to do that very quickly.

He’s got to be able to demonstrate to customers that their peers have agreed to begin accelerating the move of major ERP workloads to the cloud. And he has to that very quickly.

He’s got to be able to demonstrate some quick and high-profile wins with the Industry Cloud for two reasons: first, because he’s already touted it as a growth engine and *everyone* looking at SAP is going to be probing to find the growth stories; and second, because there’s a big appetite among customers for such vertical-industry expertise and solutions—and if SAP doesn’t show the urgency in exploiting that potential, then we can all rest assured that Google Cloud and Oracle and Microsoft will most certainly do so.

And Klein must be able to deliver on SAP’s promises to have its broad portfolio of acquired cloud solutions—from SuccessFactors to Concur to Ariba to Qualtrics to Emarsys and others—all on the same platform and same data model so that customers don’t have to continue the heavy work of integration.

I want to close out this section on SAP’s Challenges by noting that while some say adversity builds character, I don’t think that’s quite right. Rather, I believe that adversity reveals character. And 40-year-old Christian Klein, in the face of some intense adversity late last month on the Q3 earnings call, revealed a character that was strong, in control, confident, and unwavering. He didn’t blame or lash out at others, he didn’t moan about bad luck, and he didn’t try to hide from the inescapable challenge of having to explain why the world should believe that what happened in Q3 was a blip, not a trend.

We’ll get into this in more detail in the upcoming section on SAP’s Leadership, but I wanted to round out this discussion of challenges by saying I believe Klein will be more than able to overcome them.

Unique Differentiation

It’s not a terribly subtle way to start this section, but if you want to talk about differentiation, then here’s something that’s strikingly different than what anybody else in the Cloud Wars Top 10 has:

  • 42,000 on-premises ERP customers.

Some will no doubt choose to stay on-premises for reasons having to do with data sovereignty, security, or just a dangerous lack of will from the C-suite; some will be wooed away by competitors.

So here’s a way for SAP to further differentiate itself in the context of those 42,000: flip not only the revenue model from license to subscription, but create an entirely new engagement and success and support model for those 42,000 that is based on what those customers want and need and perhaps can’t even yet imagine, rather than on what SAP’s contract lawyers believe would be most expedient for SAP.

That might sound silly or naive or both, but look at the steps SAP has already taken in this general direction—because perhaps that’s not such a far-fetched idea after all. Going back 10-15 years, SAP was among the first tech companies to transform the revenue-generating side of the company from Sales to Customer Operations. Now, perhaps that’s a distinction without a difference, but I don’t believe that’s the case when selling products and services in bundles that can easily reach into multiple millions of dollars. And the bigger point was the recognition—even way back then—that customers needed to be wound into the fabric of the organization.

So in 2017, when Adaire Fox-Martin was named to the company’s executive board, she was in charge of Global Customer Operations.

But today, in keeping with the need for cloud engagements to be centered on future success rather than on one-time big-bang transactions, Fox-Martin now leads a global team called Customer Success, which includes global sales, services and customer engagements. As her bio explains it, “She is responsible for SAP’s business across the globe with a resolute focus on the success of over 440,000 customers and nearly 40,000 employees. Adaire and her team maintain an unwavering commitment to providing extraordinary experiences while recognizing the unique business demands of each customer.”

Nothing about the usual sales cliches along the lines of being a quota-crusher, an end-of-quarter bulldog, or member for 10 straight years in the Chairman’s/CEO’s/President’s/CRO’s Circle.

True, they’re just words on a page and perhaps don’t carry much weight in the real world. But SAP is certainly not known for flowery executive profiles disconnected from real-world responsibilities—and as Fox-Martin has ascended steeply within SAP over the past few years, it has surely been in large part because she knows that without rampant and crystal-clear waves of customer success, all the sales bluster in the world won’t do a bit of good.

And in that new role—leading Customer Success rather than Sales—Fox-Martin might be able to lead the charge within SAP to help regain the full and unwavering trust of any customers ruffled by Q3 by rolling out a very different model built around modern digital-era customer requirements and aspirations rather than lock-’em-down-tight legalese inspired by contracts from the on-premises world.

I believe the Big Opportunity for SAP in 2021 and beyond will be at least as much about how it chooses to engage with customers as it is about the code the company creates.

Yes, SAP is differentiated by its enormous set of products, technologies, solutions, tools, and capabilities—and that’s fantastic and, under executive board member Thomas Saueressig, must continue to be world-class.

But look once more at those couple of sentences from Fox-Martin’s bio that describe her priorities: “…a resolute focus on the success of over 440,000 customers and nearly 40,000 employees” and “…an unwavering commitment to providing extraordinary experiences while recognizing the unique business demands of each customer.”

If SAP can establish itself as the market leader in those capabilities in 2021, then SAP is going to have a very good year indeed.

Cloud Wars Top 10 by Age of CEO

Vendor

CEO

Age

1. Oracle

Larry Ellison (chairman)

75

2. Google Cloud

Thomas Kurian

59

3. TIE IBM

Arvind Krishna

58

3. TIE ServiceNow

Bill McDermott

58

5. Adobe

Shantanu Narayen

57

6. Salesforce

Marc Benioff

55

7. Workday

Aneel Bhusri

54

8. Microsoft

Satya Nadella

52

9. Amazon AWS

Andy Jassy

51

10. SAP

Christian Klein

40

Cloud Wars Top 10 by Age of CEO

Vendor

CEO

Age

1. Oracle

Larry Ellison (chairman)

75

2. Google Cloud

Thomas Kurian

59

3. TIE IBM

Arvind Krishna

58

3. TIE ServiceNow

Bill McDermott

58

5. Adobe

Shantanu Narayen

57

6. Salesforce

Marc Benioff

55

7. Workday

Aneel Bhusri

54

8. Microsoft

Satya Nadella

52

9. Amazon AWS

Andy Jassy

51

10. SAP

Christian Klein

40

Unique Differentiation

It’s not a terribly subtle way to start this section, but if you want to talk about differentiation, then here’s something that’s strikingly different than what anybody else in the Cloud Wars Top 10 has:

  • 42,000 on-premises ERP customers.

Some will no doubt choose to stay on-premises for reasons having to do with data sovereignty, security, or just a dangerous lack of will from the C-suite; some will be wooed away by competitors.

So here’s a way for SAP to further differentiate itself in the context of those 42,000: flip not only the revenue model from license to subscription, but create an entirely new engagement and success and support model for those 42,000 that is based on what those customers want and need and perhaps can’t even yet imagine, rather than on what SAP’s contract lawyers believe would be most expedient for SAP.

That might sound silly or naive or both, but look at the steps SAP has already taken in this general direction—because perhaps that’s not such a far-fetched idea after all. Going back 10-15 years, SAP was among the first tech companies to transform the revenue-generating side of the company from Sales to Customer Operations.

Now, perhaps that’s a distinction without a difference, but I don’t believe that’s the case when selling products and services in bundles that can easily reach into multiple millions of dollars. And the bigger point was the recognition—even way back then—that customers needed to be wound into the fabric of the organization.

So in 2017, when Adaire Fox-Martin was named to the company’s executive board, she was in charge of Global Customer Operations.

But today, in keeping with the need for cloud engagements to be centered on future success rather than on one-time big-bang transactions, Fox-Martin now leads a global team called Customer Success, which includes global sales, services and customer engagements. As her bio explains it, “She is responsible for SAP’s business across the globe with a resolute focus on the success of over 440,000 customers and nearly 40,000 employees. Adaire and her team maintain an unwavering commitment to providing extraordinary experiences while recognizing the unique business demands of each customer.”

Nothing about the usual sales cliches along the lines of being a quota-crusher, an end-of-quarter bulldog, or member for 10 straight years in the Chairman’s/CEO’s/President’s/CRO’s Circle.

True, they’re just words on a page and perhaps don’t carry much weight in the real world. But SAP is certainly not known for flowery executive profiles disconnected from real-world responsibilities—and as Fox-Martin has ascended steeply within SAP over the past few years, it has surely been in large part because she knows that without rampant and crystal-clear waves of customer success, all the sales bluster in the world won’t do a bit of good.

And in that new role—leading Customer Success rather than Sales—Fox-Martin might be able to lead the charge within SAP to help regain the full and unwavering trust of any customers ruffled by Q3 by rolling out a very different model built around modern digital-era customer requirements and aspirations rather than lock-’em-down-tight legalese inspired by contracts from the on-premises world.

I believe the Big Opportunity for SAP in 2021 and beyond will be at least as much about how it chooses to engage with customers as it is about the code the company creates.

Yes, SAP is differentiated by its enormous set of products, technologies, solutions, tools, and capabilities—and that’s fantastic and, under executive board member Thomas Saueressig, must continue to be world-class.

But look once more at those couple of sentences from Fox-Martin’s bio that describe her priorities: “…a resolute focus on the success of over 440,000 customers and nearly 40,000 employees” and “…an unwavering commitment to providing extraordinary experiences while recognizing the unique business demands of each customer.”

If SAP can establish itself as the market leader in those capabilities in 2021, then SAP is going to have a very good year indeed.

Leadership

Near the top of this piece, I shared a quote made by Klein on that difficult Q3 earnings call that, I believe, reveals courage, commitment, and confidence:

“As the CEO of SAP, I firmly believe that prioritizing sustainable value creation has to be our very top priority. Therefore we will not try to trade the success of our customers and the significant growth potential of SAP against short-term margin maximization.”

That cannot have been an easy position for Klein to take—surely he knew the ramifications of telling a slew of financial analysts that some future growth projections would have to be trimmed, particularly in the midst of a booming cloud market. But look at that key rationale he put forth: “…we will not try to trade the success of our customers….”

Now—was that a feel-good comment without Klein’s complete commitment behind it? That’s always possible but in the context of everything else he said on that call, I think it’s absurd to claim he was posturing.

Klein spelled out in precise terms the agenda he’s pursuing and why he’s pursuing it:

SAP
Christian Klein
  • “moving our large on-premises ERP workloads to the cloud”;
  • “gaining market share for our leading cloud applications”;
  • “establishing our platform as the basis for business transformation in the cloud”;
  • “winning in new markets;”
  • “increasing our R&D investments to deliver new innovations in Industry Cloud”; and
  • “a strengthened focus on our customers’ success to ensure adoption, higher renewals, and ultimately lifetime value.”

 

SAP’s entire organization—along with its customers, partners, and other stakeholders—had to be rocked by the Q3 disclosure, particularly after a string of very strong quarterly performances in the cloud.

But with that agenda that Klein has laid out, they’ve now got a foundation to stand on as they move forward, and they’ve got a set of ambitious goals to stretch for and against which to measure themselves.

Klein made no apologies, asked for no quarter, and is clearly not prepared to give any. At a time of intense unease, he was calm, confident, and consistent. He injected as much clarity and certainty as possible into a very uncertain moment, and I believe he demonstrated that, after a year the likes of which very few if any CEOs have ever experienced, Klein is the right person to lead SAP into 2021 and beyond.

Leadership

SAP
Christian Klein

Near the top of this piece, I shared a quote made by Klein on that difficult Q3 earnings call that, I believe, reveals courage, commitment, and confidence:

“As the CEO of SAP, I firmly believe that prioritizing sustainable value creation has to be our very top priority. Therefore we will not try to trade the success of our customers and the significant growth potential of SAP against short-term margin maximization.”

That cannot have been an easy position for Klein to take—surely he knew the ramifications of telling a slew of financial analysts that some future growth projections would have to be trimmed, particularly in the midst of a booming cloud market. But look at that key rationale he put forth: “…we will not try to trade the success of our customers….”

Now—was that a feel-good comment without Klein’s complete commitment behind it? That’s always possible but in the context of everything else he said on that call, I think it’s absurd to claim he was posturing.

Klein spelled out in precise terms the agenda he’s pursuing and why he’s pursuing it:

 

  • “moving our large on-premises ERP workloads to the cloud”;
  • “gaining market share for our leading cloud applications”;
  • “establishing our platform as the basis for business transformation in the cloud”;
  • “winning in new markets;”
  • “increasing our R&D investments to deliver new innovations in Industry Cloud”; and
  • “a strengthened focus on our customers’ success to ensure adoption, higher renewals, and ultimately lifetime value.”

 

SAP’s entire organization—along with its customers, partners, and other stakeholders—had to be rocked by the Q3 disclosure, particularly after a string of very strong quarterly performances in the cloud.

But with that agenda that Klein has laid out, they’ve now got a foundation to stand on as they move forward, and they’ve got a set of ambitious goals to stretch for and against which to measure themselves.

Klein made no apologies, asked for no quarter, and is clearly not prepared to give any. At a time of intense unease, he was calm, confident, and consistent. He injected as much clarity and certainty as possible into a very uncertain moment, and I believe he demonstrated that, after a year the likes of which very few if any CEOs have ever experienced, Klein is the right person to lead SAP into 2021 and beyond.

The Big Questions for SAP

We’ve tossed out lots of them in this analysis of SAP—here they are along with some new ones as well.

  • Can SAP seamlessly guide all of those 42,000 on-premises customers and their mission-critical workloads into the cloud?

  • Can SAP extend into the next 50 years the remarkable achievements of its first half-century?

  • From a financial analyst: “What’s the right KPI for us to look at during this transition point around that cloud revenue?”

  • In the red-hot market for industry-specific solutions, can SAP lead the way?

  • Will the IPO spinout of Qualtrics limit SAP’s ability to seamlessly deploy Qualtrics as part of a high-value end-to-end set of applications?

  • Should Klein have seen the Q3 reckoning coming?

  • Can Klein re-establish long-term trust in SAP among customers, partners, employees and others?

  • Is SAP’s business model right for these cloud-first times?

  • Can SAP fend off high-caliber competitors such as Oracle, Salesforce, and Workday?

  • Can he maintain and enhance a culture that embraces “...a resolute focus on the success of over 440,000 customers and nearly 40,000 employees” and “...an unwavering commitment to providing extraordinary experiences while recognizing the unique business demands of each customer”?

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About The Author

I’ve analyzed the enterprise-tech business for more than 25 years as an editorial executive and more recently as Chief Communications Officer at Oracle. I’ve written thousands of articles and columns about business innovation, strategy, leadership, disruptive technology, digital transformation, cloud computing, AI and more. In late 2016, I resigned from Oracle to launch the Cloud Wars franchise. It began with the Cloud Wars Top 10 ranking and weekly articles, and has since expanded into daily articles, a weekly newsletter, a podcast with more than 200 episodes, and now this one-of-a-kind Special Report.

About The Author

About The Author

I’ve analyzed the enterprise-tech business for more than 25 years as an editorial executive and more recently as Chief Communications Officer at Oracle. I’ve written thousands of articles and columns about business innovation, strategy, leadership, disruptive technology, digital transformation, cloud computing, AI and more. In late 2016, I resigned from Oracle to launch the Cloud Wars franchise. It began with the Cloud Wars Top 10 ranking and weekly articles, and has since expanded into daily articles, a weekly newsletter, a podcast with more than 200 episodes, and now this one-of-a-kind Special Report.

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