SAP may not be traditionally known for its channel partnering, but the company is aggressively driving a channel-centric go-to-market strategy for its applications and cloud services.
In fact, about 80% of SAP’s business is currently to SME customers – and this is delivered through 12 000 resellers around the world.
With its cloud offerings, the company expects to extend this partner ecosystem, particularly in the South African and African context.
Simon Raeburn-Ward, who heads up partner recruitment and expansion for EMEA, explains that cloud services have made their way into every consumer’s life through things like Netflix, Spotify and Adobe.
And customers are starting to bring these kind of solutions into their businesses, he says.
The potential for the South African market – for just subscription revenue – is R1,6-billion, according to Gartner. And it’s expected to grow to R2,4-billion by 2018.
“That’s why we want our existing partners to move to cloud; and new partners to jump into cloud,” he says. “We can show you what the addressable market is for you – and help you deliver on the return.”
Cloud is around different innovations and deployment methods, Raeburn-Ward says. It offers fast deployment, more frequent innovation updates, agile development, configuration and integration; and lower capex with faster time to value.
For partners, this means that their customers need to understand what digital transformation means. The IT focus has to move from process to business models.
Partners can either lead their customers to digital transformation, Raeburn-Ward says. “And to do that you need to transform your business as well.”
So why should resellers consider cloud. “Your business is about profitability, revenue and growth.
“With cloud the gross profit is actually higher and you can increase productivity and growth.”
What this really means, he adds, is that the company valuation is much higher – up to four times higher, in fact.
The fundamentals of cloud economics means the business has to change.
“You have to think about customer acquisition costs. You have to identify how you can reduce them, and how you can scale them.
“Once you install a base solution, you need to look at the additional elements you can sell a customer. So what can you do about building IP; what add-ons will add to the incremental value?”
This also means the sales cycle changes, Raeburn-Ward adds, and resellers need to be talking to customers all the time.
“You need to look at the lifetime value of the customer. And this means you have to add value all the time.”
This ultimately adds value for both the reseller and his end user customer, Raeburn-Ward says.
Businesses are looking to their value-added resellers to help them make the difficult and complex digital transformation journey – but it is by no means an easy journey, says Simon Carpenter, chief technology advisor at SAP Africa.
“We also need to help customers understand that this stuff is coming really fast. In the exponential world, there are big hairy expectations – growth is not linear.”
SAP is well placed in this journey, Carpenter says, since it already touches many of the world’s leading companies.
And the company can help customers to leverage the vast quantities of data that are being generated in the hyper-connected world
“Customers want to know about how to use this stuff, and create value.”
The new concept of algorithmic business will have a huge role to play in the business of the future. Automation will make decisions and even replace human beings in their jobs.
“We need to react, and we need to react quickly,” Carpenter says. Digital accelerates and amplifies everything; and we are seeing a five-times to 10-times faster adoption rates of new technologies.
“When you take things, put them in the cloud and exploit a human need to get involved, things happen quickly.
“Nowadays the cadence of business is about speed and agility.”
There is no industry that will be untouched by this, Carpenter adds. “Everything will be touched, even old school historical industries like mining are being upended by what digital transformation can do.”
Succeeding in the new economy is possible anywhere, but companies have to change their mindsets, Carpenter says.
He adds that industry boundaries are starting to blur – for instance, a self-driving car is being developed by a software company. Fintech offerings are coming from companies not currently in the financial services industry.
“But perhaps the biggest change is in the customer experience,” he says. “While technology is changing the game, customers are changing the rules.”
Customers are choosing how they want to interact with a company, and along the way they create a lot of data about themselves – and information that companies can leverage to understand their customers better.
“We are living in a time of digital Darwinism, where only companies that can innovate will survive.”
But making the change while running the business is not easy, Carpenter says, and the instinct is to “tinker at the edges”, making small changes.
“We almost have to unlearn almost everything we learnt at school and business schools that are the basis of the economy today.”
Carpenter explains that business today is typically made up of traditional oligarchies with a small number of companies per industry that compete in similar vertical value changes and pursues efficiencies, incremental improvement and liner thinking.
In the new world, we are seeing the emergence of smaller, more agile companies that challenge this status quo.
Big companies, despite their strength and budgets, are slowly disappearing – in fact 52% of the Fortune 500 companies from 200 are already gone.
“We see a couple of things starting to emerge,” he says. “Firstly the job of running IT is becoming less important compared to how you use the information. More companies are therefore moving their IT to the cloud, where service providers can do this stuff at scale.
“The place you want to watch is the emergence of new platforms on which you can build new communities.”
Carpenter stresses that companies that want to survive have to transform, and they need to do it by figuring out how to use their network, and how to use their information.
“To do this every company will need a digital enterprise platform,” he adds.
He believes SAP is in a good position to provide that platform. Currently, about 74% of the worlds transaction revenue touches an SAP systems, in addition, 98% of the top 100 most valued brands use SAP. And the company is already well invested in the cloud.
In addition, SAP has invested $30-billion in the last couple of years into the cloud – and has doubled its cloud revenues in the last year, demonstrating how important it is to the business.
With the SAP HANA platform, with its in-memory platform, Carpenter says SAP is four to five years ahead of the rest of the market in data handling.
The company’s solution is brought together in its Digital Enterprise Platform.
“We are not an ERP company anymore,” he says. “ERP is 20% of the company now and we are getting a lot more revenue from data.”
For most companies, their existing systems are fragmented, with different systems running in silos. “This model is no longer tenable,” Carpenter says.
“Which is where HANA comes in.
“HANA is a single platform that allows companies to run all the tools and data on one platform, with processing happening fast in memory.”
Collecting and processing data is all very well, Carpenter adds – if companies are unable to act on that data, it is effectively useless.