SAP’s evolving partner economy

Ask about who has had a successful platform strategy, and most people will point to Salesforce. I beg to disagree – compared to revenues Apple has generated for its partners and itself from its iOS store and Amazon with its fulfillment engine over the last decade, Salesforce is a distant laggard. While customers have built plenty of custom objects, the revenues generated by ISVs on the platform is relatively small. Still as enterprise software goes, Salesforce stands out.

Ask who has had a good reseller channel and people will point to Microsoft and HP. I cannot disagree with that. They do not not get much recognition but SAP’s reseller channels around its BusinessOne and BYD products would get more recognition if they were independent units. Instead, they are dwarfed by SAP’s powerhouse direct sales engine which is the envy of most enterprise competitors.

That SAP direct sales focus has also meant association with a vast ecosystem of systems integrators and outsourcers. Again, that is the envy of many competitors, but if you read the first volume of SAP Nation this ecosystem has also been a burden on the customer base. And for the ecosystem cost (which ranks alongside GDP of largest 50 countries around the world), the failure rates have been unacceptably high.

So, with all these conflicting thoughts running through my mind, I went to SAP’s Partner Summit in NYC this week. They did a good job bringing together a mix of ISVs like Hrizons (a SuccessFactors implementer which also offers complementary software), resellers, small/midsized SIs like Beyond Technologies and large ones like Deloitte. And customers like Cintas and Pregis talk about their use of old and new SAP products and the partners who helped them in their journeys.

My feedback:

It was nice to spend some time listening to Diane Fanelli, SVP describe how SAP is showcasing in its App Center a growing number of ISV offerings using tools in its Cloud Platform and Leonardo offerings. In previous attempts, SAP has tried to do similar around NetWeaver and HANA. The customer access is much more digital this time around, the Cloud Platform leverages lot more open source and the barriers to partner participation appear much lower. It is fledgling at this point in terms of revenues for the ISVs and SAP (Fanelli says focus is adoption prior to monetization). I hope they continue with her statement “the future is small, simple applications that snap into existing landscapes. You go shopping [for them] on your phone.” Which also means the onus for vertical and other books of record will stay with SAP. Too many vendors abdicate heavy lifting to their platform partners.

In my research for Volume 3 of SAP Nation, I have seen many customers use smaller SIs for their S/4HANA projects, SuccessFactors and newer SAP projects. So, it was good to spend time with Blue Marble and Nimbl at the event. I do worry that SAP continues to seek bragging rights by talking about 18,000 partners. That’s way too many. It would do better for itself and its smaller partners by ruthlessly culling the number.

SAP also continues to be enamored with its bigger SI partners. I understand their view that such partners are a channel or at least an access path to influential client executives. I don’t understand the continued lack of certification or controls. SAP’s brand suffered considerably from the overruns and failures in the first wave of ERP.

The issue is less about SAP, more about the slow evolution of SIs and outsourcers. There is little automation in their service delivery, and still way too much consultant travel. The CTO of Deloitte, Darwin Deano responded to my question with “We’re 20,000 people. It’s not going to completely change overnight. But I can assure you that every SAP project is benefiting from things like automation and other new ways of working”.  I would love to see much more remote delivery,  more use of automation in data conversion and testing, more use of machine learning in parameter configuration. I would also like to see much more proactive commitment to multi-tenancy and public clouds.

Way too many SAP partners are proposing private cloud or on-prem deployment of S/4 (and possibly C/4 going forward). Not only will that continue the previous cycle of expensive ECC implementations, hosting, upgrades and application management, it will also complicate SAP’s efforts to have sufficient data in the cloud across customers to train its machines. So, this is definitely an area SAP needs to step up and guide, and if necessary, control the ecosystem. Seeding the ecosystem with more “born in the cloud” SIs who were raised with Google, Amazon, Salesforce and Workday technologies and agile methods would also be a smart move.

Overall, it is nice to see a partner ecosystem in transition around SAP. I, for one, would like the pace of change to accelerate. And the SAP focus be on customer success and economics not just on channel revenues. Many analysts are also hoping there is a role for the recent acquisition, Qualtrix in measuring the partner experience going forward – it may go a ways to help justify the large purchase price

(Cross-posted @ Deal Architect)

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CEO of Deal Architect, a top advisory boutique recognized in The Black Book of Outsourcing, author of a widely praised book on technology enabled innovation, The New Polymath, prolific blogger, writing about technology-enabled innovation at New Florence, New Renaissance and about waste in technology at Deal Architect.  Previously Analyst  at Gartner, Partner with PwC Consulting. Keynoted at many business and technology conferences and has been quoted in the Wall Street Journal, BusinessWeek, The Financial Times, CIO Magazine, and other executive and technology publications.