How SAP’s partner ecosystem is built for long-term growth

How is SAP’s partner ecosystem poised to propel the company towards vital future growth in the cloud? Will this ecosystem earn the enterprise IT leader its sought after slice of the global digital economy, whose app economy alone will be $120B this year? These were the key questions at a recent strategic SAP Partner forum I attended in New York City.

The upshot: While the SAP Partner story overall is strong for the firm, there remains critial work to do to prepare for the future and fully realize its potential to achieve the company’s strategic goals.

SAP’s Success Through Partners

The German software giant is well known for providing some of the most mature and sophisticated enterprise solutions in the world. As the saying goes, there are average industry solutions that can’t be counted on to work in practically every market, industry, and operating environment. And then there’s SAP. It’s a reputation that the company has burnished at every opportunity.

This expectation cuts both ways however: While it separates the also-rans from the top-tier and allows premium pricing, it also provides real delivery and customer success challenges in making sure the more advanced capabilities of SAP’s platforms are actually differentiating results in reality to provide additional business value for the customer.

The SAP Partner Ecosystem as of 2019

Enter SAP’s partner ecosystem, which often provides the last mile of success, by having a large global set of delivery partners that have 1) a nuanced understanding of the history and needs of local customers and SAP products both, plus the ability to bring them together effectively, 2) built additional unique capabilities and solutions on top of SAP’s many platforms, and 3) integrated all of these elements together, along with 3rd party legacy IT systems, into workable enterprise IT portfolios.

In other words, it’s the classic trinity of VARs, ISVs, and SIs that make so many enterprise software vendors successful on the ground, and especially so in SAP’s case. In fact, today one key measure of real success for an enterprise software vendor is how many such partner organizations can be brought into its orbit. By this measure SAP is still a bit behind organizations like Microsoft, which has over 68,000 cloud partners albeit more SMBs.

State of SAP’s Partner Economy and Ecosystem

As a result of its domain complexity, the considerable size of the ERP market, and SAP’s dominance of supply chain IT in particular — though the company is fast moving into many adjacent markets — SAP’s partner economy is vast, with over 18,800 partners as of late January. The total value of this partner application economy was recently pegged at $130 billion in net new yearly revenue, and slated to double over the next five years. Thus, the company’s partnership ecosystem stands both as an engine of success as well as growth for the company.

With so much staked on its success, SAP recently gathered analysts and thought leaders together at the SAP Business Partner Forum in New York to showcase success stories and the current state of its partner ecosystem.

Kicked off up by Meaghan Sullivan, head of general business and global channels marketing at SAP, she underscored how the company is committed to building a true “ecosystem of the future” to achieve its vision for the Intelligent Enterprise, a roadmap the company has developed for strategically wielding enterprise data that is designed to outmaneuver competitors with smarter products and services. It’s a sophisticated model that they are current touring around the country to explain to the market better. Both comprehensive and deep, the Intelligent Enterprise is inclusive of supply chain and (most recently) customer experience, as well procurement and workforce management. It also includes a growing number of industry verticals with its SAP Leonardo offering.

Perhaps the most insightful comment of the day came from Diane Fanelli, SVP and GM of SAP’s Global Platform Channels, who noted that when it comes to the IT solutions of tomorrow, “the future is small, simple applications that snap into existing landscapes. You go shopping for them on your phone. That trend will continue in the enterprise, as they become more comfortable with this kind of [informal] digital acquisition.

Translation: Like Salesforce has attempted with some success with AppExchange, SAP is building and growing rapidly with its SAP App Center a delivery channel for partners that is more consumerized, on-demand, and ready to digitally expand reach for partners, while driving lower barrier acquisition and sales for both SAP and its partners. Though long-predicted, especially by yours truly, enterprise app stores has been some time in coming. SAP is clearly determined to build App Center out as a next-generation channel and make it successful. The early numbers seem to bear this out: Growth has been rapid given its launch only 18 months ago, with over 1,500 enterprise apps from SAP and its partners now resident in the App Center.

Which brings up a recurring point and one of the areas where SAP can most improve its PartnerEdge program, though it’s a famously tough balancing act all enterprise vendors must deal with: With so many partners vying for business, a software vendor will tend to favor its most tried and true partners, especially large ones that can handle plenty of project capacity, and SAP is no exception. While SAP clearly was aware of this perception, as it highlighted smaller players like Blue Marble and Nimbl, the high profile presence of Deloitte underscored the big ecosystem players that traditionally tend to dominate partner activity.

Takeaways for the future success of SAP’s partner economy

From this, here’s my analysis of the overall takeaways and recommendations for SAP that will help them achieve their goals of doubling the performance of their partner economy through 2024:

  • Continue to democratize the partner ecosystem. The App Center is a terrific start, but it’s still at an early adoption phase, though eventually it will be a channel for a significant percentage of partner solutions as SAP customers more fully adopt the cloud. However, the broader partner ecosystem, while considered perhaps too large for SAP to service well by some, needs more pro-active governance to equalize access and accelerate its run rate. The U.S. federal government has famously done this with set asides for certain key segments to keep its constituents happy. This model has real potential for SAP to ensure a sense of fairness and equity with its partners. Dimensions for such set asides could include industries, geographies, and solution domains, making them more fine grained if necessary to let smaller partners stand out.
  • Encourage streamlining and acceleration of the rest of partner delivery. While digital channels are the long-term future of much of SAP partner solution delivery, real scale for this type of solution acquisition is 3-5 years away. In the meantime, there’s a great deal of work that can also be done to productize, template, and automate existing partner offerings to cut delivery time and cost, although likely at the expense of margin in return for speed and scale of customer growth. While Deloitte’s SAP CTO Darwin Deano stressed they are working on automating delivery across their 20,000 staff members, they admit it’s slow going. To achieve this, SAP will need a few poster children partners that can demonstrate such acceleration means more client projects can be handled at the same time with higher success rates and more revenue.
  • Push the pendulum for cloud through the partner ecosystem. Many of the strongest aspects of the future state of SAP’s partner ecosystem comes from customers shifting to the public cloud. This ranges from digital delivery of partner solutions through App Center to making its own solutions easier to provide to customers. An SAP Cloud Platform migration kit that helps partners quickly move their on-prem applications into fully productized customer-ready partner offerings would go a long way towards achieving this goal. SAP’s is clearly staking its future on the growth of its cloud platform in so many ways. Making it easier for all of its nearly 20,000 partners to move themselves and their customers to the cloud is just smart, and only requires a single point, though sustained investment.

These days enterprise vendors realize they have almost no chance to win in the cloud without a large number of partners to help spread out the scale and cost of innovation, customer acquisition, delivery capacity, client knowledge, support, and much more. This has long been the case when it comes to consumer digital platforms like operating systems and mobile devices, the enterprise software space is finally reaching the tipping point when it’s not enterprise vendor vs. vendor but ecosystem vs. ecosystem.

In this way, all enterprise software vendors have the same top digital transformation issue that their customers have: How to achieve ecosystem growth successfully and sustainably at scale, simultaneously. In my view, SAP has succeeded in building one of the largest and most successful enterprise partner ecosystems to support its direct sales channel. Now the challenge will be to transition its sales model for both SAP’s offering and its partners’ to new cloud delivery channels, from pre-sales and solution acquisition to consulting and delivery. This will have many challenges, especially cultural, as the sales organization can’t seem to be threatened. This risks slowing down the transition to become a fast and agile cloud player. In my analysis, SAP certainly has the ability to execute here, the only question remains how well it will be done.

Additional Reading

SAP: Strong Q4 2018 earnings, restructuring on the horizon

CX software drives revenue growth at SAP Brazil

(Cross-posted @ ZDNet | Enterprise Web 2.0)

Iterative development and minimum viable products help non-profits succeed

Both large organizations and small companies have adopted the principles of lean startups. Concepts such as minimum viable products and iterative development are mainstay approaches for organizations developing both products and services.

However, we do not often hear about non-profits and mission-based organizations using these approaches. Author Ann Mei Chang’s new book, called Lean Impact, remedies this lack of knowledge by bringing deep expertise in the subject to bear on numerous case studies.

I spoke with Ann Mei as part of the CXOTalk series of conversations with the world’s top innovators. During our conversation, I asked her to explain how the minimum viable product fits into the social sector:

The minimum viable product is essentially trying to come up with the smallest, quickest, cheapest way to learn about something where you have a high degree of uncertainty. Again, in the social sector, we often are trying to solve problems that are long-time, intractable, and in conditions that are highly dynamic, and so there is a lot of uncertainty, and there’s a lot that we need to learn.

The book makes linkages between Silicon Valley startup approaches and the needs of social impact organizations. I asked Ann Mei to explain the differences between these two worlds:

One of the biggest reasons is the nature of funding. If you’re at a tech company or any business, you usually have a customer that you’re trying to serve, and you build a product or service for them. The customer pays for that product or service, and so there’s a direct feedback loop. If people don’t like your product, they aren’t going to pay for it. You learn very quickly if you’re on the mark or not.

When you’re talking about social good, a lot of times the people who are paying for your product are different than the customer. So, you have already this complication where your feedback loop involves two very different parties who may have two very different interests. That complicates things. It makes it harder to drive your feedback loop.

On top of that, funders in the social sector, especially funders for nonprofits, tend to be very restrictive. They want to know your whole plan up front and then see you execute on that plan. They’re often also very risk-averse. They’re looking for immediate results. That also makes it hard to innovate. It’s hard to pivot, experiment, and take risks. Some of these systemic constraints make it difficult for nonprofits to do the sort of testing and iteration that’s needed to innovate.

On top of the funding side of the equation, there’s also some innate challenges. It’s harder to measure a social impact like, are you breaking the cycle of poverty? Are you making society more resilient and democratic? Are you developing? Are you helping kids get a better education?

These are things that take time, often, to answer, much harder than, for example, seeing if somebody makes an e-commerce purchase. These kinds of challenges exist in the social sector but not in the tech world or even in the business world.

Also, I think we need to be much more thoughtful and careful when we’re experimenting with people who are vulnerable already. We can’t do the Silicon Valley thing of move fast and break things because we’re talking about real people here and real lives.

You can see it was a fascinating conversation. The video embedded above offers a summary, but you can also watch the full interview and read a complete transcript


(Cross-posted @ ZDNet | Beyond IT Failure)

Zoom CEO strives for sustainable customer happiness

Making customers happy on a sustained basis is hard and expensive. As a result, business leaders often de-prioritize the importance of customer experience when making investment choices related to time, money, and product focus.

Customer experience often dies from the decisions of a thousand small cuts. For example, do we cut corners on features because we think customers won’t notice? Do we release the product without enough testing, effectively turning customers into guinea pigs who pay us for that privilege? Do we make it easy or hard to cancel subscription renewals? How good is our customer support and service?

Also: What’s next for 2019? 5 customer connection trends to watch

Given the importance and challenges of customer experience, I invited a respected startup founder and advocate of customer happiness as my guest on episode 321 of the CXOTalk series of conversation with the world’s top business and technology innovators.

Eric Yuan is CEO of Zoom Communications, one of the fastest growing SaaS software startups in the world. By any measure, Zoom is an extraordinary company, for example:

  • Ranked No. 3 in the Forbes Cloud 100 list for 2018
  • Ranked No. 2 among large companies on the Glassdoor list of best places to work in 2019
  • Named Frost & Sullivan’s 2019 Company of the Year in the Global Video Conferencing Industry
  • Listed as a contender to go public in 2019, with a current valuation of over $1 billion

As a paid customer of Zoom and a speaker at their user conference, I got to know Eric Yuan personally over the past several years. During that time, I have repeatedly heard him discuss the theme of customer happiness. Based on the company’s performance combined with my own experience, I am quite comfortable presenting him as someone who can legitimately teach us about customer experience.

Watch our full conversation in the video embedded at the top and read edited excerpts below. You can also check out the complete transcript, to learn how customer happiness shapes Zoom’s product, culture, and hiring.

What is Zoom?

Eric Yuan: Zoom is a modern enterprise video communication company. We’re working very hard to make video communication frictionless.

How fast are you growing?

Eric Yuan: We more than doubled the employee headcount over the past 12 months and we grew our user base revenue well. We think that’s the outcome of happy customers. As long as every day we make our product better, process better, and also make sure every interaction with our employees and the customers better, I think everything else will be taken care of.

Also: CIO case study: Customer experience and digital transformation

What does customer happiness mean for you?

Eric Yuan: That’s the most important thing.

Every day as a CEO who manages a company, I have so many things to work on but, ultimately, I’ve got to understand what’s the number one important thing as a business.

If we cannot make the customer happy, nothing will matter. That’s why this is our number one priority. If a customer is happy, everything else will be easier. Customers will like to talk with us, share our stories with others and, essentially, will help us to further improve our product experience and also make our business better.

Does customer happiness start with understanding their perspective?

Eric Yuan: Absolutely. You’ve got to look at everything from a customer perspective. If you truly care about them, you are not only going to look at it from your perspective. When you build a product, you will say, “Hey, will this product, will this feature, deliver happiness or add value to a customer or not?” Anything you do, look at it from a customer perspective. Then, actually, the customers, they will feel more like a part of your business. They’re happy to grow your business.

What does customer experience mean?

Eric Yuan: Ultimately, it’s three things. When we talk about happiness, first of all, your product has got to work. Every time a customer is using Zoom, they really like it. That’s the number one thing; your product has got to work. Every time after the meeting is over, customers say, “Yes, this experience is great.” They enjoy using your product.

The second thing is your process. When you do business with customers, you’ve got to make sure your process is very simple but very easy.

The third thing is about the people. Meaning, because not only do those customers use your product but, also, we want to make sure every interaction between Zoom employees and customers  — like support, customer success managers, engineers, product managers  — every interaction between our company and the customers, they enjoy it. Process, people, and the product, from all those three aspects, we make sure the customer is happy.

Also, understand one thing. Sustainable happiness comes from making others happy.

We apply that theory to our business. So, as a business, we do all we can, look at everything from a customer perspective to make the customer happy. Then our business will be happy. Then employees will be happy and then I will be happy.

How do we make sure the customers are happy? We look at every interaction from the product, the people, and the process.

How much time do you devote personally to customer happiness?

Eric Yuan: One hundred percent or maybe 200%. Every day, I look at my calendar. Either meeting with customers or looking at our internal process and how to simplify that, how to make sure we design our company process and also from an end-user perspective. We will look at it from our employee perspective. Even look at it from our internal perspective and also the product as well.

Every day, just look at all those three things: people, product, and process. I spend all my time on those three things.

I give you one example. Like free users, they want to call our support. They want to get some questions or try to get some help. If we really focus on customer happiness, we will help them. That’s what we did over the past several years. We still serve our free users very well.

Also: I thought Comcast had improved, then I called customer service

Say the customer wanted to cancel. We make cancellation very easy. They do not need to spend too much time to call us, do this, and then cancel the service. We make everything easier. So, any decision we are going to make it here, we always want to make sure, “Will this help our customer or not? Will this change benefit our customer or not?” Ultimately, that’s part of our company culture.

Can you separate company culture from product development?

Eric Yuan: You cannot separate those two. The product is kind of more like the outcome of your company culture, right? If you do not have a great culture, occasionally you might develop a good product. However, that’s not sustainable. Very soon, you are not enlisting new customers. You try to add some features you think is right. The customer may not like it.

Also: If being customer first is so important, why don’t companies do it?

If you have a good culture, really look at everything from a customer perspective, I think your product will be sustainable. Meaning, you always can improve your product, improve your process, and improve everything centered around the customer experience. That’s why culture is the number one thing. The product is sort of the outcome of that.

Disclosure: Zoom is a long-time paid underwriter and supporter of CxOTalk.

(Cross-posted @ ZDNet | Beyond IT Failure)