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The Reinvention of SAP

One of the world’s most important tech brands, SAP, is in the midst of transforming its image from “backend workhorse” to “next generation customer experience innovator.” And it’s making progress. But can it fully shed its legacy reputation?

Since the mid-1970s, SAP has been a global leader in the field of enterprise software. More than any other company (with the possible exception of Oracle) SAP was responsible for creating a key software category: enterprise resource planning (ERP).

ERP is about making things easier for companies and their customers by automating and centralizing the core business processes that drive modern business – including HR, manufacturing, and distribution. And SAP was one of the undisputed leaders of ERP. SAP’s ERP applications currently have a hand in 77% of all global transaction revenue.

In the 1990s, ERP was a revolution. But today the traditional tools and methodologies of the ERP tech stack are being questioned if not abandoned. Open architectures, virtual computing, and cloud platforms are replacing end-to-end on-premises business suites. And the focus of innovation has shifted from automating back-end processes to transforming front-end customer experiences (CX).

Cloud-only competitors – led by Salesforce – have capitalized on these trends to position themselves as the new frontier of enterprise software. SAP has responded by shifting its technology and its customers to the cloud and finding a role to play in the booming CX space.

They’ve had considerable success: positioning their HANA in-memory database engine as a tool for delivering real-time personalized consumer experiences (as well as backend optimizations) and going all-in on the cloud with initiatives such as the SAP Cloud Platform Extension Factory for building innovative open source applications that can be deployed across the entire SAP suite of cloud solutions. As a result, the company announced new cloud bookings up 24% in Q2 of last year.

But some analysts remain skeptical. SAP shares have performed poorly since its last earnings call and overall software revenue was down 9% year-over-year. This has led some investors to focus on the weaknesses of the legacy business rather than the success of the new initiatives.

SAP’s response has been to double down on transformation, rebranding itself as a cloud-based customer experience company and going head-to-head with Salesforce.

One of the first steps was to rename the SAP Hybris suite as SAP Customer Experience and the SAP Commerce Cloud. Then, they raised the bar higher by joining with Adobe and Microsoft to launch a new Open Data Initiative. The goal of this program is to make it easier to liberate customer data from siloed software CRM systems (such as Salesforce) so it can be more easily enriched with data and leveraged by machine learning tools.

This is an ambitious initiative. Salesforce is having some difficulties leveraging customer data across recently acquired marketing and commerce systems. In order for the Open Data Initiative to pay off, SAP and its partners must convince an entire industry to embrace its open standards. But the rewards could be enormous.

Salesforce responded with its own data sharing initiative with Amazon Web Services, which promises to open up its data for some customers. It remains to be seen whether they will embrace SAP’s more expansive vision.

As a partner of both SAP and Salesforce, CoreMedia is remaining neutral in this battle of the titans. But we applaud any effort that aims to improve the quality and flexibility of the end-to-end customer experience. That will be a big win for customers.

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