German software giant SAP held its annual meeting for U.S.-based industry analysts last week in Newtown Square, PA. As in years past, RSR joined our colleagues from the analyst world to hear where SAP is going, and how they are going to get there. There are several aspects of the meeting which are unique to SAP. For one thing, the executives are very accessible and open – the Base Camp isn’t a place where the solution vendor delivers highly polished marketing hype. For another, SAP arranges roundtable “birds of a feather ” discussions, where it’s possible to explore any of a range of subjects much more deeply with the SAP leadership. Finally (my favorite part), the afternoon features industry breakout sessions, where analysts can hear from development leaders about improvements to the solutions being offered or considered. To say the least, it’s one really full day.

Going over my notes from the meeting and comparing to past Retail Paradox Weekly blog posts I’ve written about SAP, one thing really jumps out about the company’s message: a consistent pursuit of its product vision. For example, the message delivered in 2011 to the retail community that then-Retail Industries Business Unit leader Lori Mitchell-Keller was that, “SAP wants to help companies ‘run, grow, and transform… by offer(ing) solutions innovations that enable consumer insight, consumer-driven supply network and unified customer interactions, all on a platform of technology that can be delivered ‘on device’, ‘on demand’, or ‘on premise’, depending on the needs of the customer. ”

Lori is now the Co-President for Industries at SAP (along with Peter Maier, who also attended the Base Camp this year), and her message was fundamentally the same as it was 7 years ago. According to Lori, the company is focused on: enabling enterprise realtime insights and control, optimized asset utilization, employee enablement (moving from a transaction orientation to a process exception handling one), enabling “segments of one ” personalization, and AI-driven process automation. The point of all of this technology enablement, according to Lori, is that businesses have to embrace continuous change, by “bringing intelligence to life ” by using new insights to offer smarter products, fulfilled in innovative ways, and to offer creative customer interactions supported by automated processes.

Later in the day, Achim Schneider, Lori’s successor as the global head of the Retail Business Unit, said that those objectives are realized by technologies like the Cloud, Internet-of-Things (IoT), artificial intelligence and machine learning (AI/ML), and virtual reality and voice recognition.

RSR has certainly been writing about those things for quite awhile. The question is, how does SAP make it happen? That’s where the company’s consistent focus on its vision is important. While SAP has continued to take advantage of new innovations as they emerge from the tech world (for example, there was more talk of microservices, less talk about “SOA “, or services oriented architectures), it has been pursuing the same roadmap for a decade or more.

SAP has refined it’s messaging somewhat, but the architecture is still defined as having three elements: a “digital platform ” at the base (data management and cloud technologies); “intelligent technologies ” in the middle (IoT, AI/ML, and Analytics); and then the solution suites on top which includes the following business solutions:

• The “Customer Experience ” – C/4HANA (the suite of solutions incorporating SAP acquistions hybris, Gigya, CallidusCloud, and Coresystems);
• Supply Chain and Private Label – omnichannel planning and digital manufacturing;
• The “Digital Core ” – that’s S/4HANA (the latest version of SAP’s ERP);
• People Engagement – SAP SuccessFactors;
• Business Network & Spend Management- SAP Fieldglass, Ariba, and Concur.

SAP promises out-of-the-box integration between the business solutions, a consistent user experience, object orchestration and master data management, and “easy to extend ” capabilities. But what strikes me as the most intriguing aspect of how SAP is architecting the whole platform is in how the company has positioned “intelligent technologies ” in the middle, to make it possible for businesses to monitor and optimize business processes, and to manage by exception, saving precious human resources for those events that defy automation – like individualized customer services.

SAP’s DNA, Applied To Retail

This process engineering orientation comes right out of manufacturing, which of course is part of SAP’s DNA. But the retail industry has in the past been resistant to process improvement disciplines that are common in manufacturing (for example, who will ever forget Bob Nardelli’s attempt to implement GE’s “six sigma ” process disciplines at Home Depot?). Retail is a famously “whatever it takes ” industry; witness how many retailers are offering a variety of omnichannel fulfillment options even as they complain that omnichannel order fulfillment is tanking their profits.

RSR has written about the opportunity to optimize non-selling functions so that more of the labor spend can go to customer facing activities. And that’s essentially what SAP is trying to enable – especially if you consider the customer interaction as one big exception. But the truth is that a lot of consumer purchases are routine, and SAP can help retailers vastly improve those kind of interactions with process optimization and automation, too. Those retailers around the globe who are either big now or are planning to be big probably already get the message.

SAP’s Challenge

SAP has always had a perception challenge in the Retail industry, as a monolithic and expensive ERP that can take years to implement. The company has combated that perception with both heavy investments to modernize the solution portfolio and with customer success stories that highlight implementations that take months rather than years (examples most notably come from vertically integrated brand retailers that have implemented SAP’s Fashion Management System – FMS).

The business world’s need for speed has been the driving force behind SAP’s (and its competitors’) push into the cloud. In SAP’s case, cloud implementation used to be an option (on-premise licensing being the most favored way to go), whereas now, cloud is the preferred way to go. SAP unequivocally supports a “hybrid cloud ” future, and is working hard to make it happen.

The other challenge for SAP is really more about retailers’ historical bias in favor of point solutions. In our coverage of the 2016 Base Camp meeting, I mulled this over, re. omnichannel order management: “what SAP calls ‘dynamic order sourcing’ invokes different capabilities from the ‘core’ on an as-needed basis to fulfill a customer order that originated from ‘anywhere’ in the selling environment. So when one asks SAP if it has a DOM capability, the answer is ‘yes!’, but when you ask, ‘what’s the name of the product?’ you can’t get a simple answer… this lack of a simple answer to a seemingly simple question could be a problem. “

Dani Khalaf, a Vice President in Achim Schneider’s Retail Industry Business Unit, pointed out that when a customer now signs up for SAP, the entire code base is “there “, ready to be used by any company in any industry – capabilities are “keyed ” via a customer’s license agreement. This does two things, one good for the customer, and one good for SAP. For the customer, it means that as the business expands and (perhaps) crosses into another vertical industry (think of a consumer products manufacturer deciding to go direct-to-consumer), the systems required to support such a move are already there.

For SAP, it means “one code base “, and that of course is huge, because it means that the software giant can focus more on helping businesses engineer their operations and worry less about whether or not there are systems to support it. That is an important change for everyone involved. And (to the basic point of this blog), the company has been doggedly working towards that end ever since co-founder Hasso Plattner announced back in 2005 that SAP was going to rewrite the entire portfolio to be “SOA compliant “. At the time, I thought that was unlikely, having rarely seen a soup-to-nuts rewrite successfully undertaken. But SAP did it, and it’s here now.

Retailers just need to stop thinking about point solutions and start thinking more about adaptive processes enabled by adaptive technologies.