American Turnaround by Ed Whitacre

In his book about AT&T and GM, Ed Whitacre, the former CEO of those companies, talks about how he led those companies through disruptive technology and business model changes. I was particularly interested in understanding how AT&T, a company that relied on land lines and lucrative long distance call revenue, made its transition to a successful modern era wireless phone company. He points out that AT&T embraced the wireless business while MCI, a competitor, did not respond to the changes fast enough.

I am seeing a similar situation at SAP. Our business model of on-premise software with about 30 percent profit margins is being disrupted by cloud providers. Our hardware partners who made 2 dollars for every dollar we made and our services partners who made 4 dollars for every dollar we made are also seeing their business models disappear.

While we have recognized the inevitable move of all software to the cloud and have committed ourselves to the cloud, every employee and partner needs to execute on the strategy for us to be successful.

The good news is that the message for the top is clear. We need to be a cloud company powered by HANA. We do have very good acquired cloud assets for line of business applications such as human resources and procurement. We also have a good home grown system for travel and expense. We are trying some innovative things in other areas such as customer and finance. We have the HANA Enterprise Cloud model, where we manage applications in the cloud for customers.

I am cautiously optimistic.

SAP Cloud Deployment Models and Their Evolution

You may have seen pictures of three main cloud deployment models, for all the cloud applications that SAP provides. I want to share the thinking behind the design and evolution of those models.

SAP customers, who run SAP ERP on-premise applications, are adopting cloud solutions to take advantage of faster innovation, consumer grade user experience and lower total cost of ownership.

Lines of businesses such as human resources, procurement, finance, sales, service and marketing are adopting the cloud to respond to changing employee and customer expectations without having to rely on internal information technology teams and undertake large, high-cost, high-risk on-premise software implementations. They are also turning to the cloud because of the superior user experience that engages a newer generation of employees who expect enterprise software to function like consumer apps they use every day. For example, an industry that is struggling to attract and retain new college graduates can implement onboarding solutions, delivered from the cloud and on mobile devices, that attract and engage a new generation of employees during the critical new-hire onboarding period.

Line of business users normally start with one or more applications in the cloud and have a desire to get there quickly without too much help from their information technology teams. In many cases a company's information technology team may not have the time or people to devote to a project that does not directly contribute to the revenue of that company. The hybrid deployment models are designed to meet the needs of such line of business users.

Information technology teams are adopting the cloud because it helps them deliver solutions to their internal customers faster at a lower cost, while freeing up time and money to invest in projects that help the core business of their companies. For example, a banking customer that runs SAP for Banking can move human resource management, procurement and travel management to the cloud while retaining their on-premise software to run their bank.

When companies move all their business applications in one or more lines of businesses to the cloud, usually their information technology teams take the lead in decision making and implementation. They look for a single provider who can provide multiple applications for all their business needs. The full cloud deployment models and the associated services are designed to meet the needs of such information technology teams.

Executives such as CEOs, CFO and CIOs are moving subsidiaries or newly acquired companies to the cloud and connecting cloud systems with their on-premise ERP to reduce the cost of information technology, gain better insight into the business, reduce the time it takes to integrate systems and culture of newly acquired companies.

When executives such as CEO's CFOs and CIOs move subsidiaries or newly acquired companies to the cloud for cost and other business reasons, they do it because they may have a need to keep such subsidiaries separate for legal or other business reasons. In this model a subset of employees, usually from a subsidiary, end up using cloud applications while another subset of employees, usually from the parent organization, end up using on-premise software for the same business process. This might sound inefficient. But there are many technical and legal reasons for which executives of a company may want to key some subsidiaries separate. However, they would still need to look the whole organization including subsidiaries while making business decisions. The Two-Tier deployment models are designed to meet the needs of such executives.

The role of integration in these deployment models
When lines of businesses  move their software applications to the cloud, they sometimes incorrectly assume that these applications are self-contained and need not talk to other business applications that may be on-premise and other supporting applications that may be in the cloud. Such an assumption is costly and may lead to the failure of cloud implementations. SAP studied thousands of cloud implementations and learned that on an average line-of-business cloud applications are connected to over 15 systems using at least 60 integrations. For large businesses this number could be in the hundreds.

SAP’s cloud integration strategy was developed in response to these specific consumers of cloud software, their challenges, their desires and the ground realities they face. While, SAP’s cloud applications are designed to provide complete self-contained functionality, they are also well integrated with a customer’s on-premise SAP systems to support end to end business process.  SAP provides the necessary technology and content to connect its cloud applications to 3rd party cloud applications. SAP also provides a set of tools and technologies that enable customers and partners to build their own custom integrations. For customers who may not have the know-how, SAP provides fixed price professional services packages to implement the integrations.

Deployment Models For SAP Cloud Apps

Business ByDesign Integration with SAP ERP

I spoke to my Business ByDesign colleague Mike Morel to understand how they go about integrating Business ByDesign with SAP ERP. Mike explained everything to me and was kind enough to share a lot of resources. To get my head around it, I mapped what they do to what the SuccessFactors, Ariba and SAP Cloud for Travel teams are doing to integrate the respective solutions to ERP. Here are my notes based on my understanding of what Mike told me.

1. What is SAP Business ByDesign?
SAP Business ByDesign is ERP in the cloud designed for small businesses and subsidiaries of large companies.

2. What are the Business ByDesign deployment models for subsidiaries?
Subsidiaries  using Business ByDesign can use the Two-Tier ERP deployment model.

Many companies that run the SAP® ERP application as their corporate enterprise resource planning (ERP) system are moving to a two-tier model to support their subsidiaries. With this model, they choose a subsidiary ERP system that meets subsidiary functional requirements and is less expensive to deploy, easier to change, and simpler to manage. Yet it also satisfies corporate requirements, which typically include regulatory transparency, operational metrics visibility, use of centralized business functions, and key data rollup.

3. What are the packaged integrations available for this deployment model?

SAP Business ByDesign supports multiple  integration scenarios with the HQ SAP ERP system. Packaged integrations are provided for master data integration, financial statement consolidation, procurement integration, payroll integration and analytics integration, Business ByDesign provides a set of web services for scenarios not supported by packaged integrations.  

4. What are the integration technologies used?
There is a proprietary ERP Add-On available. Certain packaged integrations use files to exchange data. Almost all other packaged integrations use iDocs or web services to integrate. SAP NetWeaver PI is optional. Customers who want to use SAP NetWeaver PI as middleware can choose to do so.

You will notice that the approach the Business ByDesign team has taken has a lot in common with all other cloud products from SAP. The only difference is that different teams think about these integrations slightly differently. Sometimes they tend to use slightly different terms for the same thing.

However, the underlying approach and integration architecture is more or less the same for all cloud products.

Journey To The SuccessFactors Cloud For Utilities

According to the Center for Energy Workforce Development, the Utilities industry in the Americas is facing a looming talent shortage, which is going to get bigger in the next decade. These talent shortages are coinciding with disruptive technology changes, cyber attacks and changing business models.

I am not a utilities industry expert. However, I spoke to a colleague who is experienced in the industry and thought about how the SuccessFactors cloud can help address some of these problems. I wrote this in a story format to share with Utilities Customers in an innovation event next week. While doing this I borrowed patterns from the Oil and Gas industry customers I worked with and brought some of those lessons to the table.

Customers in the Oil and Gas industry, who face talent management problems similar to the Utilities industry, started with SuccessFactors Workforce analytics to study their problems. Armed with that data they implemented certain talent management solutions in the cloud. Once they became effective in the talent management area, they moved their employee administration to the cloud.

Here is my hand written story. I am done with the presentation, which I plan to share with several customers at the Los Angeles Utilities Innovation day on May 14, 2014. My colleague Darrell Lew will be joining me to share his experiences and show the product. I look forward to seeing you there, if you are going.

Are you a Utilities expert? How do you think cloud HR can help address challenges faced by utilities today.

SuccessFactors Platform, API and Integration Help Documentation

The SuccessFactors product management, engineering and knowledge management teams have started writing help documentation for SuccessFactors Platform, API and Packaged Integrations in the help.sap.com site. Go to help.sap.com/cloud4hr. This location has documentation for the packaged integrations that support the Full Cloud HCM deployment model.

Details of the packaged integrations supporting Talent Hybrid integration can be accessed from help.sap.com/erp_sfi. Please bookmark these locations. Effort are underway to add more documentation to these sites. I have added these links to partner integration Jam groups.

You might be wondering why we have two locations for integration help documentation. We are wondering the same. That might change soon.

Side-By-Side HCM Overview Update

I added a couple of slides to the SAP SuccessFactors integration strategy and road map presentation. describing the Side-By-Side HCM deployment model. SAP and SuccessFactors colleagues can find the slides in the internal Jam group for integration. Partners can find it in the partner Jam group.

We are debating if we should specify more Side-by-Side scenarios or just stick to just this scenario to keep things simple. I'll keep you posted.

Hybrid Integration Scenarios In SAP Service Market Place

My colleagues in the SAP Service Market Place team have created a section that described all the hybrid deployment scenarios for SAP Cloud For Human Resources and SAP Cloud For Sales, Service and Marketing. Many of my solution management colleagues contributed to these pages.

The information provided in these pages about SAP Cloud for HR goes one step beyond the overview presentation I have shared in the internal integration Jam group and the partner jam group. It goes into the level of details that a white paper normally goes into.

That makes it a useful site to learn about the packaged integrations, understand what they do and share them with customers and colleagues who need this information. You can access the site here. The address is service.sap.com/public/hybrid. Information about hybrid scenarios in other application areas will be shared the in the future.