SAP Legacy SAP ERP Customers Are Nearly Out of Time – HPE GreenLake SAP

Ano with HBEI lead the SAP Private Cloud sales efforts. And joining me today is Kelly Smith from SAP and Kelly, your Role? Yeah.

Good morning everybody. Kelly Smith. I'm the Vice President of SAP covering the South Market Unit.

Um, so been with SAP for six years focusing on ERP strategy And also on the line on, on Zoom is, uh, one of our most valued customers, Randall Grogan. Randall, Good morning. I'm sorry I couldn't be there this morning.

Um, I'm Randall Grogan. I'm senior director of Energy Transfer. Kept responsibility for financial systems, including, uh, SAP, and, uh, glad I could join this conversation.

Excellent, thank you. Let's, let's jump right in. So we're gonna cover today, uh, the agenda on session one.

There's five sessions. We're going to jump in for 15 minutes for each one. And first, we're gonna talk about how legacy S-A-P-E-R-P customers are nearly out of time, which means out of support.

We're going to have Kelly present what this, uh, SAP cloud ERP option looks like. Uh, built upon the GreenLake Cloud infrastructure as a service from HPE. We'll talk about modern hybrid cloud and why that's important, uh, because customers need choices.

And we're gonna have Randall talk extensively about why he chose a solution, why it fits best, and what value it provides his business. And then we're gonna talk about modern cloud for the AI world, why hybrid comes out of necessity, even if it's by accident. So let's jump in.

Um, as we begin, uh, legacy customers for SAP are near nearly out of support, but I have to cover some definitions. First. Is anybody familiar with SAP and their environments out of the delegates here?

Yeah. Um, and, and is this a bigger or small undertaking to, to make ASAP move or, or do an upgrade or change data centers? It's enormous.

Good Answer. It's enormous. So, so the point here is that the time duration for large organizations, or any organization that really adopts SAP, it's, it's built into the fabric of the organization.

There's so much around there. So I threw out some definitions on the screen for ERP and things for people that aren't familiar with the terminology, but HANA is SAP's database that, that came out in about 2010. And in about, I'm sorry, maybe, yeah, about 2010.

And in 2015 S four hana, the product, the ERP product that runs on that database was became available. So what we're gonna talk about today is SAP's newest product and implementation methodology, SAP cloud ERP, and it's sold in two additions. And there's actually three different options.

So Cloud ERP is the public edition. That is a true software as a service, uh, offering. And that offering is delivered for less complex customers that, that are okay with going greenfield and have less complexity, including customizations and things that they wanna do.

So the private edition is geared towards the customers that may want Brownfield, they can still go greenfield, but they want, they might want to move their systems into this, this new product, and they might wanna do some customization and things like that. And then they have integration of different types. So the two options are to deploy either a hyperscale, public cloud or deploy in any data center that meets the minimum requirements.

So they're both the same. And so, SAP has primarily focused on hyperscale cloud, and, and a lot of businesses have adopted that. The most businesses have adopted that.

But there's only one issue, if you look at the adoption rate as of the end of calendar year 2024, you know, the, the analysts have reported that 39% of all legacy ERP customers on SAP's client list have even bought licenses for S four. So there's a reason that something's just not working here fast enough. People are either, you know, procrastinating this decision, they're not adopting this for some reason, and we know it's a monumental undertaking, but they've had 10 years to do it.

So we, we look at that, we look at the fact that RISE was created as a, as a methodology to make it easier for people to focus on what they do, managing their business, and not focusing on what SAP should be doing. And that's patching and keeping SAP up to date. So 85% of those cloud ERP customers that have, that have chosen this solution are less than 5 billion, might hint that maybe there's some complexity involved for bigger business.

And two thirds of the cloud customers are a net new to SAP. So, SAP has done a tremendous job, and you could look at their stock price. They've done a tremendous job at this offering and getting people to adopt it.

However, the legacy ERP customers are lagging behind. And so this whole presentation and the whole concept of discussion here is to say, why is, why did this happen? Why is it happening now?

And how can we help it along? And, and Kelly, um, I I, I think as we look at this, my, my philosophy and, and Randall too, I, I think the idea is that we may be asking for too much change, disruption and risk all at once. And, and that's really the concept here is, is not is it best to put it in the hyperscale cloud?

Is it best to put it in or keep it in your current data center? Even if you don't own your data center, maybe it's in a co-location, you wanna leave it there. I don't know what the answer is.

It doesn't make a difference what the answer is. The answer is, how do we get more people to adopt this solution? Absolutely.

And just a, a couple comments there. I mean, I think that, you know, in previous, if you heard the sap, the word SAP or the company SAP, a lot of people would say rigid, you know, hold you in place, not flexible, challenging. And, um, you know, under Christian Klein's leadership, when he came in as CEO, being a technical expert, he comes in and says, okay, wait, we've gotta become more flexible for our customers.

We've gotta be able to offer them optionality and moving this, you know, gargantuous, ERP, and, and how do we do that? Right? So having the ability to offer options like customer data center, um, is one of those ways in which we have the flexibility to do so.

And you know, this number of 39% is, is flow for what our target is for. But if we look at the overall customer base, we have 7,200 customers on or moving to cloud ERP, whether it be public or private cloud. So the momentum is building, given the fact that we're now getting feedback and understanding those early adopters and those early movers, how to make it better and better, and streamline the process while allowing some of the optionality of toolkits and methodologies to help within the process.

So that number is climbing, um, significantly, which we're excited about. Um, and obviously one of the components in which we're doing that is through CDC. Yeah.

And, and so CDC stands for customer data center option. And, and the point here is that you don't have to move your data center if you don't want to. And, and, and like I say, it's, it's not a question of which one's better, it's just what's the least amount of risk.

And, and so this transition option, which is the, the new thing that was introduced, uh, just at saf at SAP's customer conference Sapphire a few weeks ago, this transition option is an option that SAP will allow you to move at your pace, not just on product. Um, but you don't have to move your data center either. So they're making it easier and easier.

So if you follow the America's user group and the German speaking and French speaking user groups, those are probably the most vocal user groups. They usually say SAP is rigid. I think just the opposite right now.

We're doing everything we can to make this flexible for people to not have to, to, to, you know, put them into a position of too much business disruption to them. So I think the primary reasons, and, um, this is up for discussion, but my guess is, and a lot of the analysts are saying that there's a lot of business disruption to move SAP, whether you're simply moving data centers, whether you're moving from your current data center to another, whether, whether you're doing more things at the same time for, um, digital transformation, ai, uh, different analytics, and there's downtime risk for not just SAP, but the non SAP dependent systems. And I think most analysts see that in cloud transitions, the number one obstacle to moving anything to the cloud, even for great reasons when they're microservices based and everything.

Hey, Jim? Yep. Please.

One question is, is cloud ERP the only follow on solution? They can't use the old S-A-P-E-R-P anymore after 2027? No, that's, uh, that's an important, uh, One of the flexibility options, right?

0, you know, whatever your aversion is of that. And that has an end of maintenance in 2027. Currently today following product, Extended standalone like that Or extended maintenance goes to 2030.

I'm not, not talking extended maintenance, I'm talking about a new product that sits a similar functionality. But, but not cloud ERP. There isn't anything is what you, so, so The, there's the ERP product itself.

S four HAA has no end of support listed, but the newest innovation and feature set goes into the cloud ERP version of that, right? So that's correct. There's, there's, there's no end.

You have to be on S four HANA to get support, but there's no end of support for S four hana, even if you don't move to cloud ERP, but you will miss out on the newest innovation, including the AI innovation right now. Okay, thanks. So the reasons for this are, are, and there's a lot of confusion in the market space right now.

And, and similar to that question, you know, like, oh, cloud ERP, are we losing support for the S four Hana ERP product? No. You're, you're not.

But you know, and, and then the, the change at like any software company, there's a million changes and name changes that happen and people get confused. Um, so, you know, I, I list a couple of confusions. So if a customer runs S four HANA perpetual license in the public cloud, SAP would class classify them as an on-premise customer, because that's the on-premise license that doesn't generate cloud revenue for SAP.

So it's all in the eyes of the beholder. Uh, if a customer runs cloud ERP on their on-premises data center, SAP would classify the customer as a cloud ERP customer, which is contrary to a, a lot of the terminology that we use. So you can imagine the amount of confusion in the marketplace right now.

And, and so really what we're saying in this, this whole concept is, um, if we clear up the confusion and make it easier, we will have more success. And that's what's happened inside HPE. So without sharing specific numbers, if you look at the revenue growth for this particular product, which is our GreenLake cloud infrastructure as a service underneath, we provide all of the hardware as a service and the services and support as a service to SAP who in turn sells the whole hit platform as a service to a customer.

And so we've had tremendous success in this product so far, and it's only heating up, and I think it's gonna heat up even more with those tailored options. And so, and then people will say, which customer examples does it fit? Um, we'll speak to the energy.

'cause Randall is from that company. Randall Grogan's on the, on the line with us right now is our prize customer. And, uh, and then a few other ones I'll, I'll note here, there's a technology customer that will probably use this to sell to more people, more customers, and a manufacturing customer that speaks a lot and actually will be speaking at the HPE customer conference in a, in a few more weeks.

So it doesn't fit one industry, it's really more about choices and openness in the market. So I wanted to just have a, we, we've got a few minutes for just an open chat on what your ideas are for maybe how this fits customers and how we can make sure that people are aware of the fact that there isn't just this limited choice. And, and Kelly and and Randall are available to, to answer any questions you might have about, you know, what does modern Cloud need today?

What, what do people need as they try to decide this complicated equation of where each workload goes and at what time and, and what does it work with and how do we make a talk to each other With the ERP system? It's not the easy answer, right? Because I think how many customers you have, that's so many options of the deployments.

Mm-hmm. Duration of that, right? I think that, uh, when you sit in the shoes of company that needs to invest again, a couple millions to switch their processes, because it's, I don't think that it's basically problem of the software is everything around it, right?

The core stays the same, more or less, right? You just can spice it with AI a little bit with some fancy features, but you know, if the cars doesn't go from the production line, it doesn't matter, right? Right.

So, uh, I think the integrations will be the, the key here, what integrations outside the system you have and how much you can move them around outside your infrastructure. Absolutely. Or you need to keep them inside.

And, uh, for me, you know, I'm not a focus on SAP in my career, but, uh, it's always somewhere there, right? Mm-hmm. And honestly speaking, it's one of the most complicated integration systems at the customer sites.

Mm-hmm. So yeah. That's why they don't want to move.

Yeah. You know, don't touch the things that it works. And even if it's fancy feature at the end, you know, hanging as a, as a fruit, well, you know, the CTO have some certain time in the co company if they will make mistake, it gonna be very short time.

Yeah. Especially in ERP. So it's very delicate system.

It's funny 'cause I I, I worked in, in small to medium size ERP for a while too, and there's so much fewer integration pieces. But when I work for my own company now as Hewlett Packard Enterprise, we look at the monumental systems that we have on the, in the, in the, in the, the, the touch points between the systems. Even if it's only a dozen applications, we have hundreds of integration points that are feeding data back and forth.

So it's never SAP in a vacuum. It's SAP and all its dependent ecosystem, all as one big family ecosystem that works together, right? I think so to push customers to move into the new, uh, version or new, um, delivery method, right?

There need to be a success story behind it. 'cause nobody will go just for change. Mm-hmm.

Yeah. Yeah. It story for CTO for somebody Sure.

Will really get a back out of it, you know, if they're gonna be success, right? Yeah. And we've, that's been a strategy that SAP's kind of looked at in, in this year is, is the personas, right?

So how do we meet the demand of the CFO, the CTO, the CIO, you know, the CPO, and what is the winning recipe across those profiles to say, this is why you should move. Um, so a lot of this boils down to obviously what is the business case for each of these individuals. So, um, you know, Randall, I think you can speak to this when, um, you're on stage here soon, but between Randall and his team and I help support Randall and the, the team moving to, to rise or cloud ERP, um, we have a roles and responsibilities list of over 1200 line items that goes into analysis of what's the responsible, what's the responsibility of the customer, what's responsibility of the partner, and what's the responsibility of SAP?

That's one component to look at how does that optimize your run? How do you run today easier letting SAP take some of the burden? Then it comes into, okay, do I stay with my S four system as it is, or my ECC system as it is and just migrate it?

What is, what's the cost or if I'm going to transform, what is the value that that CFO is going to see in doing such? So we have a whole ecosystem of SA at SAP called value advisory that puts together business cases and the best business cases outcome is when the customer is ingrained and embedded doing it with you. And Randall and his team were instrumental in doing that.

I think they, you know, the group became probably, I talked to them more on a daily basis than my husband at some point because of all of the in-depth conversations we were having to make sure that this made sense from a technical perspective, a business perspective, and a cost perspective. Yeah. I think that, uh, generally SAP projects are more about, uh, business environment and politics inside the corporation than truly a technology.

It's follow right after that. Yeah. Because it needs to be set somewhere, right?

Or HP or cloud or wherever place. But, um, this discussion, what the incentive, what the success stories behind it, what the value of course bring course, you know, that's, yeah. That's the first step.

And Absolutely, usually If this step doesn't come by your, you know, like inducted by you, you will not want to move up 100%. And Your your conversation about the, uh, different personas and maybe, maybe we jump right into the Sure. Next Sec before you go there.

Yeah, go ahead. Why is the, the private option the best kept secret here? I, I'm trying to understand.

Sure. I think that, yeah. So when we look at, you Think it's SAP tried to avoid when they're selling it?

No, absolutely not. So here's, you have SAP strategy is, is cloud, right? So we wanna eventually move all of our customers to a public cloud option.

However, if you are a big organ Cloud, you're talking about the SaaS solution, not the, uh, private Correct. On a, on a hyperscaler that's designated for you. Much like our cloud software solutions of SuccessFactors, Ariba, they're in that public cloud, they're run by SAP, you get what you get out of the box, right?

Right. But if you look at our customer base who's been, who have been customers for 20 plus years, they've built complexity in their ERP and they're a, there are 20, 30, 40, 50,000 customizations. All of the integrations not to, you know, and plus the suite.

So what we set, what we've done is, is we said, okay, well you can go into a private cloud environment and we can, you have your option of hyperscaler choice. 99% of my customers in my large enterprise, um, ecosystem are, uh, private cloud customers. And I absolutely support that because they're not, our solution isn't, and public cloud isn't baked enough yet to push all of our customers like an energy transfer into public cloud.

It's not there. So Is the challenge all the integrations that it would, uh, require to implement, I mean SaaS versus, you know, versus integrations? Is that the issue?

It's that, It's, it's a combination control of, Of control of when you do the upgrades and patching and things like that. So people have this huge governance process for when they incorporate a patch into their larger environment. And in SaaS you don't get to make all those calls.

It. And so you talk about SaaS, I mean, you can at the, at the most extreme level, you could look at the off the shelf products that you can buy right now just by going online, putting in your credit card. And those are really simple and they're available immediately, but they don't allow the customization and the, and the, and the control when it, you know, maybe, maybe there's a new patch in there and you've got something that you've got an API that's firing and maybe that change happens to that API and now it's not gonna fire properly.

So I think the bigger companies are more hesitant and resistant to that. And I, my argument is I'm not sure they're ever gonna go to that. 'cause there are systems that are off the shelf right now, and some big companies will adopt that public cloud model because that's a simpler division that follows a more simple process.

Yet I think there's always gonna be opportunity for that private edition that, that, you know, people need that level of control. The, The best kept secret, what we're talking about today is the ability to have a custom data center, meaning you own your data center and we have the strategic partnership with HPE with the ability to do that. So cu certain customers, energy transfer being one of them said, I have, I, I have other businesses on my data center.

I want my own secure. I want security of having and knowing where my data center is. I I want control of that.

And so that is, that is some of the conversations we get in with customers that say, well, I'm not ready to move out of my data center because X, Y, ZI want my data, I wanna own it. I don't, I'm not letting that go. That's where this option of customer data center is you owning your data center and having SAP run it on your behalf through the same cloud, private ERP, but HPE hardware, That's the point.

I mean, um, rough from, from Italy. So the, yes, the point is that, uh, I bring the, the voice of, uh, cloud service providers and, uh, Italy, Europe is, uh, concerned about revenue. So yes, one of the reasons to have a private cloud is keep data inside.

Mm-hmm. Uh, as a CSP, is it possible to have to move the data from customer data centers that maybe they are old and uh, uh, I mean as a hardware to, um, national service provider? And the question is, is it possible to have a multi-tenancy on that installation?

It's coming. So on this particular one, the multi customer option is, is not out yet, but there are service providers. Uh, Portugal is one in the go in the public sector.

It's a customer in Portugal that's using it for various agencies within the cloud service provider. They are a cloud service provider for the country of Portugal. Um, so we have had success.

We've, we've done different things. We have, uh, EU access for people accessing the CSP data center only. So when you wanna say I want some level of sovereignty around labor, around, uh, it gets a little more complicated as you talk about management services and support services 'cause it is global in nature.

But we can start to put together those things and those are kind of special requests that we handle, you know, on a one-off basis. But yes, cloud service providers are absolutely part of this ecosystem and we would encourage cloud service providers to look at this solution, especially when there's some geopolitical situations getting in the, in the way.