What clicked for SAP globally and in India this year?
Two years ago, we spoke of transforming SAP into a true cloud company. For a 50-year-old company, doing so was not easy from a tech, mindset, and cultural perspective. That said, 2022 was an inflection point for SAP, and our largest revenue stream today is the cloud. For India, we maintained the mantle of being the fastest-growing country for SAP for many quarters. For APAC (Asia-Pacific), we’ve finished seven quarters as the No.1 business region, and this will be the eighth quarter at the top, in terms of increasing contribution to the APJ business and the growth rate, which has been the highest in India. Globally, we’re contributing 13-15% to SAP’s Rise business division (Cloud ERP), which is big for a country the size of India. We’ve doubled our cloud customers in the past two years.
How is hybrid and multi-cloud adoption by the firms influencing your business?
There will be hyperscalers (typically data centre owners and operators) such as Google, Amazon and Microsoft, in addition to local cloud providers. You can run your SAP workload on Google Cloud, Microsoft Azure, Amazon Web Services (AWS), or on SAP data centres for mid-market clients — and we treat all of them the same. Does this facilitate multi-cloud adoption? Yes. A client may decide to run their services on Google and Amazon partially, and that’s fine since every service can ‘talk’ to each other. To shift SAP workloads to the cloud, customers prefer SAP Rise, and this has contributed to our growth with hyperscaler cloud providers only providing the infrastructure layer below the SAP platform. Yes, there is hybrid cloud adoption, and there are firms running on more than one cloud solution, but most are looking to standardize. Clients want agility and a single point of contact deal with it.
For SAP, which sectors are contributing to more growth?
Every business is a tech business, and digital transformation is no longer a question. The question is: How can we transform faster, in a modular way, or shift to the cloud altogether? Should we do it only with SAP or get other companies involved? We’re seeing more growth in engineering, construction, life sciences, consumer packaged goods, and retail, and IT -ITeS (IT-enabled services). India also has a good mix of large and mid-market enterprises. Typically, 80% of our clients are mid-market, MSMEs and SMBs. We saw growth in both. Finally, SAP virtually didn’t have any digital native footprint, but in the past 18 months, it has really grown. Today, 40 of India’s over 100 unicorns are operating on SAP solutions
But aren’t the drop in IT spending, massive tech layoffs, and talks of a global slowdown acting as dampeners to your growth story?
From the India standpoint, we’re not seeing these factors acting as dampeners. When we talk about India in the near future, we realize the excitement around India’s growth in the context of it becoming the third-largest economy in the world (by 2030). We’ve got the largest consumer market too. It feels like our time has come. As a country, one of the biggest pieces that can help us leapfrog to our 2047 goal is technology. The way forward is to transform digitally, become more agile, and get a global footprint. For SAP, we haven’t seen a slowdown. There is some caution, which is linked to global movements in North America, etc. (In April, SAP said it expects an overall revenue impact and loss of roughly €300 million from a “lack of new business" and “discontinuing" existing business relationships in Russia and Belarus).
What are companies in India doing right to sharpen their digital tech adoption strategies, and in which areas can they do better?
Businesses are looking to shift their operational core to the cloud. Then, there is the experience economy, which includes people experience, customer experience, and how to serve different clients. We’re seeing growth largely on the customer, and people experience sides. Finally, larger companies are looking to consolidate their procurement and finance processes. These are the key factors that companies are getting right. But from an India perspective, the top management, in many cases, takes too long to decide on tech adoption. The decision-making process could be faster. Technologies are being adopted, and consumption among companies does begin, but are they utilizing enough value out of these services? Not yet. I think there is a learning in the market — even among some large conglomerates; there’s so much more that they can do with the return on investment (RoI).
Given the buzz around artificial intelligence (AI), SAP is not perceived as an AI-first company. Do you agree?
AI is beyond a snazzy marketing name. I believe that by the time the decade turns, any business that isn’t into AI will be defunct. We need to understand the cusp between man and machine by 2024, and we’re already getting there. We have been weaving AI into the fabric of our solutions for years now – in processes such as people experience, shortlisting the right candidates, and how we can customize the interviewing and onboarding experience. Before an employee joins, SAP can show which cases would be relevant for a company and pick them up automatically based on the roles and the applicant’s purpose. A lot of these are based on the automatic screening of skillsets and job requirements. Besides, AI is deeply embedded in our manufacturing solutions.
SAP continues to be at the cutting edge of innovation, and we’re getting better at the things that we were not great at. For instance, we introduced low-code, no-code products to the SAP build a month ago. We’re doing this because there is a huge digitization demand that would be greater than the ability of professional developers to always build — and that time will come very quickly. So, how do we make things easier for businesses? We’re coming up with development processes through drag and drop and other simplified processes. This would thus allow us to expand this pie of our business.
In terms of AI and cloud readiness of companies, the bulk of mid- and small-sized companies are apprehensive about adopting new tech and understanding how to derive ROI from new tech. How is SAP addressing this in India?
We are definitely seeing huge adoption in small businesses. We’re also seeing a hunger to go global among small businesses and understand how they can do better. Until 18 months ago, a lot of firms believed SAP to be too expensive. Today, that barrier has been breached because it’s not about the cost of investment but the opportunity cost that you’re losing. Can things be better? Yes, but the overall sentiment is positive. The government has done its part too.
AI adoption is completely separate from cloud adoption. For the latter, there are clients that have taken 22 days to go live on our cloud platform and still others who have even taken 60 days. Some others have also taken 30 minutes. The difference in readiness will flatten out in the next two years, and everything will become ubiquitous.
How is the competition with Salesforce in the customer relationship management (CRM) space panning out?
The digital solutions in SAP’s core today power 95% of the top 500 companies in India. We serve the mission-critical core infrastructure of these large companies and also offer products to address people experience, customer experience, the procurement process, business network and supply chain offerings. This gives us a comprehensive stack. In terms of CRM, Salesforce, too, has a great solution. We live in an experience economy where you want everything to be connected to your core so that you can have a 360-degree view of operations and you can personalize the services and the entire stack that you require. For this, it makes sense to go with an SAP CRM. Salesforce leads in the CRM front, but for us, it is a big pie that integrates very well in our overall stack.
What are the key tech shifts you are seeing?
The biggest shift that I expect in 2023 or 2024 is sustainability. Every company today is talking about solving our carbon footprint, circular economy and business processes, value chain and becoming sustainable. Companies are roping in more Chief Sustainability Officers today. The whitepapers, etc., are falling into place, but what I’m not seeing fast enough is the translation to execution of how the carbon footprint is being measured within an organization for net zero. Business leaders need to understand that it’s not about the top line or bottom line but a ‘green line’ — and that not investing in the green line will decrease their profitability.
By 2023, SAP will become carbon-neutral. We’ll spend time and investments innovating products and solutions that can help clients around climate change and let them act on it. We have a roadmap of solutions, so this is a big tech trend going forward. Also, 60% of India’s GDP runs through a SAP system. Thus, the onus of helping clients solve for a carbon footprint is on us.
We are also coming to terms with the metaverse, but it may take a couple of years to mature. I’m hugely bullish on the longevity and reverse-ageing of technology, and there’s a lot going on in the metaverse space. There’s also a lot going on in the electric vehicle space in corporate India too, so that is also an exciting space to watch.
