SAP On Cloud: Hyperscaling Business Success

Rajat: Hello and welcome to an all new episode of the Zinnov podcast Business Resilience series. I am Rajat Kohli, partner at Zinnov and I’ll be your host for today. As the world switched almost overnight to remote models of working, SAP workload has become more and more prominent after the pandemic.

The need for digital HR systems grew along with ERP systems for finance, supply chain, and logistics as well. Microsoft’s SAP business unit is at the forefront of digital transformation optimizing environments to meet the rising demand and empowering employees to achieve more with increased process efficiency. To get a better sense of what SAP on Cloud means in today’s world and what kind of mindset is necessary to drive such massive enterprise transformation, we have with us a very special guest, Joao Couto, Vice President of the SAP business unit at Microsoft. He has a very momentous journey of almost 25 years in the field of strategy, telecommunication, and software cloud solutions.

He has been instrumental in leading organizations that deliver innovative and meaningful impact to customers through cutting-edge technologies and services. Welcome to the Zinnov podcast Business Resilience series, Joao. It’s great to have you with us today.

Joao: Thank you very much. It’s a pleasure to be with you and thank you also very much for the opportunity.

Rajat: Great. Welcome to the series. Personally, me and our listeners are very keen to know the SAP on the cloud, the big elephant, how it is shaping up and what’s the future. So let’s get started with today’s episode and hear more from him.

Joao, you have been industry veteran for more than two decades. Can you walk our listeners through some of your career highlights from a technology lens?

Joao: Yeah, sure. So, just to give you a glimpse of what has been my experience so far. I’ve been leading the SAP business unit for two years and a half while at Microsoft. Incredible experience at setting up the business unit from scratch.

It is now a multi-billion business. We have helped more 1000s of customers. Transforming and modernizing their SAP environments and that has been truly fantastic across the globe with hundreds of very highly qualified partners going through this experience.

Prior to that, I was the COO of Microsoft in Germany. I live in Germany. I’m originally from Portugal, trying to accelerate the digital transformation. Prior to that very, very rapidly I was leading the Portuguese operation leading the company to a cloud operation and making it visible to the entire world on some elements.

We were one of the first to take the lead on Azure so that was really, really great. Also, of course, just stepping a little bit back the experience on taking the German operation to be Subsidiary of the Year. That was also a good highlight of the career. And then prior to that, I was the CFO to Vodafone, having the pleasure to work both at the headquarters, as well as in the Portuguese operation.

And prior to that nine years of management consulting experience with a A.T. Kearney working pretty much across the globe. So that’s a little bit of the glimpse of my professional career. Personal-wise married, two beautiful children and a beautiful wife as well, happy living in Germany. So that’s a little bit about myself.

Rajat: Great. That’s a quite a beautiful journey you’ve had and sharing a glimpse of the personal as well as a professional life. That’s great to know. Now getting into the core of your work and I’m sure that super excitement that you have with your team. What business value are enterprises reaping from moving SAP to Cloud versus On-premise? And how can we leverage the Cloud to drive innovation in the SAP domain?

Joao: Super good question. indeed this is very much linked with the key drivers that the customers look for when they start their transformation journeys and also with our key differentiations at Microsoft. The first is of course gaining agility. So by moving the SAP environments to the cloud you gain a lot of agility from a resourcing point of view. You are able to scale up scale down your environments responding very quickly to demands of your business. Of course there’s also the cost element. By doing that you are optimizing the way you manage your resources, only paying for the time that you actually use the resources rather than investing upfront, creating spare capacity in, I would say, anticipation of potential business needs that might occur in the future. In the cloud you don’t need to do that. So that was the entry point for customers to start modernizing their SAP environments and actually just moving them into the cloud, simple lift and shift, no major transformations.

The second stage of the transformation was very much kicked in by the pandemic where organizations were faced with this urgent need to allow their employees to actually access their systems, access their environments remotely on a secured way. And I emphasize the secured way which nowadays is everyday more important to have a much more secure environment when moving and enabling their remote access to the systems.

The third element is where customers are looking into their modernization already with an eye on the need to transform their environments. And when transforming their environment they are basically looking at two things.

A – How can I extract more value from the data that I have on my environments? SAP is an enormous rich environment of multiple sets of information, be it from a financial standpoint, from an operational supply chain, supplier, customer. So there is an enormous potential of information that is available and connecting that enormous set of information with non-SAP systems, right? With operational systems that exists in the company or even with external sets of information which might be structured or unstructured, and trying to correlate all that and making an intelligent use of that information to create better informed decision-making in the company. And with that also looking into how can I optimize and simplify my business processes. Typically SAP systems have 100s 1000s even of business processes and rules which are configured during many years, sometimes even decades that were configured in the SAP systems. How can I simplify all that? And how can I automate a lot of those interactions with very simple to use automated processes using very simple Low-code/No-code applications to develop this kind of automations. You don’t need to be an IT expert to do that. And that empowers the entire company to really extract the next level of value into the organizations.

And then lastly making that all available to the employee. So enabling the employees to really take advantage of all this information and all those automation environments to really create a single working environment using collaboration tools like Teams and avoiding having to learn multiple applications and being concentrated on that collaboration tool, interacting with very simple user interfaces and then creating very easy connections on the backend with the existing application landscape.

So that’s the key drivers for the transformation and that also connects with driving innovation.

So have you automated those business processes internally? You drive a lot of innovation. But also when you do that, you enable the company to innovate even at business processes and business models level. Just imagine when you do that you are able to transform transactional business models into service recurring business models. As an example, imagine you buying a coffee machine. You can actually buy it with a pre-configured, espresso-type service. But if you like cappuccinos, why don’t you just log in, you order another package of software with cappuccino over the air, it’s downloaded into your machine. Your profile is updated and all of a sudden you are able to actually use the coffee machine for cappuccinos as well. And then you have a new service revenue stream. Or construction cranes and you buy and you pay the service based on what actually the crane is being used for. So these are just a few examples of how you drive also innovation into the company. You can find companies in all these kind of stages of maturity in their business process journey.

Rajat: Interesting perspectives, Joao. But if I look at the other aspect while moving SAP to the cloud is a bigger picture, successfully deploying it is another aspect altogether. And because of that some of the enterprises are still not able to move to the cloud because the deployment is a big task. What are the major challenges that enterprises face while migrating SAP to the cloud and how Microsoft is helping addressing these challenges?

Joao: Look, it’s a very good question. I think there are very different approaches into that, right? Now companies are facing the need to actually start the modernization given that SAP is stopping the support of their legacy <<>> version in 2027. In that journey the key challenges that the companies face is -am I going to leverage the opportunity to modernize my SAP environment and modernize my business process? Or, I’m just looking to do a technical upgrade of my solution platform and trying to do it as fast as I can with minimum effort. And typically this distinguishes between doing the S/4HANA upgrade as a greenfield or as a brownfield approach. What we do to help companies going through that journey is making available to customers a set of highly automated tools to help them create equivalent environments in the cloud in a very automated way in a question of hours not weeks, making sure that we make available to customers also advanced tooling to analyze the business processes that companies have configured.

Do I have high degree of business processes that are kind of obsolete, but being obsolete are still there and still kind of creating a heavyweight into the system and also the data that is attached to it is just slowing down the whole this. Also analyzing organizational settings that are configured in the system.

Do I have legacy organizations that really are not needed anymore? So can we clean that up? Analyzing opportunities to improve the business processes and as I move on into these examples, it becomes more and more relevant the Artificial Intelligence also to analyze that how the business processes are really working, can I optimize them?

So I’ve seen many, many different approaches of companies that leverage this set of automation tooling to really accelerate their journeys. And this journey could take as little as like two to three months or it can take even one year or even multi-year when companies have really complex settings and they want to take that opportunity to consolidate everything.

So it really depends on the what is the stocking base, but I would say that key challenges are do we take the opportunity to simplify, centralize, optimize the whole environment?

Or am I going to look at these as more as a technical upgrade and I just want to do the technical upgrade as fast as we can and then I will worry about that simplification and automation and innovation of the entire company later on in the process?

So these are just a few examples of the challenges and how we and partners are basically helping customers to go through that journey.

Rajat: These are some of the riveting thoughts. And you’ll agree with me for any successful cloud transitions partnerships can be very critical and the partner community is continuously inventing and experimenting with new products, such as a cloud-based bundled ERP solutions or subscription-based services as well. These are gaining significant traction from enterprises of all sizes if you talk about the fortune or even the small or the medium business enterprises. How do you successfully collaborate with partners in driving this mutual growth? It could be the partners, the GSI or the ISP or the advisory firms as well.

Joao: So we have established a very rich partner ecosystem specifically for helping customers to transform their SAP environments. This rich partner ecosystem is composed by the top global SIs in the world by the top advisory firms in the world which also have very strong experience on SAP, some of them into the system, into the technology, some of them more into the business, and how that business processes are interlinked. Some of them more with a local regional footprint and some of them with solutions that compliment the SAP environment and enrich it be it the solution is more technically oriented, like data optimization or security or solutions that are more industry or process oriented, like supply chain inventory optimization, creating industry solutions, which are tackling some of the challenges of specific industries in terms of medical care or in terms of airline, tourism, management, et cetera.

The way we manage and the way we drive this large ecosystem is first and foremost making sure that the partner ecosystem is well aware of new innovations that our Microsoft cloud is bringing, not just on the infrastructure side with Azure, but really around all the Microsoft Cloud, security, data analytics, and solutions that can enable customers and partners to connect any kind of data in any kind of technology and making it available with artificial intelligence to make better decisions and democratizing the access to the decisions as well.

Empowering them with Low-code/No-code collaboration platforms. Basically an effort to make sure that the partner ecosystem is ready, trained, is fluent on our entire portfolio of solutions that will make them available, making sure that they also have visibility around what is coming next.

So these are just a few examples and this, I would say it’s more on the foundational side. We also help our partner ecosystem throughout their engagement journey with the customer from the start when they are trying to picture, what is the value proposition, structure of a certain project, build a certain level of architecture, drive that innovation with our solution experts, and then throughout the implementation project really standing side-by-side with our partners and trying to support them.

So these are just a few examples – how do we train, how do we lift up the competencies of our partners and engage with partners and customers to make sure that the journey is super successful?

Rajat: Interesting. Do you see a change in the personas of the customer stakeholders that are interacting with you on the SAP workload?

Joao: Absolutely. So I think that at the beginning as the customers were taking this more as a technology evolution the key persona was always like the IT department, the CIO. As we progressed into this transformation journey, we are seeing very often CFOs getting involved.

Of course SAP system is core into the finance, not just for keeping the records straight, but also helping the finance organizations to drive more value into my organization which is all of the essence of the modern finance transformation. So CFOs are getting increasingly involved. Also the Chief Operations are getting more and more involved as well as companies looking to ways to modernize their supply chain, to modernize their production factories.

And then lastly, we are seeing also a stronger involvement of Chief Sales because of course, you can only sell what you have, right? So it’s in their interest also to understand how can I develop new business models. How can I make sure that we have a streamlined sales organization, not only on the B2B side, but also on the B2C side.

So the personas are getting more and more linked into business. Of course, CIO and technology still having a very central role, but more and more having decision or influencers into the broader organizations with different functions.

Rajat: Interesting. That’s the transition that we are seeing. Last but not the least, I think so nowadays SAP on cloud is easy for the enterprise to decide that yes, they have to go on the cloud.

But as per you and your valuable experience, what is a playbook for the enterprise that what factors they should consider when they have to decide a hyperscaler on which cloud they will run the solution?

Joao: Okay. So it’s a very good, question. I will try to be as independent as possible and outline key areas that customers should know.

The first one is what is the experience that the cloud provider has? So, going deeper a little bit on this, what is the level of robustness of the processes? What is the level of geographical presence? Does the hypercloud provider has a strong geographical presence that enables to do business everywhere in the world that has certifications both from a regulatory industry perspective?

Secondly, what is the ability for the cloud provider to actually connect the SAP system to non-SAP systems? So what is the available set of connectors, available set of integrations that already exists off the shelf with SAP and non-SAP systems? Some examples – how do you connect the data from SAP into other sources of data? How can you connect the SAP system to visualization tools? All of those connectors, there are thousands of connectors available so that you can actually explore and take advantage of that. All of that is going to make it much, much more easy to extract the value as fast as you can out of your modernization-transformation project. Also the level of automation as you monitor systems, as you transform, optimize your systems, et cetera, all of that is come along with a broad set of optimized systems that enable you not only to set up, but to manage your SAP system in a much more robust efficient way.

We also talked about security, right? So, what are the security fundamentals? What is the experience of the cloud provider on enterprise security? What is the integration of the experience of that enterprise security with the SAP systems? Can I take advantage of that? So these are just a few examples that customers should go through in order to make their decision. and I would just like to end with, as we started, the partner side. The partner side is crucial. Many customers, almost all of the customers have built their SAP environments in strong partnership with a preferred partner or even a preferred sacrifice.

They are the ones that know better the systems, making sure that they are fluent on all these innovations, making sure that are able, that they have the right skills available to the customers to really have a fantastic project. So these are some of the considerations.

Rajat: Great. I think so you summarized ended with a beautiful playbook for the enterprises on what all factors they should consider, the connectors, the previous experience of the cloud provider, the integration capabilities and the partner ecosystem. I think so this is really great.

Joao, thank you so much for taking the time out to do this. This has been a wonderful conversation with you. I can proudly say that I know a little bit more about SAP, and SAP on the cloud, and the Microsoft business.

Thank you for sharing your perspectives with us. They have given me and as listeners a lot of food for thought. Thank you once again for taking the time to be here with us.

Joao: Thank you very much. It was a pleasure Rajat and thank you also to all of the ones that will invest the time to listen.

Rajat: All right, then that’s all for today’s episode. we’ll be back very soon with another episode, another hot topic and another industry veteran until then. Take care and stay safe.