INTELLIGENT DIGITAL TRANSFORMATION ON A GLOBAL SCALE
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INTELLIGENT DIGITAL TRANSFORMATION ON A GLOBAL SCALE WRIT TEN BY
JOHN O’HANLON PRODUCED BY
CR AIG DANIEL S
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A comparatively recent strategy of inorganic growth at scale has significantly expanded SAP’s markets and furthered its ownership of the intelligent enterprise. We speak to the strategy’s architect Arlen Shenkman, Executive Vice President for Global Business Development and Ecosystems at SAP
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AP is the defining enterprise software company of our time. Industry leaders in almost every sector, private and
public, were getting to grips with the concept 04
of enterprise resource planning (ERP) back in the 1990s when, in the face of determined competition, SAP succeeded in adapting to the rapid evolution that was taking place at the turn of the century. Not only did it expand its platform to embrace additional functionality, but it started to prepare itself for the exodus from on-premise enterprise software to the as-a-service model that resides in the cloud today. SAP’s is the fastest growing business cloud by a wide margin. At its inception, the company had a strategy of having regional resellers but today it is reaping the benefits of having decided very early on that it was going to be a global company. It entered China in the early 1990s and now China is its fastest growing market
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in defiance of any gloom around its slowing growth. “We are not having challenges in China — we are doubling down in China,” declared SAP’s CEO Bill McDermott as recently as January 29th. Arlen Shenkman’s association with SAP spans 15 years and in that time, he has helped evolve the company’s global growth strategy in a number of important ways. Trained in corporate law and corporate finance he brought with him broad experience with large international firms, much of it to do with mergers and acquisitions (M&A). In w w w.s a p . com
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CLICK TO WATCH : ‘SAP BUSINESS WOMEN’S NETWORK – DEFINE THE WAY’ 09 2005, he was invited by SAP’s then
activity at the center of future develop-
CFO Werner Brandt to build out an
ment. “Our objective was to do trans-
M&A practise for the company. Before
formative acquisitions. We really started
then, though it had made a number of
down that road in 2007 with the acquisi-
smaller acquisitions, SAP’s growth had
tion of BusinessObjects in the analytics
been largely organic and by strategic
space, and that expanded our address-
partnerships with technology compa-
able markets considerably.” The $6.78bn
nies, notably IBM.
acquisition of BusinessObjects was a watershed moment for the company
TRANSFORMATIVE ACQUISITION AT SCALE
commitment and because it brought
Brandt however recognized that to meet
business intelligence tools to SAP’s back
the challenges of the market and the
office transactional systems.
limitless potential presented by data it would be necessary to place M&A
both on account of the major financial
By 2010, SAP was ready to make its next transformational jump with the w w w.s a p . com
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$5.8bn acquisition of Sybase, which
Concur, SAP is the undisputed business
gave SAP users the option of running
network company. We are redefining
their operations from mobile devices,
how businesses conduct commerce
paving the way for real-time analytics
across goods and services, contingent
and removing barriers between business
workforces, travel and entertainment.
applications and business intelligence,
With the SAP HANA platform, the pos-
says Shenkman. “We then went on with
sibilities to innovate new business
a series of acquisitions to expand our
models around Concur and the network
cloud capabilities, ranging from Success-
are limitless.”
Factors to Ariba and Fieldglass and
Following the successful completion
the travel and expense management
of this phase of strategic M&A activity
services company Concur.”
Shenkman served for two years as
The $8.3bn Concur deal in 2014
CFO of SAP in its largest market, the
coincided with the launch of the latest
USA, before being invited by the CEO
version of the S/4 HANA business
to work directly with him in the newly
suite. As Bill McDermott observed at
created role of Executive Vice President,
the time: “With Ariba, Fieldglass and
Global Business Development and
Ecosystems in May, 2017. His job, he explains, is to help the company get to grips with the opportunities it has to grow externally. “We tend to define that as inorganic growth: oftentimes that can be a new strategic partnership or an acquisition or a strategic investment, but in essence our charter is really to help the company put its arms around strategic initiatives with global partners. We’re looking for initiatives that enable us to expand our portfolio and continue to help our customers and our ecosystem with the digital transformation that most of them are going through.”
“ Data only has value when it helps you make better decisions and makes employees, customers and product users have a better experience with you” — Arlen Shenkman, Executive Vice President for Global Business Development & Ecosystems at SAP
E X E C U T I V E P R OF IL E
Arlen Shenkman Arlen Shenkman serves as executive vice president for global business development and ecosystems at SAP. He is responsible for business models, investments, and mergers and acquisitions. Before his current role, Shenkman served as CFO of SAP North America, SAP’s largest business unit, responsible for all finance functions in North America, including forecasting and planning, identifying efficiencies, and ensuring the region’s overall financial health. As part of the leadership team, Shenkman was engaged in driving new sales.
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Different is bet
tter
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THE INTELLIGENT ENTERPRISE
said, the most recent SAP acquisition
The word ecosystem in Shenkman’s job
($8bn) of Qualtrics has outlined a new
title reflects the realities facing business
category, that of experience manage-
today. A holistic view of organizational
ment (XM). The experience economy
activity as an organism or a living entity
is a reality – 80% of customers have
influenced by the activity and changes
chosen to switch brand because of
in every place, internal or external, that
a negative experience and the impact
touches it, is made possible by the
of yearly loss of trust due to abuse
convergence and management of
of data privacy and brand loyalty is
data in the cloud. We can see here
put at a staggering $2.5tn, and the est-
the beginnings of what SAP today
imated market size for customer exper-
describes as the intelligent enterprise.
ience solutions, platform and integra-
In this new world the notion of cate-
tion to operational systems stands
gories is perhaps invidious, but that
at $100bn. w w w.s a p . com
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“ One of the things that really excited us was the idea of creating a category around experience management” — Arlen Shenkman, Executive Vice President for Global Business Development & Ecosystems at SAP
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1972
Year founded
96,000
Approximate number of employees
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Qualtrics is a technology platform
an employee’s, or a product user’s
that organizations use to collect, man-
experience. But Qualtrics is truly
age and act on experience data. Expe-
a horizontal platform that allows you
rience management may be described
to get feedback and information
as a system whereby teams, depart-
around the holistic experience from
ments and organizations can manage
all of these. This gets really interesting
the four core ‘experiences’ of business:
when you bring it together with our
customer, product, employee and
product portfolio, which links together
brand. “One of the things that really
that operational data with experiential
excited us when we were considering
data. How is it possible to have an
this acquisition,” says Shenkman, “was
intelligent enterprise without under-
the idea of creating a category around
standing how your customers,
experience management. This is often
employees, product users, and every-
narrowly defined as a customer’s,
one exposed to your brand, feel about
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you?” It is hard to have a holistic view
real time – addressing issues like
without really understanding what
competitiveness drops, employee turn-
is happening to the business from an
over or customer churn before they
external perspective, and why that
have time to develop into a problem.
is happening.”
The integration of this ability with
Simply put, Qualtrics brings together
SAP’s ecosystem eliminates the old
the mass of experiential data trawled
distinction between front office and
from whatever source – customer,
back office. ‘Intelligent enterprise’
brand, employee or the product itself.
ceases to be a mere buzzword once
Rather than crunching these numbers
the business is viewed organically,
in the back office and subjecting them
rather like the human body or a natural
to traditional feedback and survey pro-
ecosystem in which latency can mean
cesses, it gives companies the ability
the difference between extinction
to adjust policy based on this data in
and survival. w w w.s a p . com
DATA IN THE ECOSYSTEM Data, of itself, is dumb, says Arlen Shenkman. “There has long been a debate in large companies and among enterprise software specialists about the intrinsic value of data. My personal perspective is that data only has value when it helps you make better decisions and makes employees, customers and product users have a better experience with you. That can’t happen unless you know what they think about you.” For 50 years SAP has been focused on customer success driven by the 20
quality of its products: that remains the focus, but today it’s no longer enough. There’s no doubt that the acquisitions of the past ten years have deepened and broadened SAP’s reach. Innovation can’t happen in isolation, he insists. “Without doubt M&A has driven a very robust portfolio of products, each of which enhances our focus on the success of our customers – and that, we believe, is the key to our own success as a global organization.” So, it’s probably not quite the thing to regard the Qualtrics acquisition as a complete reinvention of the company. SAP always had this focus, based on customer service delivered through
its global presence and the global presence of the 18,000 partners that implement, build and innovate on its platforms. “This is where the complexity of our ecosystem comes in. We have very large global partners like Accenture, Capgemini, Deloitte, EY, and PWC. We work closely with the major public cloud providers, and hardware and software partners, and we have many smaller regional suppliers from around the world. The core of the SAP ecosystem is a very strong set of companies around the globe that develop software that resides and integrates with an SAP platform, whether on-premise or a cloud solution like SuccessFactors, Fieldglass, Ariba or Concur. Over the years, SAP has carefully cultivated our ecosystem. Every partner contributes certain expertise that allows us to deliver a more intelligent enterprise.”
THE LANDSCAPE SURVEYED There’s no doubt though that Qualtrics is a bit of a game changer for SAP, and one that will take a while to settle in. It is impossible to say never again, but the man with the overview of the ecosystem is able to claim a degree of satisfaction with its current state. “We love the w w w.s a p . com
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“ The core of the SAP ecosystem is a very strong set of companies around the globe that develop software that resides in and integrates with an SAP platform” — Arlen Shenkman, Executive Vice President for Global Business Development & Ecosystems at SAP
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Qualtrics acquisition and we are really excited about building a category around XM, however I am not aware of any hole in our portfolio that would represent a strategic gap for us,” he says. “When we look over the landscape today, what our development teams have built and the cloud assets that we’ve amassed over the past eight years, we’re very comfortable with that portfolio.” So, no more large scale acquisitions are currently in his sights.
The breadth of the SAP portfolio is legendary of course with capabilities spanning ERP, procurement, CRM, HR, MRP and so on you’d be hard put to identify any weakness. There will doubtless continue to be smaller acquisitions as the potential of technologies like AI and IoT are realized, but from here on in, SAP can concentrate on its core mission. “The journey for so many of our customers is digital transformation. SAP is helping them all the way, from finding the right place for them to start to deploy some solutions to implementing them. Some of the companies we work with are already through that journey; others are not. With 425,000 customers in 180 countries it’s not surprising they are on different timetables!” The acquisition program since 2010 has hugely expanded what he calls SAP’s addressable markets. “We have crafted a strategy to ensure our customers go through their digital transformation and move to the cloud successfully, deploying SAP technology to become the best businesses they can be.”
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