Feature II
Stay a Step Ahead with SAP Cloud ERP
Expenditures for cloud computing are increasing worldwide. After entering a new era in 2021 by passing the 300-billion-dollar mark1, spending on cloud computing is expected to reach one trillion dollars in 20242. Three years ago, the driving force for growth was the COVID-19 pandemic, which disrupted supply chains and markets globally. Since then, business strategies have focused on gaining agility and flexibility. The prerequisites for doing so are digitalization, real-time transparency, and innovative technologies – especially generative artificial intelligence. These are exactly what cloud computing offers. And SAP is there to help its customers on their journey to the cloud and with their digital transformation.
End-to-end digitalization is the foundation for keeping up with the rapid pace of change in the business world. In contrast to cloud computing, however, conventional local IT infrastructures simply do not meet the requirements for a rapid rollout of new technologies. As such, cloud services are becoming the key to leveraging the benefits of digitalization, compelling more and more companies to move their IT systems to the cloud. Cloud ERP systems can improve the agility and performance of the IT landscape and accelerate digitalization. Because, ultimately, it is technology that makes it possible for companies to enter new markets and achieve better business outcomes; and technology that helps our customers leave their past performance behind, and simplify and expand their business.
Cloud ERP: the foundation for successful business models
ERP (enterprise resource planning) systems generate enormous value for businesses. As central systems, they support core processes in procurement, manufacturing, and sales, as well as in financial accounting, HR, and logistics. Without ERP, it is virtually impossible for today’s enterprises to be competitive.
Instead of running on local, on-premise servers, cloud ERP is delivered over the Internet as a service. This enables businesses to access their applications from anywhere, at any time, and to benefit from the nearly limitless possibilities for scaling and innovation that the Internet provides. Their users always have access to the latest updates and functional enhancements, as well as the newest information. This gives them real-time insights into their business processes, enabling them to make the right decisions quickly. Artificial intelligence plays a not inconsiderable role here – as a data-driven cloud feature that can be used flexibly in process automation, master data cleansing, machine learning (ML) for planning, or as generative AI for general productivity (insights and explanations).
Cloud ERP not only connects units and departments within an organization, but also allows partners to collaborate seamlessly throughout the entire ecosystem. It provides real-time answers to questions like “What are our current inventory levels in North America?” “Will the supplier parts that are urgently needed for production in Munich be delivered on time?” and “Which supplier can I turn to, if necessary, to ensure that production continues as planned?”
SAP cloud ERP: the software suite for successful enterprise transformation
Whatever their starting point, SAP can help companies on their journey to the cloud. Specifically, this means that SAP works with its customers to develop an individual plan for each, and then provides all the tools and services they need to move to the cloud.
After all, migrating to the cloud and deploying SAP cloud ERP is not just about subscribing to software “as a service” and accessing it flexibly over the Internet; it’s also about enabling agility and continuous innovation. A customer’s processes and underlying IT landscape have often grown over decades, with custom enhancements implemented regularly. As a result, some IT landscapes resemble a labyrinth. This complexity makes processes cumbersome and opaque – and also increases security risks. Therefore, companies that want to capture the benefits of digitalization and cloud computing need to analyze and redesign their processes and IT infrastructure. In that respect, migrating to the cloud transforms entire enterprises, top to bottom.
Which means that projects involving ERP transformation are anything but trivial. After all, making changes to systems and processes in the value chain while day-to-day business continues is the tech equivalent of open-heart surgery. Employees and users also have to be brought on board. SAP has the most extensive portfolio for business transformation management in the industry. Process specialist SAP Signavio and enterprise architecture management expert SAP LeanIX play key roles in paving the way to intelligent, connected, collaborative, sustainable, and modular cloud ERP. With its cloud ERP solutions, SAP offers customers a one-of-a-kind collection of powerful tools for optimizing their business processes and IT system landscapes, to enable an efficient, targeted cloud transformation project.
RISE and GROW: the express lane to the cloud
To determine the best path an enterprise should pursue toward digital transformation, its management team needs to consider multiple factors: What are the company’s specific needs? How willing is it to adopt standard processes? Is the emphasis on custom solutions? How quickly can continuous innovations be rolled out? What are the company’s long-term business objectives? Should it implement a completely new ERP solution or upgrade an existing one? According to Jan Gilg, President and Chief Product Officer, SAP Cloud ERP, “Fast-growing businesses are increasingly choosing cloud ERP as a strategic investment in long-term economic success. I see that in every meeting I’ve had with our customers. These enterprises benefit from the technology’s ability to simplify everyday work, manage compliance with regulations, and optimize processes – all supported by continuous innovation and reliable consulting.”
To ensure that customers can make their move to the cloud and their digital transformation as smooth as possible, SAP introduced two full-service offerings: RISE with SAP and GROW with SAP. Each package is tailored to different market segments and reflects the different needs and sizes of SAP customers.
- The innovative, integrated RISE with SAP package was launched successfully in 2021 and is used primarily by larger enterprises. It consists of a variety of tools and services for fast, efficient cloud adoption.
- GROW with SAP, launched in 2023, enables small and midsized companies to implement cloud-based ERP solutions quickly and capture their benefits.
In the meantime, RISE with SAP and GROW with SAP have achieved market success: In the first quarter of 2024, numerous customers worldwide chose RISE with SAP to drive their companies’ end-to-end transformation projects forward – including Fresenius, Lindt & Sprüngli, MAHLE International, and ZF Friedrichshafen, to name just a few.[1] German telco powerhouse Deutsche Telekom is now also accelerating its cloud transformation with RISE with SAP.[2]
GROW with SAP is being used by midsize companies like Climeworks, Unico, Churchill Downs Incorporated, Aleron Shared Resources, and Centrale del Latte di Roma to implement cloud-based ERP solutions at a rapid pace, at predictable cost, and with continuous innovation.[3]
[1] https://www.sap.com/docs/download/investors/2024/sap-2024-q1-statement.pdf
[2] https://news.sap.com/2024/03/deutsche-telekom-rise-with-sap-cloud-transformation/
[3] https://www.sap.com/docs/download/investors/2024/sap-2024-q1-statement.pdf
What is SAP’s innovation strategy for cloud ERP?
SAP’s strategy focuses on continuous improvement and adaptation to changing business requirements. This includes using new technologies like generative AI, machine learning, and advanced analytics to boost the efficiency and flexibility of ERP solutions. SAP’s “cloud-first” approach, which prioritizes using cloud solutions for digitalization, ensures rapid provisioning and scalability, and enables businesses to adopt innovations quickly and enhance them continuously.
SAP also promotes collaboration with customers and partners to co-develop solutions that are tailored to specific industry requirements, to ensure relevance and competitiveness in the market. Consistent use of SAP Business Technology Platform (SAP BTP) is a decisive factor here, because this is where customer-specific enhancements and modifications are programmed outside of the core ERP software. SAP BTP is the backbone of the clean core approach, which makes it possible to install SAP updates smoothly and without business interruptions. To make this form of software development possible quickly for partners, customers, and business users, SAP BTP features no-code/low-code approaches with SAP Build/SAP Build Code, which do not require programming skills to create application elements and processes.
Joule: the smart AI assistant
SAP cloud ERP solutions contain SAP Business AI: intuitive, flexible, powerful AI features that optimize business processes. These features are usually part of the user interface, however, and must be started by the user. This is where Joule, a new AI copilot, comes in. Joule creates an entirely new user experience that harnesses automation and helps users complete complex, connected tasks faster – and even with better quality. Productivity gets a boost and users can make informed decisions on the fly. SAP is embedding Joule throughout its portfolio – from procurement, supply chain management, financial accounting and HR through marketing and sales.
How do users engage with Joule?
Employees can ask the generative AI assistant questions in a chat window or use voice commands to describe an issue they need to solve. Joule then provides informed answers drawn from the wealth of data in the SAP portfolio and third-party sources. For instance, Joule is capable of independently making data comparisons and of linking up data records that indicate a problem in the supply chain. Impending delays in the supply chain can therefore be identified before a bottleneck arises. Joule can also help make processes faster and more efficient – if you ask it to. It provides support in HR, too, by generating job descriptions, for example, or formulating suitable questions for job interviews.
SAP cloud ERP: standardized, yet industry-specific and adaptable
SAP customers benefit from standard best practice solutions that are fully compatible and ready to use. These solutions provide a large base of features that have been developed for general business requirements in a variety of industry sectors. These optimized solutions are modular, which means businesses can even modify and enhance their functions to meet specific or evolving demands without having to sacrifice the benefits of standardization and integration. The clean-core approach is also the foundation here. “Clean core” means that updates can be installed seamlessly, so there is no longer any need for businesses to keep putting them off. At the same time, the externally linked customizations are retained thanks to SAP Business Technology Platform.
This combination of intelligence, standardization, and flexible extensibility lets customers strike the right balance between efficiency and innovation along their digital transformation journey. The key advantage of this approach is its rapid “time to value” – that is, the time needed until the solution goes live.
Cloud transformation with SAP – strong prospects in a growing market
With its change of strategy in the fall of 2020, SAP created an express lane to the cloud. Seen from today’s perspective, there was no alternative to this step. Enterprises that want to remain competitive in a changing environment need to digitalize end to end. Sooner or later, they will reach the point where they need to shift from local, on-premise solutions to the cloud. More and more businesses are taking this step and choosing SAP as their partner. Most recently, for example, Deutsche Telekom chose RISE with SAP in March 2024 to migrate a major part of its ERP landscape to SAP S/4HANA Cloud.
The full cloud ERP suite is opening up strong growth prospects for SAP. The predicted figures for cloud computing cited above illustrate the market potential. Since cloud solutions are essentially booked as “subscriptions,” recurring revenue grows and can be planned more reliably – along with the order backlog as measured by the current cloud backlog (CCB). In the first quarter of 2024, CCB grew faster than ever before, to €14.2 billion (+28% at constant currencies). Concurrently, SAP’s cloud revenue increased by 25% in the first quarter of 2024 at constant currencies, while the share of cloud ERP suite revenue rose even faster, by 31%, in the same period. SAP is in the right place at the right time and has clear ambitions for further profitable growth. Thanks to the appeal of the cloud ERP suite and dynamic market growth, we believe we are ideally positioned.
Key performance measures for SAP's business success
Find out what Current Cloud Backlog means and which other metrics we use to measure and manage our business success.