SAP made some announcements about new SAP Industry Cloud partnerships during the Sapphire virtual event for 2022, so this week IgniteSAP is going to take a closer look at SAP Industry Cloud as a set of industry-specific applications of SAP Business Technology Platform.
With increased digitisation business models are changing: so a company that originally produced consumer goods may now sell direct-to-consumers, or a financial institution may be now selling finance products that originally required the backing of a bank.
With these changing business models, and along with all of the extreme world events affecting the economy, businesses are looking to adapt quickly, and in a way that does not disrupt their revenue streams. SAP has developed SAP Industry Cloud to bring resilience and adaptability to a wide variety of industrial business contexts: each of which has its own challenges.
Peter Maier, SAP’s president of Industries and Customer Advisory describes SAP Industry Cloud as:
“the innovation platform and space for SAP where customers and partners build industry cloud solutions and applications that complement the intelligent suite using the Business Technology Platform”
Solutions for Industries
SAP Industry Cloud solutions and apps sit in the application layer, as a software service, supporting business processes, expanding existing processes, and solving business problems specific to a particular industry: alongside more common SAP business solutions.
Also, some industry cloud offerings created by systems integrators who are SAP partners are aimed at overcoming challenges of transformation specific to an industry.
The modular nature of SAP BTP means that customers are able to find solutions to new business challenges without upgrading an entire ERP system, access tools which provide efficiency in business processes such as AI and RPA technology, and to tailor any solution from industry cloud to their specific context.
Catering for Demand
Currently the SAP store offers 202 distinct Industry Cloud co-innovated products. These fall into 7 main categories of industry, though there are many areas which do not fit these, such as Transportation and Logistics, or Higher Education and Research:
Engineering, Construction, and Operations
Industrial Machinery and Components
Another industry product that falls outside of these categories is SAP Cloud for Real Estate which helps companies manage Real Estate, identify cost savings, reduce risk, and improve sustainability.
The Vertical Edge
The Retail, Professional Services, and Industrial Machinery and Components categories were added in October 2020. At that time Maier of SAP explained why SAP Industry Cloud was expanding to cover these new industries:
“The speed at which companies have to operate today calls for technology-enabled agility. Innovative companies successfully strike the balance between optimising their current business operations and innovating at the ‘vertical edge’ to discover and develop new revenue streams. Our industry cloud portfolio delivers solutions to help drive business transformation profitably and sustainably, enabling our customers to adapt to changing business environments in their industries.”
Diverse Revenue Streams
We might also add that the area of software solution development for specific industries is going to expand: as each of these industries seeks to take advantage of cloud technology and edge technology to gain a competitive advantage over their peers. Consequently, there will be a corresponding expansion of the software solution market that seeks to support these industries as they implement technology to address new industry-specific challenges, and opportunities for greater efficiency in business operations.
The total number of products is increasing rapidly because many SAP partners are contributing to a pool of Industry Cloud solutions in response to this new market. SAP have said recently that co-innovator partners are expected to contribute 80% of the intellectual property for SAP Industry Cloud as a whole. According to SAP’s Chief Partner Officer Karl Fahrbach, this could rise to 90% as part of SAP’s over-arching strategy to become a “partner-ecosystem-led business”. The heavy involvement of third-party systems integrators comes with accountability for the ongoing success of the customer.
“Before, like most technology companies, we had a very basic ‘vendor/partner’ relationship with our ecosystem, but now, we put the customer at the centre of everything, and we expect our partners to come to the table with new levels of capabilities, new certifications, industry knowledge, and new levels of value for customers”.
New Partners for Industry Cloud
SAP, Microsoft and US consulting firm EY are looking to collaborate a product designed to facilitate digital transformation in the cloud for financial services organisations, like banks and insurance companies. This co-operation between EY and SAP adds to pre-existing offerings for retail, healthcare, and utilities companies. Microsoft will be over seeing the infrastructure and EY brings their intellectual property to the deal.
EY also announced EY Energy Industry Cloud at the SAP Sapphire Event for 2022 last week. It aims to accelerate digital transformation by identifying and mitigating transformation challenges which are specific to that industry.
Tenthpin, a Swiss management consultancy for life-sciences groups, already contributes SAP’s Intelligent Clinical Supply Management, and is now backing SAP’s industry cloud for clinical trials. SAP also is part of a consortium looking at an offering for orchestrating cell and gene therapy.
SAP S/4HANA and SAP Adaptive Server Enterprise is a solution endorsed and validated by SAP and IBM as part of a platform called IBM Cloud for Financial Services.
Accenture recently brought out their own offering which is designed to compliment Rise with SAP, SAP’s platform for transformation as a service. Accenture’s Soar is an example of a partner integrator which is offering SAP Industry Cloud implementation as part of a larger package.
Customisation and Standardisation
According to Forrester Research collaboration between SAP and external partners began as early as 2004, and SAP has been talking about the Industry Cloud concept since 2014.
The IT services ecosystem now has a proliferation of systems integrators catering for various vertical markets requiring cloud capabilities. SAP themselves are pushing the desirability of a clean core, so these SAP-endorsed and co-innovated offerings provide the balance between the contradictory needs for customisation and standardisation.
In an interview in January 2021, Peter Maier explained why SAP chose to create a platform that effectively standardises the customisation process.
“We created an open platform that empowers our customers to build and adopt vertical innovations as part of their IT landscape. In essence, SAP’s Industry Cloud gives our customers the tools they need to modernise and customise their business operations… Our open business and technology platform has an open-API framework that provides access to key entities of the SAP Intelligent Suite, unlocking operational and business data to support better decision-making and drive greater efficiencies. SAP customers have noted that the industry cloud gives them the opportunity to modularise their future enterprise architecture.”
Coordinating Hierarchy and Network
The SAP Industry Cloud also facilitates greater coordination “between the shop floor and the top floor” with the practical application of AI, ML and IoT in a manufacturing context so that factories are more connected internally, and also more connected to the wider set of business processes, like supply chain and finance.
The Partner Ecosystem
This brief overview of SAP Industry Cloud serves to illustrate that, along with a long-term strategy of moving their customer base from on-premise to the cloud, and from single-purchase customers to subscribers to a service, SAP also is moving to a “partner-ecosystem-led business”, which was also made clear during the partner discussions and presentations at this year’s Sapphire event.
From a corporate perspective this increases their share of predictable revenue by diversifying the number of revenue streams, it also takes advantage of the skill sets of a variety of trusted partners in the SAP ecosystem, along with substantial cross-selling as a byproduct.
“Where They Are”
Another theme of Sapphire this year was “meeting the customer where they are” rather than expecting them to fit in with whatever product you are selling.
By tailoring a set of products to the requirements of specific industries, then making them ready to integrate and use in context with a minimum of disruption, SAP is tapping in to the revenue from countless sources. As we saw in our overview, there is a paradox in the requirements of each business in that they each need something guaranteed to integrate well, while also needing customisations specific to their context: where they are.
SAP’s solution is to standardise the process of customisation itself, with the products of SAP Industry Cloud, based on the technology of SAP BTP, and in addressing this need they are contributing to the long-term strategic goal of increasing predictable revenue, from an expanding customer base.
Are you an SAP professional looking to reposition yourself to best advantage in the SAP ecosystem? Get in touch with the team at IgniteSAP and we will take you through the opportunities available to you.