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SAP gets cloudy with a chance of AI in bid to woo on-prem brigade

HR chatbots and more as maintenance deadline looms

SAP has launched a raft of AI and cloud technologies amid ongoing attempts to shift its majority on-prem ERP customer base onto a stack better suited to the fluffy white stuff.

Analysts described the deal with Microsoft AI stack as "low-hanging fruit" and said the core ERP offer was not always going far enough to justify the business case for migration.

In Orlando, Florida, the German software giant's top team of executives and partners gathered this week to boost the company's trajectory by injecting new technologies under the banner of SAP Business AI.

Speaking during his keynote, SAP CEO Christian Klein said: "Embedding generative AI and intelligent chatbots in our products is about two things. First, increasing the productivity for the billions of end users working with SAP software, and second, opening up new game-changing capabilities for all business functions."

As part of its agreement with Microsoft, SAP is integrating its SuccessFactors human capital management software with Microsoft 365 Copilot, Copilot in Viva Learning, and the Azure OpenAI Service to access language models that analyze and generate natural language.

SAP is putting its own AI feature inside its business applications. For example, one called Intelligent Collections will be available in SAP S/4HANA Cloud to help collection specialists forecast the risk of a late payment on an invoice and better prioritize which customers require follow-up.

But SAP's ERP users will perhaps be most interested in plans for their systems. SAP has been struggling to get customers from its older ECC ERP system to its latest S/4HANA in-memory system. Figures from Gartner show that as of Q4 2022, only 32 percent of ECC customers had licensed S/4HANA in any way, and only 23 per cent had gone live with implementation of some components.

To help with the shift and "accelerate digital transformation," as SAP puts it, the German vendor is offering the SAP Business Transformation Center, a new component designed to offer the digital blueprint for solution architects. By analyzing the SAP ERP Core Component (SAP ECC) source system, a customer can determine the scope for the data transition to SAP S/4HANA Cloud, SAP said.

SAP Signavio, built from a recent acquisition, will also help in "mining" existing processes. The SAP Business Transformation Center determines which data needs to be transferred while the SAP Cloud Application Lifecycle Management tool "orchestrates" the transition to track individual project tasks.

Liz Herbert, principal analyst at Forrester, said customers know they need to move to S/4HANA due to a looming maintenance deadline (2027) as well as needing technology better aligned to a modern, agile, adaptive, AI-based world.

"They like having tools that can help, especially ones with low or no cost like these," she said. "However, they still need to believe there is a business case to spend significant money and resources to do the transformation now and that remains the number one issue we see. These tools can help with this business case but don't always go as far as they need to justify tens or even hundreds of millions in spend, which is a reality for larger customers."

SAP's focus in all its announcements was on new features for software deployed in the public cloud. The trend has troubled users in its German-speaking heartlands, which called on the vendor to make new technologies available in S/4HANA on-prem, given the huge sums some customers had invested in making the migration from ECC.

However, Herbert noted that SAP is still more open to non-SaaS deployment than other major ERPs like Oracle. "There is an overtone of shift to cloud which is true all over the ERP market regardless of vendor. SAP is a bit later on this shift versus other top peers," she said.

Holger Mueller, vice president and principal analyst at Constellation Research, said it was good SAP was finally taking a programmatic approach to upgrading. "This will lower the upgrade cost to customers, but practice will have to show by how much though," he said, adding that going cloud-first with new technologies was "the carrot in order to incentivize customers to upgrade."

"The big help here is generative AI which technically and commercially needs to live in the cloud."

He said SAP working with Microsoft's Copilot was "just the low-hanging fruit" and "SAP only had a few weeks to come up with something."

SAP has been running with the pack in terms of introducing AI in its business applications. Just recently, CRM vendor Salesforce introduced Slack GPT to the collaboration platform it acquired in 2021.

If nothing else, the new features will appeal to the corporate top brass. A recent Gartner survey found AI was the top technology that CEOs and senior executives believe will significantly impact their industry over the next three years, cited by 21 percent of respondents. ®

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