As more and more enterprise software products find a home in the cloud, software vendors (ISVs) are seeing a decline in their traditional licensing and support businesses. Offering a portfolio of services that simplifies the migration process from on-premise to a cloud-based system is rapidly becoming one of the main points of differentiation for many ISVs, including for Oracle and SAP. While Oracle is approaching this by introducing greater automation into the process of migrating workloads to its cloud offerings, SAP is banking on building greater engagement with its customers and getting deeper into their transformation than it has before.
This difference in approach is evident in SAP's Digital Business Services (DBS) portfolio of services where it combines customer success services (its support services business), with a robust set of frameworks and accelerators (Model Company) that maps business processes across verticals to SAP solutions, and offers a greatly simplified way to move those processes to the cloud – in this case S4/HANA. SAP aims to triple its cloud revenue by 2023 from the €5bn it earned in 2018, and services will likely play a leading role as SAP customers transition.
Ovum attended SAP's DBS Analyst Day last week, and came back with the strong impression that a robust service offering is critical to an ISV looking for a reliable revenue stream to offset declining license business, and accelerate SAP-based transformation. SAP is taking its deep vertical knowledge and business process expertise to put together an "assemble to order" approach for its S4/HANA solutions to drastically reduce the time and effort around implementation. DBS has developed Model Company frameworks for 18 industries and eight lines of business (LOBs) that can be combined in multiple configurations to suit myriad customer requirements. SAP also learns from its engagements, and bakes these best practices back into the Model Company framework, and continues to invest in developing frameworks for more industries (two) and LOBs (four) that will further strengthen its offering. SAP is also allowing its partners to build on the Model Company framework with their own accelerators and tools, further widening and deepening its capabilities in this space.
SAP is also taking the lead in highly complex transformation programs (we heard from three of its customers at the event), and in each of these engagements SAP was heavily involved in the design and advisory process and worked with an SI partner around the actual delivery when it required scale. SAP offers the customer the flexibility to choose whether they want SAP or its SI partner to lead an engagement, but it is becoming increasingly apparent that ISVs like Oracle and SAP have to continue investing in building the capabilities needed to play a larger and more significant role in customers' transformation journeys to survive and thrive in the digital economy.
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