A New Quality of SAP Cloud

SAP's cloud success

For the stock market, investors, and perhaps even SAP's own employees, SAP's management—i.e., the supervisory board and executive board—must appear to be an ingenious ERP Olympus: with a product that was purely an on-premises system when first conceived, SAP CEO Christian Klein has conquered the hearts of shareholders and helped the SAP share price reach an all-time high. For that he deserves respect and congratulations.

Nonetheless, SAP's customers and partners have once again been left behind, although many of them have not yet recognized SAP's trap and one-way street. With mass layoffs and cloud hysteria, SAP CEO Christian Klein has hit the Zeitgeist on the head. On the day of SAP's annual press conference, the share price reached the unimaginable level of 160 EUR—once again, a feat worthy of congratulations and respect.

SAP#s success with lift and shift

SAP CEO Klein deserves respect because he has achieved his current success with a product that was planned many years ago as the on-prem successor to SAP Business Suite. When S/4 was unveiled in New York by former CEO Bill McDermott, Supervisory Board Chairman Professor Hasso Plattner, and former CTO Bernd Leukert (now a member of the board at Deutsche Bank), there was no talk of cloud computing. SAP was still trying to digest the Business ByDesign cloud disaster, meaming no one wanted to hear anything about cloud computing.

However, as hyperscalers became more successful and cloud-native vendors entered the ERP market, SAP had to react and become cloud-ready. The solution was a planned lift and shift of S/4 Hana. Positioning the Hana database in the cloud was not particularly challenging, and then-CTO Vishal Sikka was able to accomplish this in a short period of time.

S/4 as a cloud metamorphosis

As the product of a successful ERP on-premises generation, S/4 was far from being a cloud-native product. Of course, SAP had no chance of catching up with Salesforce, Service Now, and Workday after years of lagging behind. Still, the global ERP leader had to present a cloud system to the market, customers, partners, and investors.

The metamorphosis was a lift-and-shift approach and code splitting into private cloud (former on-prem system) and public cloud (almost cloud native). The chaos was perfect, but shareholders and financial analysts were happy: now SAP had the cloud computing they had been waiting for.

Share price before quality

The unfortunate situation is due to two factors: S/4 was never designed as a cloud system, and without cloud computing there is obviously no surviving the financial market and in the IT scene.

The push for cloud computing has not only led to adventurous SAP license offers and subscription models, but has also massively damaged the quality of SAP's ERP system. Irrespective of shareholders and financial analysts, this calls for a return to SAP’s roots. SAP has the potential and the knowledge to build a cloud-native S/4 Hana. However, many experienced employees are currently being terminated because SAP CEO Christian Klein is chasing the supposed AI trend instead of realizing SAP's true potential with Signavio and LeanIX.

Back to the beginning: were SAP to go back to its roots, then the share price would likely fall again, but the quality of SAP's ERP would increase. Profit maximization stands in the way of a constructive quality offensive.