SAP's New Clothes

SAP CEO Christian Klein has found great success riding the cloud wave. His work, along with CFO Dominik Asam's commitment, appealed to the stock market and financial analysts. Some predicted that the SAP share price would reach around 300 EUR, but things turned out differently! By the end of the year, the share price barely held above 200 EUR, while competitors and IT/AI companies lurch from one peak to the next. The AI bubble is not yet mature enough to burst. What will become of SAP?

Unlike Workday, ServiceNow, and Salesforce, SAP is not a native cloud. SAP does not use cloud computing to benefit its customers; it merely consolidates its market power without a unique selling point, see EU proceedings. In the past, market leadership was naturally given by an ERP USP. SAP R/2 and R/3 were revolutionary in business, organization, and technology—there was nothing comparable! SAP Business Suite 7 (ERP/ECC 6.0) continued this successful tradition. SAP became the world market leader in ERP.

After client/server and virtualization, cloud computing is another operating model. However, SAP CEO Christian Klein is misusing cloud technology to bind customers more firmly to the company. At SAP, the neutral technology "cloud computing" has become a form of vendor lock-in. This of course opened up interesting business models, as seen with RISE with SAP. CEOs Christian Klein and Dominik Asam have transformed cloud computing into a profitable business model.

The new AI clothes do not suit SAP. For many years, CEO Christian Klein and his Executive Board colleagues, Thomas Saueressig and Muhammad Alam, have been developing a consistent AI roadmap. Although cloud computing is an easy-to-understand operating model, SAP is losing sight of the big picture when it comes to AI. The rapid technical development combined with high financial investment is leaving SAP behind. SAP can't find the right fit due to a lack of in-house expertise and research; the global ERP market leader lacks a robust AI strategy.

SAP tries out a new AI “outfit” every few months, but none of them have truly worked. In the IT/AI sector, it's not unusual for a service to be delivered unfinished. Users and experts can become overwhelmed by the scope of the AI sector. According to brokerage firm D. A. Davidson, OpenAI—which now employs 4,500 people—exemplifies the infamous Silicon Valley ethos: fake it till you make it. Just pretend until it, hopefully, actually works. Business Technology Platform (BTP) is a good example of this. SAP BTP's GenAI hub is more of a playground and testing ground than a final AI solution.

SAP's AI problem is self-inflicted and comes as no surprise. SAP CEO Christian Klein lacks an architecture model for the next ERP generation. The "cloud" operating model maximizes revenue and maintains the share price on the stock market—something SAP CFO Dominik Asam is doing well. However, there is a lack of vision regarding much bigger issues, such as Next ERP and the AI roadmap.

Therefore, it is not surprising that SAP board members Thomas Saueressig and Muhammad Alam speak of patchwork and Frankenstein architecture with modest self-reflection. Currently, SAP ERP gives the impression of a composite, cobbled-together IT system on the fluctuating BTP and BDC platforms.

A truly composable ERP would have a stringent architecture and a clear vision. This leaves Saueressig and Alam to philosophize about the dangers of SAP customers not continuing to buy end-to-end from SAP. Ultimately, patchwork (Alam) and Frankenstein architecture (Saueressig) should only be sales arguments for the new SAP Business Suite.

In the widely noticed interview with the German publication Computerwoche, Saueressig warned against ERP Frankenstein architecture and told my colleague Manfred Bremmer: "Of course, you can discuss on-premises AI. But that ultimately means connecting modern technology to the past." Someone is speaking against their better judgment. It's common knowledge that ECC 6.0 can be successfully combined with SAP BTP via a cloud connector provided by SAP. Combining different fashion styles and clothes has never been a bad idea—IT life can be colorful, too.