Loss of Innovation at SAP

SAP was born out of a unique business innovation. While IBM was trying to save its mainframe business and software was merely an add-on to hardware, five former IBM employees relied entirely on the power of software—and succeeded!

SAP's founding, alongside Oracle, Microsoft, and Apple, marked a new beginning in the IT revolution. Years later, Google (Alphabet), Amazon, and Facebook (Meta) brought about another paradigm shift. Today, the IT industry consists of software, such as SAP's ERP; hardware, such as Nvidia's AI chips; and service providers for social media and the cloud.

The search for the origin of AI innovation is complex and resembles the chicken-and-egg problem. While Nvidia's AI and graphics processors have contributed to the success of AI systems like ChatGPT, the algorithms already existed upstream. However, they were largely worthless because hardware powerful enough to run them did not yet exist.

Computer science is currently evolving into a back-and-forth between AI chips (hardware) and AI algorithms (software). IT platforms and service providers, such as Meta, Alphabet, Microsoft, and Apple, are benefiting from this innovative competition. In addition to the many gray areas and hybrid forms, Alphabet, Apple, and others also produce hardware in the form of special processors. This raises the question of where IBM and SAP stand.

IBM is arguably the most extreme IT conglomerate. From quantum computers to AI and business consulting, this over one-hundred-year-old company encompasses almost every IT business area. Where does SAP stand? What about SAP's innovative strength?

SAP was once criticized for letting the “internet train” pass them by. This refers to SAP's late recognition of the importance of global networking and open collaboration based on the internet. SAP R/3, an ERP program, was considered a "black box" with no suitable interfaces to the outside world. However, SAP was much more attentive downstream. The potential of cloud computing was recognized in good time, and former SAP CEO Bill McDermott tried to offset an impending loss of importance with numerous, sometimes chaotic acquisitions.

Current SAP CEO Christian Klein is attempting a similar strategy. SAP aims to keep up with global IT developments by forming numerous partnerships with AI providers, most recently Nvidia. Whether this approach will be sufficient remains to be seen. However, the collaboration with Nvidia should be more than just cooperation. It could mark the beginning of a research community.

SAP, however, is not very experienced or successful in collaborating with other IT companies. Heilbronn, located near SAP's headquarters in Walldorf, Germany, is poised to become Europe's AI hub. With funding from German retail giant Schwarz and taxpayers, the Innovation Park Artificial Intelligence (IPAI) is set to be built in Heilbronn. SAP is involved but has not taken on a leading role, only contributing a small amount in the millions.

It is unclear how SAP intends to counter the loss of innovation in the field of AI in the future, even to insiders in the SAP community. The Hana database was SAP's last independent invention under the leadership of Professor Hasso Plattner and his then-Chief Technology Officer, Vishal Sikka. SAP claimed full credit for the invention of in-memory computing databases based on a well-known advertising slogan from Switzerland.