SAP Details First Cloud-Only Innovations

⇨ Generative AI assistant Joule uses natural language and will be embedded in multiple SAP offerings

⇨ SAP S/4HANA Cloud, private edition will move to major releases every two years with feature updates every six months

⇨ Both Joule and new sustainability features will only be available to RISE with SAP users

Despite fielding many questions over the last few months about whether they are abandoning customers running on-premise solutions, and with CEO Christian Klein recently being compelled to make a statement at a customer event about how “no customer would be left behind,” SAP doubled down on their cloud ERP messaging and provided details of the first cloud-only innovations during the “Rise into the Future with SAP” event held on September 26^th.

Chief Marketing and Solutions Officer Julia White set the stage for the discussion by saying that we are at the beginning of cycle of technological innovation when it comes to generative AI. She underlined that this innovation is only possible in the cloud, specifically in SAP S/4HANA Cloud, private edition, available through RISE with SAP. White said that this is because the cloud supercharges ERP in a way that makes it uniquely optimized to an organization’s needs.

White then announced SAP S/4HANA Cloud, private edition, release 2023, which will be a major milestone for SAP and part of a new two-year release cycle that is planned for SAP S/4HANA Cloud, private edition. New enhancements, or feature packages, will be made available every six months, and there will be an extension from five to seven years of the maintenance window for each release.

In addition, White also announced the generative-AI assistant Joule during the broadcast. Although White stated that Joule will use natural language and will be embedded across SAP’s cloud enterprise portfolio, the initial use cases will be in SAP SuccessFactors and the SAP Start suite later this year. Joule will come to SAP S/4HANA Cloud, public edition early in 2024, with SAP Customer Experience, SAP Ariba, and SAP Business Technology Platform (BTP) to follow in the future. Joule is designed to sort through and contextualize data from multiple systems and present the insights that it finds.

The remainder of the presentation was focused on why cloud ERP makes sense combined with product demos and some customer conversations – much like a Sapphire keynote. Eric van Rossum, Chief Marketing and Solutions Officer for Cloud ERP, Jan Gilg, President and Chief Product Officer for Cloud ERP, and Peter Pluim, President of Enterprise Cloud Services, discussed how cloud ERP is collaborative, intelligent, networked, and sustainable. Gilg showed off new features in service management, SAP’s Green Ledger, an approach to carbon accounting and sustainability management, and how Joule can be worked into daily process flow to help prioritize and streamline activities.

While the presentation itself followed SAP’s standard messaging around cloud ERP, the live Q&A yielded some interesting information. In an answer to a question about how collaborative business AI will be delivered, an SAP expert indicated that SAP’s approach is to have a business semantic layer between SAP S/4HANA Cloud and the large language models (LLMs) that are being used. This allows SAP’s engineers to choose the best LLM for a given scenario based on the business AI focus of providing relevant, reliable, and responsible AI services. This will also separate the LLMs from the data that is stored in SAP S/4HANA Cloud, improving privacy.

Many questions from attendees revolved around whether the AI and sustainability features announced would be available for on-premise customers. Responses were uniformly no, and that those would only be available via RISE with SAP. At least one of the responses from the SAP experts managing the questions specifically said, “RISE with SAP contracts”, perhaps indicating that this is more about contracts than the technical reasoning that SAP suggests. This was backed up by the fact that a direct question about whether the AI and sustainability innovations would be available in SAP S/4HANA Cloud, private edition, customer data center option, was answered affirmatively.

SAP S/4HANA Cloud, private edition, customer data center option is not a cloud-based offering, although SAP recognizes it as cloud revenue because it is subscription-based and is managed by SAP in the same way that SAP S/4HANA Cloud, private edition would be. The customer data center option for SAP S/4HANA Cloud, private edition runs on Dell APEX, HPE GreenLake for SAP, or Lenovo TruScale, all of which offer cloud-based pricing but in the customer’s data center. But even though they are cloud-like offerings, this is infrastructure that is not running in the cloud. This  suggests that SAP making these features available only through RISE with SAP is a licensing decision and not a technical one.

Whether or not that is actually the case, these new features will only be available to customers running RISE with SAP. Klein committed to not leaving any customers behind, and that SAP will continue to invest in features and functions for on-premise customers. The difference is that what Klein defines as “strategic innovation” will only be available in the cloud. This includes the Joule AI, and new sustainability features that were demonstrated during the “Rise into the Future” event.

What Does This Mean for SAPinsiders?

The announcement today was about pushing SAP’s cloud ERP messaging while wrapping in information on the Joule AI and new sustainability capabilities. For customers that are still running SAP ECC or SAP S/4HANA on-premise, there was nothing new from a message perspective. What was new is that customers now have an idea of what these cloud-only innovations will look like. This is only the starting point for these capabilities, and, over time, they will be more deeply embedded in other SAP solutions. Given this announcement, what should organizations that are still on the fence about their ERP future do to be prepared?

• Recognize that cloud ERP is here to stay. While Klein may have faced difficult questions from users, SAP remains fully committed to moving customers to cloud-based ERP offerings – specifically, SAP S/4HANA Cloud via RISE with SAP. And while SAP has committed to not leaving any customer behind, they have chosen to make certain new innovations only available via RISE with SAP. If organizations want to leverage these features, the only option available today is to move to RISE with SAP, and SAP shows no signs of moving away from that requirement.
• Prepare to make a choice about future ERP plans. Many SAP ECC customers have not yet licensed or deployed SAP S/4HANA. For some, there seems little reason to move to SAP S/4HANA given that they have an environment that works. For others, the cost of the move is high and is difficult to justify. However, even if 2027 is not a hard deadline, a decision must be made about future ERP plans. While SAP will continue to support on-premise deployments, those deployments will not be able to utilize some of SAP’s latest innovations. Ensure that business teams are fully aware of the status of existing solutions and new innovations as they will be crucial in determining what happens in the future. It is vital that organizations are fully prepared for these conversations and the decisions that come with them.
• Further AI announcements are still to come. While the Joule demonstration showed how an embedded AI can work within SAP offerings, this is only the start of AI-related innovations that are coming from SAP. Not all of these will be embedded in offerings. For example SAP is also working on connected AI that can be leveraged with SAP BTP. An example of this was the recent announcement of SAP partnering with Google Cloud to leverage Vertex AI in conjunction with SAP Datasphere. SAP BTP is ideally designed to leverage these sorts of AI innovations which are easier to deploy than an embedded AI like Joule. Given these capabilities, expect to hear more AI announcements in the coming months.