5 min Applications

Christian Klein: “SAP has the most modern cloud stack of all SaaS vendors”

Christian Klein: “SAP has the most modern cloud stack of all SaaS vendors”

SAP is still sometimes described as a tech dinosaur that does not innovate fast enough. Christian Klein has been the CEO of SAP since 2020, and under his leadership, things have gradually changed. We spoke with him during SAP Sapphire in Orlando.

One of Christian Klein’s statements on stage was that “at SAP they believe very much in best-of-suite.” This is an interesting statement because we previously analyzed that the entire tech industry is moving toward best-of-suite. It is simply becoming too complicated and too expensive to opt for best-of-breed. Just integrating all those solutions with each other is very hard—something Klein totally agrees with.

Criticism on SAP was justified

In recent years, SAP has also been criticized quite a bit for its extensive portfolio, complicated data model, and, as a result, the complexity of integrating with SAP. That included solutions that SAP said were very potential but never came off the ground; a good example is Leonardo.

Klein told us the criticism was completely justified. SAP had made several acquisitions, everything was still running on legacy IT stacks, and it was difficult to integrate with SAP solutions. Klein told us that the organization wasn’t set up properly in some respects. Technically the wrong choices were made. All those pain points have since been resolved. Klein states now that “SAP has the most modern cloud stack of all SaaS vendors.”

“SAP has the most modern cloud stack of all SaaS vendors,” Christian Klein, CEO SAP

Culture change in the organization

In the past, SAP was organized so that the product teams had a lot of freedom, with the goal of keeping the line-of-business as satisfied as possible. However, 20 to 30 percent of R&D budgets went to platform, integration, extensibility, and data harmonization. As a result, much of the budget was already lost, resulting in a brake on innovation.

In recent years, SAP has made changes and there has been a culture change. Klein acknowledges that SAP also had to replace some people to make this possible. Some people wanted to stick with the old methodology. Ultimately, products were divested, things were merged and, above all, a lot was modernized.

If we had to describe SAP’s portfolio today, it still consists of several large applications: SAP Ariba, SAP Concur, SAP SuccessFactors, SAP S/4HANA, SAP CX and several more. However, underneath that is a new foundation with the SAP Business Technology Platform (BTP) and DataSphere.

SAP’s data model was simplified several years ago, and as a result, it is now much easier to integrate with SAP or extend SAP applications with business-specific features. This can be done without modifying the SAP core, but by using the extensibility of the platforms through APIs.

Read also: SAP expands Datasphere with knowledge graph and compass

Business Technology Platform is central to product development

Klein explains that when Leonardo was introduced, the way development was setup was very inefficient. At the time, SAP had, for example, several separate development teams building IoT use cases for their applications. Klein argues that there were different ideas of what you could do with Leonardo. However, the business context was missing and many teams were reinventing the wheel. As a result, Leonardo ultimately failed.

SAP learned from that by centralizing innovation and development more. SAP presented Business AI this week and is a good example of that. Klein says; “If you look at Business AI, Philipp Herzig, chief AI at SAP, is building the foundation. He and his team are training the models and making the services available that can be used. The line-of-business within SAP can then use that and develop use cases with it.”

New innovations and technologies are now often developed within the Business Technology Platform, so that all the development teams can then use them across applications. This method of product development is more centralized and focused on making new innovations available faster. It also means that BTP is essential for all applications; no application will work without it.

SAP no longer wants to do everything itself, it is putting more effort into partnerships

Another point we brought to Klein’s attention is that in the past, SAP wanted to do everything in-house, developing everything itself. He acknowledges that was indeed the strategy, but that no longer applies. He says they no longer want to compete in all areas. They now choose to do Business AI, which SAP is good at. SAP has a lot of business data that it can use to train very specific AI models for certain industries or use cases.

It has AI partnerships for the larger, more generic models and uses OpenAI, Cohere, Antropic and others.

SAP is ready for the future

Based on what SAP is showing this week and what Klein tells us about the changes made in recent years, SAP is in much better shape than it was a few years ago. It has been able to shake off much of the complexity, the organization is better structured and SAP is innovating much faster.

Also read: SAP bets 300 percent on Joule and AI

Organizations can now use SAP much more effectively and efficiently within their organizations. Of course, that does not mean things like an ERP system are suddenly very simple. ERP is simply a complex matter at the heart of an organization with which many business processes are managed. However, SAP is taking steps in the right direction to also simplify ERP. Among other things, the new Joule CoPilot allows users to perform tasks much faster. Joule will also provide much more insights into business processes and analytics.

Finally, there is the acquisition of WalkMe. This, too, should help reduce complexity. We look forward to seeing how SAP will integrate that in the coming years. According to Christian Klein, SAP is ready to start making a difference with Joule and Business AI.