SAP partner organizations and customers depend on each other. Much of what SAP sells would be impossible for customers to implement, run, or manage without help from the experienced partners who take on these responsibilities.
So, who qualifies as an SAP partner organization? Traditionally these companies have fallen into three distinct categories: the system integrators (SIs) that help you implement your software, the value-added resellers who both sell and implement your software, and the partners who offer their own software and services based on the intellectual property they have developed.
The Next Generation of SAP Partners
Today, these three types of partners are more likely to cross over into each other’s lanes as business needs evolve for SAP customers. Those partners who typically have not focused on creating their own intellectual property, for example, are now doing so to differentiate themselves in the market. And from the customer side, the demand for specialized industry-focused or workflow-focused solutions is increasing, driving the development of new products to satisfy those appetites.
SAP refers to the evolution of this group into “next-generation partners” and has built its own partner strategy to help them along the way as they become more multifaceted. This approach was a big topic at the 2020 SAP Global Partner Summit—normally held the week of SAPPHIRE NOW and this year presented in a virtual event. During the summit, we had the opportunity to catch up with SAP’s Chief Partner Officer Karl Fahrbach to hear more about the latest enhancements his team is making to help both SAP partners and customers succeed.
Ann Marie: Karl, could you tell us a bit about the partner business at SAP?
Karl: Within our partner business, we have two philosophies. The first one is making sure that we have good business outcomes and results. The other philosophy is transforming the SAP partner business to a next-generation approach.
Ann Marie: In your opinion, how will partners need to evolve in the near term to better support SAP customers? Obviously, we’ve all had to adapt very quickly because of the COVID-19 pandemic.
Karl: Next-generation partnering is an initiative that we launched a year ago and that has become even more relevant these days. If I look at where we set the bar and the direction we took at the beginning of last year, our priorities are still the same.
First, in an environment like this, we know we need to invest in innovation. We need to make sure that our partners take innovation very seriously. That’s where the growth and margins will come from.
Our role is to make innovation easy for our partners, right? This is an area where we’re really pushing our partners very hard to make sure that they understand it is important. It’s the way they will be able to survive and be successful in the future. And we understand that we need to make it easier for them to compete.
The second priority is we need to make sure that our partners experience good economics when it comes to working with SAP. It was evident when the COVID-19 crisis hit that a need arose for a better economic model. Some of our partners were suffering from a cash-flow perspective, some didn’t have financing, some saw their margins going down. Under the pillar of our next-generation partnering initiatives, we are constantly reviewing our ability to deliver the right economics for our partners.
And the third priority is the experience. We are working very hard to make sure that our partners have the best experience with SAP. I think it was relevant before, but now in this new situation, being empathetic and listening to our partners and our customers is key to having a good impact.
And then if I look at our partners, what is it that they need to change? In the short term, it’s to listen to their customers. They need to understand what has changed from their customers’ perspectives. And they need to adapt by adding things like new offerings. What their customers were buying in the past—two months ago, three months ago—may not be as valued anymore. Their needs have changed. They have different problems, so our partners need to adjust their offerings to help customers solve those problems.
Ann Marie: What changes do partners need to make for the long term?
Karl: If I look at the long term, I believe that our partners need to move from a focus on transactions to look at the entire life cycle of the relationship with their customers. That’s going to mean examining whether their customers are successful, versus how much business partners are managing by transaction. That’s what really drives revenues, upselling, and cross-selling. The other element is, as I mentioned before, innovation. Partners need to invest in innovating and that will make them even more relevant to their customers.
Ann Marie: ASUG has done some research on how the SAP S/4HANA certification process affects both partners and customers. We found that certification isn’t as seamless as either group would like. Have you made any enhancements to the SAP certification process in the past year to help customers innovate and partners be ready to deliver what’s next from SAP?
Karl: I think we need to make sure that our partners have a better certification process. In the end, what we want to drive is quality for our end customers through the partners.
We recently launched the partner delivery quality framework, which gives partners the tools to make sure that their services and communications are much more seamless for their customers than they are today. The framework includes three main pieces. The first piece looks at the quality of the projects, making sure that the quality of each project is in line with the standards for verified partners. The second piece is, if you have a certification, we will make sure that our partners have more certified consultants. That will drive the quality of the delivery arm for our partners.
And then the third piece is that we, from an SAP perspective, don’t dedicate our resources only to the business side where we’re asking our partners: How much are you selling? What’s going to be the plan for this quarter? What does your pipeline look like? We want to make sure we give them enough guidance and support to help them make their services better.
Obviously, we have a lot of partners with certified add-ons. This is something we are looking at very carefully to make sure that we are providing enough services to support. We are offering free access to the SAP S/4HANA sandbox before the official release so customers can select the add-ons they want to play with. We have a process that involves checking all the add-ons to be sure they are certified for SAP S/4HANA.
Ann Marie: I think that will help quite a bit. It’s hard for partners because there are so many different releases that customers are using that it’s challenging for them to know exactly where to focus their certification efforts. And it’s challenging for the customers to know which of their integrations will be certified for those next releases when they decide to upgrade. As we see more customers moving to SAP S/4HANA, it’s good to know that SAP has its eye on this issue.
Karl: We have a service that we offer to partners through an annual subscription to guide them through the complexity of all the different software releases and what they need to do to recertify their add-ons on an ongoing basis. We actually drive this process with them through that service so partners will not be lost and forced to figure out for themselves when and what they need to recertify.
Ann Marie: Switching gears a bit, what’s the benefit to partners in participating in the SAP App Center? And what’s the benefit to customers?
Karl: For the partners using the SAP App Center, the benefit is very clear. We recently announced our software Partner Solution Progression. What are the models and what are the programs for partners to innovate with SAP and how do we monetize? The backbone of everything is the SAP App Center. It all starts there. Every partner that has developed intellectual property and wants to monetize it should publish its applications in the SAP App Center.
The SAP App Center is the place to go for customers, as well as internally for our account executives to build their bills of materials when they’re talking to customers. We have seen a lot of research that is telling us that customers want, on average, to buy a vendor’s solution plus two or three partner solutions on top. That process will be facilitated by the SAP App Center.
If partners want to monetize their intellectual property, have access to our customer base, and reach our account executives, the SAP App Center is the place to be. It will put customers closer to solutions, partners closer to customers, and connect partners with our account executives. The SAP App Center is the marketplace where everything will converge.
Ann Marie: Why is SAP’s customer first initiative so entwined with the work that you’re doing with partners?
Karl: At the beginning of 2020, we created a new board area called Customer Success. That’s a big change for SAP because we are moving away from just measuring our customer interactions in sales, number of orders, revenue, and so on. We are redefining all our KPIs around making our customers successful. We now talk about adoption, we talk about expansion, and we talk about consumption. Those new KPIs will be driven by this new board area.
We have taken all the customer-centric roles—from marketing, to sales, pre-sales, our service organization—and we have moved them to that new area. We have a Customer First organization that drives renewals, as well. As we step away from just measuring the success of our people by sales alone, we are now considering all of the factors I mentioned here part of customer success.
Now my role and the partner organization are part of our Customer Success board area. This is because we know that to make our customers successful, we need to make our partners successful. Our partners will drive customer success.
Ann Marie: We’ve been following all the different cloud initiatives going on at SAP, such as Project Embrace, for example. I know that there were some announcements at the 2020 SAP Global Partner Summit about the cloud. How are you helping SAP customers team up with various partners to develop and manage their cloud strategies?
Karl: We give our customers choice. If you look at the typical solutions we offer by market segment, you’ll see that we’ve always had an on-premise option and now we have a cloud solution for each of them. Our portfolio is very rich in terms of cloud offerings when you look from a Line of Business perspective to delivering the intelligent enterprise through your ERP system.
We have the right offerings when it comes to consumption. Our partners offer public and private cloud services. We have a partner-managed cloud offering where our partners deliver the service on our behalf, combined with other services. And we have the hyperscaler options. This allows our partners access to a very competitive and unique portfolio of cloud solutions.
When I look at the program that we have for our partners to monetize cloud engagements with our customers, we have been making a lot of progress. We offer partners a choice of models, and our partners are able to resell our cloud solutions, which is very rare in the industry. For example, we have a revenue-share model that we introduced a couple of years ago, which is called Cloud Choice Profit. This model allows partners to close SAP deals on SAP paper.
Ann Marie: I know that there were some announcements at the 2020 SAP Global Partner Summit about making sure that SAP solutions are ready to support the needs of various industries for customers. What can you tell us about the developments in that area, particularly related to how SAP is preparing partners to help deliver those industry solutions?
Karl: If you look at the different industry solutions, this is something that we will be investing in a lot at SAP. We have a very powerful track record of being successful in industries on-premise and we want to build the same track record for the cloud. As for the role of the partners there, we have realized if we want to be quick, if we want to be fast, if we want to deliver quality solutions, we cannot do everything on our own.
To fill in those white spaces in our portfolio by industries, we will need to work with partners. For some industries, we will work with partners to extend SAP industry solutions. For some industries, we will work with our partners to divide and conquer. SAP will cover some specific pieces of the industry and our partners will cover the rest. And some industries will be completely covered by partners. If we want to double down on an industry, we see partners playing a fundamental role in helping us reach these key markets.
Ann Marie: That makes a lot of sense. If you’re in a specific industry and you want to innovate, you need to work with partners that can customize solutions to support your specialized business processes. Finally, what are the biggest takeaways from the latest partner announcements that you would share with our customer and partner members at ASUG?
Karl: There are three relevant takeaways. The first takeaway is that SAP has put our partners at the very center because SAP believes to make our customers successful, all partners play a key role. Again, we’re not looking only at sales. We’re not looking only at implementations. We see the partners as strategic as they support the entire life cycle of the customer.
The second takeaway is our emphasis on quality. We need to make sure that our partners are equipped to deliver quality to our customers. This is why we are working on the partner delivery quality framework that I mentioned before, because we believe that we need to help our partners deliver high standards of quality. This is because the customer experience starts with implementations, and 90% of SAP implementations are done by partners. Partners play a key role in making implementations successful. And that success is driven by quality.
Then the third takeaway is innovation. Customers will be as successful as they are able to absorb and leverage innovation to transform their businesses. That innovation will come through our partners. So, we are equipping our partners to innovate with SAP solutions and to extend our portfolio. In the end, that will benefit our customers.
Partners are more strategic to our company than ever. We want our partners to deliver quality so they can make our customers successful. To make our customers successful, innovation is key. And the key driver for innovation at SAP will be our partner ecosystem.
Ann Marie: One final follow-up. Though they are not the norm, there are stories you hear about partners that have not delivered as promised to SAP customers. I know SAP’s partner delivery quality framework is designed to keep those partners out. But what are you doing with your organization to help protect customers from hiring a partner that isn’t up to the highest standards?
Karl: This is a very good question. We want to protect customers from having a bad experience with partners, and this is why we identified the quality standards for projects that are part of our new framework. We’re going to be checking these projects, monitoring them in real time to make sure there are no escalations and that we can coach the partner to make the project a success. We are investing in the quality of our partner capacity and making sure they are properly certified. And we are investing in resources that will help our partners maintain a well-suited services arm.
If you look at partner programs of the past, they were mostly based on sales. The more you sell, the more you resell—the better partner you are. And you go up the chain from bronze to platinum, or whatever designation exists.
We’re using our partner delivery quality framework to look at our partners in a different way. We want our partners to be rewarded not only by quantity of projects they complete, but their quality as well. The framework we have built will drive the rewards for partners. And, of course, this will come along with consequence management. The more you invest in quality and the better projects you execute, you will move up in the framework. But you will move down or out if you fail and your project quality is not good enough.
Ann Marie: I really appreciate you catching us up on the latest initiatives SAP has in place to support both customers and partners. Thank you so much for your time.
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