RISE with SAP: 100 Days Later

SAP kicked off 2021 with the announcement of RISE with SAP, a holistic approach to business transformation.  Together with its strong partner ecosystem, RISE promises to offer customers at all stages of digital transformation a single offering that provides a path to the Intelligent Enterprise, independent of starting point or complexity.  Offered on a subscription basis, it features one responsible party for service-level agreement, operations and support. This holistic approach promises to help companies truly transform their business, going beyond a technical migration to the cloud to enable continual transformation.

During its April Q1 earnings call, SAP stated that 100 clients have signed RISE agreements since the announcement.  Of interest is how SAP is positioning RISE with our clients.  Our experience guiding large companies through a RISE evaluation provides a unique point of view with respect to the strategic drivers behind SAP’s introduction of RISE.

RISE Value Proposition

SAP vows it will enable business outcomes via an Intelligent Enterprise enabled by S/4HANA and its industry-specific cloud expertise, empowered by SAP Business Network and business process intelligence (BPI).  The three areas where it will drive specific outcomes are Commercial, Operational, and Technical Enablement.

The Intelligent Enterprise is to be delivered via a three-phase journey of optimizing, modernizing, and innovating.  RISE is presented in one commercial construct encompassing software, infrastructure, and technical services, delivered by SAP and a hyperscaler, or it can take the solution even further by offering functional application and business process management services from SAP and/or their service partners.

Why RISE Now? 

SAP Wants to Reestablish Account Control.  Historically speaking, SAP has had the ability to take the lead position on an account at its discretion.  For over a decade, the company leveraged executive relationships established by Bill McDermott, Rob Enslin, Jenn Morgan, Adaire Fox Martin, and others, to maintain their position. This team also leveraged long-standing relationships to influence the entire SAP ecosystem, including complementary software, service and hardware providers to align with SAP’s go-to-market strategy.

The departure of these executives and the rise of Microsoft (Azure), Google (GCP) and Amazon (AWS) is challenging SAP’s position of influence and control.  This is a balancing act that is not new to SAP or its partners.  Most often, alignment appears at a corporate level, including joint go-to-market strategies and partnerships that are communicated in a very well-structured manner.  However, gamesmanship at an account level can be very dynamic, as there is always backend maneuvering between SAP and its partners.

Although SAP has relationships with each of the hyperscalers, it certainly understands that the aspirations of Microsoft, Google and Amazon do not end with providing SAP IaaS.  Each has the ability to deploy go-to-market strategies and significant capital that could pose an immediate competitive threat to SAP and SAP’s partners.  SAP’s RISE offering is a clear attempt by SAP to put themselves atop the pyramid of client influence and partner leverage.

SAP Wants to Gain a Larger Share of the Wallet.  Step back for a minute and think about the current market from SAP’s perspective.  For decades, SAP has delivered innovative solutions that have enabled every industry in the world.  In parallel, SAP has created an ecosystem that has given rise to hundreds of complementary software and services providers and billions of dollars in market value.  While SAP has certainly seen a share of the benefits, are these benefits in line with SAP’s expectations and proportional to the aggregate market value created by SAP?  Only SAP can answer this question but judging from the successes enjoyed by SAP’s partner ecosystem, it is clear that they see the need and opportunity to obtain a larger share of the pie.

The question is whether SAP can capture additional share and still effectively manage its partner relationships, while often stepping in front of them with the RISE offering.

What’s Happening on the Ground?

The introduction of SAP RISE is challenging traditional evaluation, selection, negotiation, and decision-making processes.  Generally speaking, companies have taken a serial approach to sourcing their digital transformation initiatives, including:

• Software
• Implementation Services
• Hosting Services
• Application Maintenance and Support.

SAP’s positioning of RISE has been disruptive to the traditional evaluation and decision-making process.  They are in the unique position of bundling software, hosting, and application maintenance and support services, along with complementary professional services; however, the bundle of SAP proposals must be compared to alternatives.

Companies that are considering a transformation are best served with anticipating the nature of the engagement that will occur with SAP and various partners and proactively defining an engagement strategy that will dictate how the engagement will be managed.  This will enable — and not distract — the decision-making process.

There are three engagement scenarios along with key considerations for each:

1. SAP Engagement – Companies should anticipate the initiation of several workstreams of sales activity and the presentation of corresponding proposals from SAP, including but not limited to the following:

• A traditional SAP ECC to S/4 on-premise software license proposal, coupled with targeted cloud solution proposals (e.g. Ariba, Concur, SuccessFactors, etc.)
• An alternative RISE proposal, consisting of a license conversion to a subscription-based model, an IaaS offering, and potentially, application maintenance and support
• In the event a customer elects not to proceed with RISE, anticipate that SAP may revert to positioning its HEC solution
• SAP Value Assurance Services to complement the offering provided by the selected system integrator.

Bottom Line:  The level of effort required to manage an SAP relationship is generally underestimated and the introduction of RISE only makes the evaluation of SAP offerings more complex.  Left unchecked, companies should anticipate SAP will position their proposals in a manner that aligns with their desired outcomes versus one that supports your ability to compare SAP’s solutions to your alternatives.

The sequencing and timing of the evaluation process must be set up to allow companies to determine if SAP RISE presents a value proposition that is more compelling than the hyperscalers can provide directly.  Based on our experience with SAP’s HEC solution and evaluation of current RISE proposals, SAP has a significant hill to climb.

2.  Hyperscaler Engagement – Most companies have existing relationships with AWS, Google and Microsoft; however, the movement of their SAP infrastructure is a major relationship and commercial inflection point that is compelling organizations to address the following:

• Approach to evaluating hyperscaler offerings in parallel with SAP RISE and/or SAP’s HEC solution given overlapping offerings
• Evaluation of the hyperscaler’s solutions in the context of current-state relationships, the S/4 transformation effort, and the broader context of the cloud and your infrastructure & operations (I&O) strategy
• Approach to evaluating the proposed hyperscaler service cloud migration partners, as the hyperscalers will, in certain cases, partner with an SI to support the migration. In addition, these SI partners get credit from the hyperscalers that support the migration
• Evaluation of the strategic relationship implications beyond IaaS migration and SAP operational support, including the competitive implications of Amazon, the impact on a Microsoft EA negotiation, the impact on reciprocal business relationships, and the ability to maintain competitive leverage via a multi-vendor cloud strategy going forward.

Bottom Line:  There are many dimensions and complexities that have to be thought through beyond simply comparing a hyperscaler’s offering to SAP RISE.  There are adjacent and long-term implications associated with the selection of a hyperscaler and the negotiation itself is simply the purchasing of capacity.  Companies are best served to forecast how relationships will be managed and how leverage will be maintained with the hyperscalers over the long term.

3.  Service Provider Engagement – In the context of an S/4HANA digital transformation, many companies are being compelled to reevaluate their service partner strategy and their long-term support strategy. Their partner strategies are certainly influenced by their decision to proceed with RISE or a hyperscaler solution.  The following are considerations we encourage companies to evaluate:

• RISE Transformational Services vs. System Integrators – We continue to see SAP position Value Assurance Services and believe the aspirations of RISE to bring home the transformation is simply overstated in comparison to system integrator capabilities.
• Hyperscaler Cloud Migration Services – Many companies are focused on the SAP S/4 implementation partner and the selection of RISE versus the hyperscaler, and underestimate the effort required to evaluate and select a cloud migration service provider. This transition can be high risk and warrants close attention.
• Managed Services Strategy – Assessment of your existing support versus future support model is also a critical success factor. This strategy will inform your sourcing decisions, your approach to modifying existing Managed Service provider relationships, or your need to enter into new relationships.  Either way, this inflection point will cause change that needs to be carefully thought through – whether the choice is SAP RISE or a hyperscaler strategy supported by complementary service providers.

Bottom Line:  The service providers have responded to SAP and the hyperscalers with complementary service offerings, but in reality, there is a heightened environment of so-called “co-opetition” (collaborative/competition) and confusion that is challenging existing business models, sales strategies and partner relations.  An impact assessment of this environment is a critical input to determining your future service provider sourcing and contracting strategy.

SAP clients embarking on transformational initiatives are being presented with a plethora of delivery models for realizing transformational outcomes.  Options include SAP RISE, going direct with a hyperscaler, bundled SI solutions and other multi-sourced vendor scenarios.  Current market dynamics are encouraging the consideration of these options but overwhelming the companies evaluating them.

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