Among other exciting companies, SAP ($SAP (+0%) ) was also at the Morgan Stanley Technology Conference. I had the opportunity to listen to the conversation between Adam Wood, an analyst from Morgan Stanley, and Muhammad Alam, a member of the SAP Executive Board responsible for product and engineering.
The conversation revolved around SAP's product and engineering strategies, with a particular focus on the S/4HANA migrationthe Business Technology Platform (BTP), Generative AI (GenAI) and the Business Network was established.
Wood began by asking about Alam's reasons for joining SAP three years ago. Alam explained that he was attracted by the unique combination of product assets, the Business Network and the possibilities of AI that SAP offered. that SAP offered. He also mentioned Christian Klein, the CEO of SAP, whose commitment to transforming the company into a cloud-centric organization impressed him. Finally, Alam believed that with its customer base, SAP was able to innovate successfully and deliver value to customers.
Wood then moved on to the core product S/4HANA and asked about the reasons for the strong upgrade wave. Alam emphasized that customers' business requirements have changed fundamentally over the last 20 years. New business models, regulatory requirements such as data residency and technological disruptions, particularly AI, are forcing companies to modernize their ERP systems. are forcing companies to modernize their ERP systems. He also pointed out that customers who have not upgraded for years could benefit from innovations and an improved user experience.
Another focus of the discussion was the Business Technology Platform (BTP). Alam explained that BTP is a platform for the development of SAP applications, the extension of existing applications by customers and the development of industry solutions by partners. He emphasized that over 29,000 customers and 3,000 partners use BTP. He also emphasized the importance of AI innovations within BTP, such as Joule for developers and the ABAP Large Language Model.
A central topic was also Generative AI (GenAI). Alam emphasized that AI has the highest priority for SAP ("AI first"). He explained that the end-to-end nature of the SAP suite in conjunction with a harmonized data model creates unique added value in the field of AI. Joule was presented as the "conversational co-pilot"that delivers AI innovation to customers. Alam described three classes of AI functions:
- Enabling 80% of the most used transactions in Joule
- Embedded AI or premium AI scenarios (130 by the end of last year, target of over 400 by the end of this year)
- Agents for various use cases (e.g. dispute management in finance, case classification and automated Q&A in customer service)
When asked whether AI could lower the barriers to market entry for software and increase competition, Alam replied that Large Language Models (LLMs) tend to become a commodity. However, SAP is focusing on differentiation through a deep understanding of business processes, access to relevant data and the end-to-end suite.
These factors would enable SAP to set itself apart from pure AI platforms and single-lane app providers.
With regard to the costs of LLMs Alam noted that these are not currently an obstacle to their introduction. Rather, the reliability of the results and seamless integration into the users' workflows are are decisive.
Another important point was the business network. Alam admitted that sales growth has fallen short of expectations, but emphasized that the adoption is progressing positively. SAP has taken measures to promote the use of the network. This has led to an increase in transactional relationships and trading volume. As a next step, SAP plans to introduce a "Promote" offer for suppliers and the upgrading of the Enterprise Suite.
Wood concluded by addressing the the industry-specific requirements of customers. requirements. Alam emphasized that SAP has extensive investments in industry solutions. SAP brings the most frequently used functions into its cloud solutions and enables partners to develop further industry solutions with BTP. To simplify the offering, SAP has developed packages for different industries tailored to the respective requirements.
Overall, it was a very informative discussion that provided a deep insight into SAP's product and engineering strategies.
