Back in July 2020, SAP appointed Michiel Verhoeven as managing director in the UK&I – until now we haven’t heard much from the new top man. In his first media interview since taking over the hot seat, Verhoeven spoke to Paul Esherwood on ERP Today Live! to set out his agenda for the UK business and to explain what the broader SAP strategy means for UK customers.
The Q&A below is an abridged version of that live interview which took place in December 2020.
You’ve worked for SAP for a little over seven years, you’ve been posted to some fantastic locations all around the world. When you got the call about the UK job, did your heart sink a little?
MV “Quite the opposite. In fact, a couple of years ago, I tried to make a deliberate attempt to move back to Europe after spending many years in Asia Pacific. I visited a number of companies in the UK at the time, and I started to network a little bit to try to make a move to London given that this is such an international city. Having lived in multiple countries, this is a great place to be and from a business perspective, even better.”
When you get offered a job like this, is turning it down an option? I guess, turning it down is the same as handing in your resignation?
MV “It didn’t even cross my mind to turn it down. It’s been an aspiration of mine to be responsible end to end for an SAP business from the moment that we sell something to the moment that we deliver and support it and be there with the customer throughout the entire experience. So for me, it was a great opportunity to step into something I’ve aspired to do, and hopefully been trained for through different previous roles to be a bit qualified for.”
When I interviewed your predecessor he set out his vision for turning SAP in the UK into a truly customer focussed organisation and I’m not sure he completely delivered on that. How is your tenure going to be different and what specifically are you going to do in terms of culture to bring SAP more in line with your customers’ expectations?
MV “Yes, I think it’s really good that you mentioned that because you made a comment in the beginning that I’m the third MD in a few years. In fact, I’m the twelth MD in 15 years. So that shows you that we’ve not been particularly consistent and reliable for our customers and partners in the way that we should be, and yet we’re a 47 year old company with frankly a fantastic brand, especially in the ERP market. So how can that be? That’s the first thing we need to address.
“Jens was in fact here two and a half years, one of the more longer serving MDs, and I’m hoping to do better than that in terms of tenure. So the first thing I would say is what Jens set out as his vision is what we all strive for as a company. It’s not Jens’ personal vision. It’s SAP’s mission to drive and deliver customer success. So in the very early period here, I have met personally in a couple of months’ time probably 50 customers, CEOs, CFOs, CIOs, and they absolutely said to me, ‘Michiel, SAP needs to do more than sell and promise. You need to deliver on your promises, and we expect to be treated fairly, equitably, and as a partner and not as just one of your customers who you’re selling to.’
“So, there is a recognition inside the organisation, inside SAP UK and in Ireland, that it’s not just about empathy. It’s about fundamentally changing the way we go to markets and service our customers.”
Does that recognition spread back to Waldorf as well because a lot of companies that work with SAP in the UK and also work with SAP in Asia or in the US or in Germany, say they get a very different experience with SAP in the UK than they do elsewhere.
MV “Yeah, number one, I think, with Christian Klein and Adaire Fox-Martin, standing behind our customer success strategy, which is the unification of sales and service and support, and our customer experience organisation in one board area, that makes it a lot easier to make decisions as an MD of a country, to empower people to do the right thing for the customer.
“So we have a big mantra that says, ‘customer first, SAP second, line of business third.’ That’s very important for people to have a true north and a compass for decision making when situations are difficult.”
So that talks to the high level strategy and customer focus, but the elephant in the room is S/4 – it was launched more than five years ago now, and it’s not quite taken off in the way that SAP would have liked. What are you going to do to help UK businesses that are struggling to find a compelling business case to move from ECC6 to S/4, and within the timeframe that SAP has set?
MV “First let me just give you a perspective of whether S/4HANA has taken off, yes or no? The answer is more than 15,000 companies globally have said ‘Yes, we believe in S/4HANA. We believe in the intelligent enterprise vision of automating business processes end to end, and we do recognise that it’s time in our journey as a company in whatever industry I’m in, to make those business processes more visible, extract the value from the data flow and the objects that come across.
“People have said, ‘Yes, I need to make that move.’ The question is, do you do it as a greenfield implementation? Do you do it as a brownfield implementation? Or do you mix and match, if you want? And what we are seeing is that the vast majority of companies are going for brownfield technical migrations and then decide to innovate on top. They get some organisational buy in, but they don’t make the big leap. And if you take the brownfield approach your technical risk is lower, your adoption will be more secure, but the incremental benefits of becoming an intelligent enterprise is further in the horizon.
“Then you have customers who have taken the greenfield approach, and they say, ‘Look, we are going to take advantage of this disruption in the market and the technology allows us to do it. We know we have to standardise our processes. We know that data and harmonisation of it is critical to our success, and we need to learn to do analytics and monetisation of our own assets a whole lot better. So we’re going to take the plunge.’ And those customers tend to have made longer running cycles of delivery, but get higher benefits out of it. We’ve seen a 20 percent increase year on year of the number of S/4HANA customers. We see from the user survey here in the UK alone that about two thirds of the people are saying, ‘Within the next three years I’m going to go on the S/4HANA journey.’ So there’s significant movement in the right direction.”
Is that two thirds of your existing ECC customers saying that they’re ready to move to S/4HANA?
MV “Yes, and that’s within the next three years. So, then you have a whole group that’s of course going to come later given that the maintenance window expires in 2027.”
If those numbers are correct and two thirds are going to move in three years there’s going to be some issues around resourcing and skills. But where does that leave the other third? They may not need to move. Migrating to S/4 is normally wrapped up in some sort of business transformational programme, and not all businesses need to transform in the same way. There are businesses that are quite capable of surviving without having huge sweeping transformation programmes. What happens to those businesses?
MV “Some of them are risk averse, and say, ‘In my industry, I need to see others go first and then I will follow.’ Others are saying, ‘I have a problem with the business case today because I have competing priorities.’ Maybe they have other areas of innovation in their go-to-market, for example, in their revenue domain, and that is currently a higher priority.
“Then there’s people who say, ‘Well, what’s my business case really?’ There are sceptics out there that said, ‘There is not enough of a business case to go for S/4HANA,’ and that tends to be the people that look at the hardware, the software, the IT costs, TCO, rather than the full business case.”
How well equipped do you think the partner network is to deliver these S4 projects? Is there enough resource in the ecosystem to get these companies live in the timeframe SAP has set?
MV “That’s a huge focus for us as a company globally. If you look at the number of SAP users on a daily basis, I think there’s more than two and a half million or something active out there. But if you look at the UK alone, we have about 2,000 certified SAP consultants. And our stated goal from SAP here in the UK and Ireland, is to have four times more certified consultants within the next three years. Now, if you do the math, you say 2000 times four, that’s only 8000. That doesn’t mean that’s the ecosystem of capable partners. There are companies who have their own trading programmes, their own certifications. And you look at the Accentures, Deloittes, and the IBMs, they have very sizeable practices.”
They have, but the issue is that a lot of the people that have got deep SAP experience have been around for 20 or 25 years now. Is there enough younger talent emerging that’s going to have that inherent SAP knowledge? You know, the cool kids want to work with cool tech – and I’m wondering how cool is SAP at the moment?
MV “Paul, that’s an area that I’m quite passionate about because we have about 5,000 or 6,000 students right now in the UK enrolled in classes where SAP is being taught, so it’s not like there’s nothing. There’s certainly a lot of activity, I think there’s more than 50 or so universities participating. But I believe the scale needs to be bigger.
“You asked is it a cool company? Well, you know, I worked in one of those cool companies and it’s called SAP. If you want to be part of a transformation, you want to make things different for people in the future and the here and now, then you should be part of SAP because this is where it’s all happening. I believe that and I’m trying to make it happen.
“This company wants to really be an aspirational brand for people to be joining. So we have a huge focus on learning hard, learning resources. We have self-guided learning if you want, Open University classes. We have structured programmes with universities, we have partner certification trainings. There’s a plethora of offerings available, and we want to make that broader.”
You’ve obviously joined at a difficult time when you’ve not been able to get out and see customers in the same way you normally would do.
If you think about 2021, what are you hoping to achieve this year?
If we talk again in a year’s time what are you hoping to be able to tell me then?
MV “Great question. Of course I think about that because every customer that I see will ask me that question saying, ‘So what, Michiel. You’ve just told me that you’re MD No 12 in the last 15 years. What’s going to be different? And the number one thing that is top of mind is a perpetuation of what Jens said. It’s the same as what we say globally – is customer success. Customer outcomes is what we have to drive.
“What does that mean? Instead of selling software and saying, ‘Mr or Mrs Customer, it’s great that the ROI of your business case shows something positive.’ That’s not an outcome, that’s a projection. The actual outcome occurs when the savings happen in the P&L of the customer later, or the extra revenue growth is materialised, or when they have x1000s of customers themselves benefitting from the commerce solution that we sold them.
“Number two, partner success. I want to see way more certifications in the market from our partner ecosystem by SAP, not just by the partner organisations themselves. I also want to see a doubling of the indirect revenues, not in one year’s time, don’t get me wrong, but that will take three years.
“The third element I think is very important is what we want to do is create a more people centric culture in one SAP. If you ask any customer, ‘Who do you know from SAP?’ They will give you five names. If you ask them, ‘What are their titles or job functions?’ They have no clue, other than to say it seems like everybody’s a salesperson or everybody’s a support person. It should be much simpler to engage, and we need to be one team.
“And then final thing that I want to see is cloud growth. If I look at the market size, we are today in a market of about €10bn roughly in cloud in the UK and Ireland combined. And that’s growing towards €16bn in three years from now. If I look at the on-premise business, that is a €3.8bn market potential and shrinking to €2.5bn. So, the market is moving to cloud – it’s not just a statement, it’s in the facts. So, in one year from now, we should already see that our cloud revenues have grown significantly, versus our on-prem business.”
In a year’s time SAP will be a cloud-first company?
MV “I think that is what we have been saying for quite a few years already. And if you’re MD number 12 it means you have to prove through actions, not through words. So, we need to gradually gain that trust from each of our customers.”