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Protocol | Enterprise

How Christian Klein’s reboot of SAP’s strategy is working out

The pandemic wasn't kind to the company. But the way it's working with the major COVID-19 vaccine makers is a model for what comes next.

How Christian Klein’s reboot of SAP’s strategy is working out

Christian Klein became SAP's sole CEO in April.

Photo: Picture Alliance/Getty Images

Christian Klein took over as SAP's sole CEO in April. It wasn't an ideal time to take the helm of an organization that sells expensive enterprise software.

As the spread of COVID-19 forced corporations everywhere to cut costs, one of the first places they looked was IT budgets. Specifically, companies around the world trimmed spending on back-end products, such as those offered by SAP, many of which still run via on-premise data centers.

But now, with an end to the pandemic in sight, Klein is charting a path toward recovery. Central to his strategy is for SAP to become even more of a key tech vendor for the world's most complex companies, analysts say. That means doubling down on industries that are already robust SAP customers, such as manufacturing and automotive, as well as convincing them to pivot to use SAP products in the cloud.

"We have always been the leading on-premise application platform," Klein told Wall Street analysts earlier this year. "Our intention is to repeat that for the cloud."

Those sorts of sectors would be ideal clients for SAP because they run very data-heavy operations. SAP's enterprise resource planning software helps track those processes and, perhaps more importantly, allows the stored information to be more easily accessible across the enterprise.

And by transitioning to the cloud-based products, SAP has the opportunity to deepen its relationships with existing customers. For one, clients switch from paying large upfront costs to monthly installments. That's an increasingly attractive model for organizations because it becomes easier to scale up or down based on demand. As that adoption grows, it could also increase the likelihood that corporations will pile on additional cloud-based SAP applications, ultimately helping the provider achieve its vision of underpinning all operations across the enterprise.

"[With] asset-intensive organizations, it's important to be able to manage the end-to-end processes. And that is something that SAP has focused on," said Paul Saunders, a senior research director at Gartner.

That strategy is apparent in the company's work with the life sciences industry. Moderna, which hopes to start distributing its COVID-19 vaccine this year, uses SAP's ERP software known as S/4HANA. That's enabled Moderna to "improve the quality of drugs being produced," according to a synopsis of the partnership from SAP. And Moderna is deploying other solutions on top of the core ERP, like a program that will help the company prevent counterfeit vaccines. Similar tools are in use at AstraZeneca, Johnson & Johnson, Sanofi, GlaxoSmithKline and Pfizer — pharmaceutical companies working on COVID-19 vaccines — according to publicly available information.

"When you look at what is just happening out there on the vaccine side, there we are almost supporting every manufacturing, every logistic provider," Klein said at a recent Wells Fargo conference.

That all serves to demonstrate how, despite its most recent struggles, SAP remains a powerhouse in the enterprise software industry.

But it's not to say Klein's onto a sure thing: For many of these companies and others, SAP is just one of a slew of vendors currently in use. Enterprises are also reimagining how they use their ERP systems, according to Deloitte, and shifting more non-critical business functions to other third-party applications to reduce legacy IT debt — a phenomenon that could ding SAP in the long run. Some companies, for example, may seek to take software that helps manage the human resource function off of the ERP and run it separately.

And despite being a market leader in ERP software, SAP isn't without competition. Oracle remains a key rival, and its founder Larry Ellison has alluded to a more fierce competition ahead in the cloud. He even told analysts during a recent earnings call that Oracle would soon announce a slate of large-scale customers it stole from SAP.

"Oracle is the clear market leader in cloud ERP," Ellison declared on a call with Wall Street analysts earlier this month. That "will become even more obvious when we announce that several major large-scale SAP ERP customers are leaving," he added. Still, that's a promise Ellison also made last year, and one which has yet to materialize — at least publicly. An Oracle spokesperson declined to comment.

Despite the challenges, SAP's overall sales grew slightly to nearly $20 billion In the first nine months of 2020. But while for Klein the recovery is a long-term vision, his plan hasn't exactly been embraced by investors. Following a statement in late October that outlined a two-year delay in reaching prior revenue targets, SAP's stock dropped 22% — a fall it has yet to recover from.

Underpinning vaccine development

Even so, a deeper look at how SAP is deployed across top vaccine-makers shows why it's hard to count the software giant and its CEO's vision out entirely.

Companies typically want to remain quiet when it pertains to an ongoing initiative as critical as eradicating a virus that led to a global pandemic. True to form, spokespersons for Moderna, AstraZeneca, J&J, Pfizer, GSK and Sanofi did not respond to a request for comment about how they use SAP products for this article. But many of the objectives previously outlined by executives at those firms in adopting the company's technology align with the goal of now quickly developing and producing a vaccine.

GSK, for example, has over 90% of its pharmaceutical and vaccine businesses running on SAP's ERP system. The global deployment enables the UK-based manufacturer to better "leverage the significant amounts of data" it collects and develop insights from that information to improve operations, former technology product manager Jonny Dent said during a February webinar.

On top of that software, GSK also uses Ariba, SAP's procurement manager, to improve how the company works with its many suppliers and contract manufacturers — the same ones that could be tasked with helping to mass-produce a vaccine.

"We're a SAP house through-and-through," Dent told participants at the time.

At Sanofi, the French drugmaker opted to implement S/4HANA in 2017. The software initially went live in several pilot countries in 2018 in Europe before the company deployed it more broadly earlier this year. One of the goals of the pivot was to consolidate the 10 disparate ERP platforms that Sanofi had as a result of over 300 acquisitions since its founding in 1999, according to a promotional video posted by SAP. Now, the company says information can be more easily accessed by individuals across different business units.

AstraZeneca uses SAP's Work Manager software to better oversee its manufacturing equipment. The tool effectively allows factory workers to more closely track their performance on the floor to help managers determine when machines may be close to breaking down. One exec previously said it led to a "6[%] to 8% increase in efficiency." Such an application could play a role in ensuring the production of a vaccine doesn't run into any major hiccups.

And J&J employs Ariba to help it partner with more diverse suppliers. Overall, roughly 80% of J&J's spend runs through Ariba, totaling more than 250,000 purchase orders as of February 2018.

So as SAP aims to become an end-to-end partner for key industries, its work with Moderna, GSK and other pharmaceutical companies will serve as a model for how it should try to insert itself in other sectors. Now Klein just needs to make sure that happens.

Power

Yes, GameStop is a content moderation issue for Reddit

The same tools that can be used to build mass movements can be used by bad actors to manipulate the masses later on. Consider Reddit warned.

WallStreetBets' behavior may not be illegal. But that doesn't mean it's not a problem for Reddit.

Image: Omar Marques/Getty Images

The Redditors who are driving up the cost of GameStop stock just to pwn the hedge funds that bet on its demise may not be breaking the law. But this show of force by the subreddit r/WallStreetBets still represents a new and uncharted front in the evolution of content moderation on social media platforms.

In a statement to Protocol, a Reddit spokesperson said the company's site-wide policies "prohibit posting illegal content or soliciting or facilitating illegal transactions. We will review and cooperate with valid law enforcement investigations or actions as needed."

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Issie Lapowsky
Issie Lapowsky (@issielapowsky) is a senior reporter at Protocol, covering the intersection of technology, politics, and national affairs. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University’s Center for Publishing on how tech giants have affected publishing. Email Issie.
Power

In California, machines could determine where vaccines go

A firm called Macro-eyes is using machine learning to predict which of California's community health centers are equipped to handle the vaccine.

With data on vaccine preparedness in community health centers scarce, Direct Relief is turning to machine learning firm Macro-eyes for help "predicting the present."

Photo: Province of British Columbia/Flickr

Andrew Schroeder has been trying for a while now to figure out which of California's community health centers are equipped to handle and distribute the COVID-19 vaccine. These are the places that serve California's poorest people — more than 7 million of them, to be exact — and, as vice president of research and analysis for the humanitarian aid organization Direct Relief, Schroeder wants to make sure they're ready for the vaccine as more supply becomes available.

So, working with the California Primary Care Association, he recently sent a survey around to the organizations that manage some 1,370 federally qualified healthcare centers in the state, asking questions about their power sources, their refrigeration capabilities and their staffing. In the end, the survey yielded data on just 106 sites — less than 8% of the total.

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Issie Lapowsky
Issie Lapowsky (@issielapowsky) is a senior reporter at Protocol, covering the intersection of technology, politics, and national affairs. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University’s Center for Publishing on how tech giants have affected publishing. Email Issie.
Protocol | Enterprise

SAP unveiled a big sales promo. It's a bid to juice cloud customer numbers.

The move is the culmination of CEO Christian Klein's efforts to turn around the German software giant.

SAP unveiled "RISE with SAP" on Wednesday.

Image: SAP

SAP CEO Christian Klein is trying out a major sales gambit in his attempt to get more customers onboard the software giant's signature cloud platform.

A new offer unveiled on Wednesday called "RISE with SAP" bundles together several products, including the flagship S/4 HANA platform, under one contract with a flat cost, a promotion that the company is hoping will encourage more users to more quickly switch from the on-premise services that dominated the company's product line until the last few years.

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Joe Williams

Joe Williams is a senior reporter at Protocol covering enterprise software, including industry giants like Salesforce, Microsoft, IBM and Oracle. He previously covered emerging technology for Business Insider. Joe can be reached at JWilliams@Protocol.com. To share information confidentially, he can also be contacted on a non-work device via Signal (+1-309-265-6120) or JPW53189@protonmail.com.

Protocol | China

More women are joining China's tech elite, but 'Wolf Culture' isn't going away

It turns out getting rid of misogyny in Chinese tech isn't just a numbers game.

Chinese tech companies that claim to value female empowerment may act differently behind closed doors.

Photo: Qilai Shen/Getty Images

A woman we'll call Fan had heard about the men of Alibaba before she joined its high-profile affiliate about three years ago. Some of them were "greasy," she said, to use a Chinese term often describing middle-aged men with poor boundaries. Fan tells Protocol that lewd conversations were omnipresent at team meetings and private events, and even women would feel compelled to crack off-color jokes in front of the men. Some male supervisors treated younger female colleagues like personal assistants.

Within six months, despite the cachet the lucrative job carried, Fan wanted to quit.

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Shen Lu

Shen Lu is a Reporter with Protocol | China. She has spent six years covering China from inside and outside its borders. Previously, she was a fellow at Asia Society's ChinaFile and a Beijing-based producer for CNN. Her writing has appeared in Foreign Policy, The New York Times and POLITICO, among other publications. Shen Lu is a founding member of Chinese Storytellers, a community serving and elevating Chinese professionals in the global media industry.

Protocol | Enterprise

Inside Christian Klein’s determined bid to remake SAP

The 40-year-old, first-time CEO has a tough road ahead of him in turning around the nearly 50-year-old vendor.

Christian Klein became SAP's sole CEO in April.
Photo: Picture Alliance/Getty Images

On April 19, the day before SAP announced that Christian Klein would take over as sole CEO of the German software giant, his wife joked that she was going into labor with their second child.

That joke became a reality at 2 a.m. the next day.

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Joe Williams

Joe Williams is a senior reporter at Protocol covering enterprise software, including industry giants like Salesforce, Microsoft, IBM and Oracle. He previously covered emerging technology for Business Insider. Joe can be reached at JWilliams@Protocol.com. To share information confidentially, he can also be contacted on a non-work device via Signal (+1-309-265-6120) or JPW53189@protonmail.com.

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