In 2008, I attended my first SAPinsider (as it was called back then), which happened to be at the same location as it was this year - the Swan and Dolphin Orlando. Over the years, much has changed with SAP’s supply chain offerings and yet much has stayed the same.
Ten years ago, SAP was the market-share leader across the Fortune 1,000 for industrial ERP; surpassing best of breed solutions like i2 and Manugistics for SCM, and investing in BI companies like Business Objects. Since that time this market supremacy has still not been challenged. In 2008, SAP was also beginning to pursue a strategy it now calls the Digital Supply Chain – but it didn’t go by that name.
We can now see that the investments, including developments and acquisitions across procurement, engineering, manufacturing, supply chain, human capital management, and customer relationship management allow SAP to make credible claims to offer an Extended Digital Supply Chain solution that competes with best of breed providers in these areas.
In more recent years, SAP has begun pushing its supply chain offering all the way to the end consumer, not just in B2B scenarios. This new consumer-focus has supported SAP’s differentiation from other traditional ERP vendors. It has also supported many of SAP’s customer's recent focus on Digital Transformation and strategic visions like Industry 4.0 and Smart Manufacturing.
SAP Leonardo Launch: Platform of Platforms
Hans Thalbauer, SVP Digital Supply Chain and IoT, gave the extended supply chain keynote again this year. His talk was largely a continuation of the latest trends from SAP over the past several years, including a focus on the consumer and Digital.
The most notable new content from this year’s event was SAP Leonardo. This was the first major supply chain event since Leonardo was announced as SAP’s IoT Platform and Portfolio, which was first shared with LNS in a November 2016 pre-briefing, and the new branding was not lost on the event or keynote.
For those struggling to keep up with new SAP products, brands, and announcements – here are the cliff notes:
- SAP HANA was originally launched in 2010 as an in-memory database platform.
- Over time, the set of capabilities covered by the HANA brand grew to include both Cloud and IoT.
- With the launch of SAP Leonardo, these have been separated out with different brand names.
- Cloud offerings are now simply known as the SAP Cloud Platform.
- IoT offerings are now simply known as SAP Leonardo.
- SAP HANA now refers to in-memory, analytics, and application development capabilities.
- SAP S/4HANA refers to the Digital Core of ERP applications running on HANA.
Leonardo is not just a new brand and product portfolio. It also represents an internal reorganization, which now includes the IoT platform success as part of Thalbauer’s responsibility, not just digital supply chain applications.
LNS Research believes this is the right organizational structure for SAP and other organizations would benefit from taking a similar approach. The relationship between applications and the platform is symbiotic, one without the other will struggle to deliver customer value.
This new structure and offering allows SAP to change the scope of the discussion in the evolution of the IIoT ecosystem. With SAP Leonardo, SAP is making a play to be the IIoT Platform of Platforms across the digital supply chain. Meaning customers can have the flexibility to move plant, asset, fleet, product, and customer data directly to Leonardo (through a variety of offerings and partnerships) or to other IIoT Platforms which can then also connect to Leonardo.
There are several compelling reasons that may make this the right architectural approach for industrial companies. First, SAP is the system of record for financials and often is the primary system driving business processes. Meaning, if companies want to create mashup applications that are aligned with the financial performance of the company, SAP must be at least included if not the primary platform. Second, many of the other companies offering IIoT platforms also have equipment or automation business that hampers these organizations to be truly open.
Of course, many of these same providers have their own strengths and positioning, often including the domain expertise and plant floor credibility that SAP still lacks.
The Maturation of the IIoT Ecosystem
In the third industrial revolution, there was massive adoption of both ERP and Automation systems with clearly defined delineations separating the two. In both cases, this created architectural and organizational challenges, including heterogeneous environments, limited integration, and cultural issues now known as IT-OT convergence (or divergence…)
In the fourth industrial revolution, it is still unclear if these same battle lines (data silos) will be recreated in the Cloud with the IIoT, or if one (or a few) truly open IIoT platforms will emerge that allow for the open flow of information and enablement of mash-up applications.
When viewed through this lens, SAP is one of the companies best positioned to create a truly open IIoT platform. Although it still unclear how many of the other vendors in the IIoT ecosystem will play nicely with SAP. OSIsoft is one company that was an early partner with SAP for the IIoT and is happy to flow time series data up to SAP and provide with this data context. Others major players may follow suit, but announcements are still yet to come.
It is also worth noting, a platform-of-platform approach to the IIoT may also encourage the proliferation of other platforms, which ultimately could drive a proliferation of additional IIoT platforms. In the long run, a proliferation of platforms will diminish the value of all platforms and is no better than any other technology stack proliferation. Although it is unlikely one platform will be able to support all business requirements, the fewer the better.
Finally, openness will be a key to the ultimate success of the IIoT ecosystem. Many companies want to say they are open, but openness may not benefit all. It clearly benefits the end users, and it also benefits the IIoT Platform vendors that own the customer relationship. Other IIoT ecosystem players who provide data and context, may or may not see a benefit from being open. And if they don’t see a benefit from being open, it is a lot easier to stay closed; which is the major risk to the entire success of the ecosystem.