For SAP solutions partners, it has always been critical to understand SAP’s overall strategic initiatives so as to align your value-added messaging while also differentiating your capabilities, and maximizing your revenue potential. Threading this needle has never been more important than during SAP’s current all out push to migrate all future business to cloud deployments. Overall, SAP’s push for moving everything to the cloud presents both challenges and opportunities for its value-added partners and system integrators. Success in this new landscape will require adaptability, innovation, and a customer-centric approach.

Some of the key considerations include:

  1. Shift in Business Model: Traditional SAP partners and SIs accustomed to on-premises deployments will need to adapt their business models to focus more on cloud-based solutions. This might involve retraining staff, developing new service offerings, and adjusting pricing structures to align with cloud-based subscription models.
  2. New Opportunities: The cloud offers new opportunities for SAP partners to provide value-added services such as cloud migration, integration with other cloud platforms, and customization of cloud-based SAP solutions. Partners with expertise in cloud technologies may find themselves in high demand as SAP customers look to modernize their systems.
  3. Revenue Impact: The transition to cloud-based solutions may initially disrupt revenue streams for some SAP partners, especially those heavily reliant on on-premises software sales and implementation services. However, over the long term, cloud-based solutions often offer opportunities for recurring revenue through subscription-based models and ongoing support services.
  4. Expanded Ecosystem: SAP’s cloud push may lead to the expansion of its partner ecosystem, as new partners with expertise in cloud technologies and services come on board. This could create opportunities for collaboration and specialization within the ecosystem, with different partners focusing on specific industries, regions, or aspects of cloud deployment.
  5. Increased Competition: As more partners enter the cloud space, competition may intensify, particularly among smaller boutique firms and larger global consultancies. Partners will need to differentiate themselves by demonstrating deep industry knowledge, technical expertise, and a track record of successful cloud implementations.
  6. Focus on Customer Success: With cloud-based solutions, there is often a greater emphasis on customer success and satisfaction, as customers have the option to switch providers more easily than with on-premises deployments. SAP partners that prioritize customer success, provide exceptional service, and deliver measurable business outcomes are likely to thrive in the cloud era.

The shift to cloud-based solutions by SAP will impact the revenues of partners who primarily sell SAP licenses in several ways:

  1. Transition to Subscription-Based Models: With the move to the cloud, SAP is increasingly offering its software on a subscription basis rather than through traditional perpetual licensing. Partners accustomed to selling perpetual licenses may experience a shift in revenue streams from one-time license fees to recurring subscription revenue. While this can lead to more predictable revenue over time, it may necessitate adjustments to cash flow management and sales strategies.
  2. Changes in Sales Cycles and Compensation: Cloud-based subscription models often have shorter sales cycles compared to traditional perpetual licensing, as customers can rapidly provision and deploy cloud solutions. This can impact the sales processes and compensation structures for partners, who may need to adapt to shorter deal cycles and commission structures based on recurring revenue streams rather than one-time sales.
  3. Impact on Upfront Revenue: Selling perpetual licenses typically generates significant upfront revenue for partners, whereas cloud subscriptions typically result in recurring revenue spread out over the duration of the subscription term. This shift may initially impact partners’ cash flow and financial planning, particularly if they rely heavily on upfront revenue to fund operations and growth.
  4. Opportunities for Value-Added Services: While selling licenses has traditionally been a core revenue stream for SAP partners, the shift to the cloud opens up opportunities for partners to provide value-added services such as cloud migration, integration, customization, and ongoing support. Partners who can successfully transition from a focus on license sales to providing comprehensive cloud solutions and services may be able to offset any potential declines in license revenue.
  5. Competitive Landscape: As SAP and its partners transition to cloud-based subscription models, the competitive landscape may shift. Partners will need to differentiate themselves by offering unique value propositions, specialized expertise, and superior customer service to maintain their competitive edge in the market.

Understanding SAP RISE and GROW Initiatives

The GROW and RISE initiatives both grew out of SAP’s emphasis on helping customers migrate to more efficient, scalable and cost effective cloud deployments. Based on an understanding of the different starting points for companies that have been using SAP on-premise vs those that are new to SAP,  the RISE and GROW options provide distinct roadmaps for customer success.

For new companies that need standardized processes, want to always be at the latest release, and prefer their cloud provider to manage their infrastructure, GROW with SAP offers a seamless Greenfield deployment path to SAP S/4HANA Cloud public edition.

On the other hand, for companies using SAP on-premise that require a high degree of customization and control over their deployment environment, SAP S/4HANA Cloud private edition provides the power of cloud with the ability to adapt to each company’s specific needs. In these situations, RISE with SAP enables a customizable forward path for either Greenfield or Brownfield deployment scenarios. RISE also is best for companies that want to run a hybrid, two-tier, cloud environment using both public and private cloud editions for different functions.

For partners, aligning with GROW offers opportunities for bringing in clients that are new to the SAP ecosystem and ramping them up quickly on SAP Public Cloud.  However lack of upfront revenue and relatively slim margins for ongoing consulting means partners will need to hone their business models for faster sales cycles, lower cost of sales, and focusing on delivering and supporting higher volumes of lower margin deals.

Conversely, aligning with RISE to help installed base clients transition customized applications to SAP Private or Public Cloud can offer opportunities for deeper consulting engagements with higher revenues and margins. However, with SAP guiding most clients toward GROW and Public Cloud, the number of RISE opportunities is likely to be fewer.

Summary

Overall, the impact of SAP’s push for cloud-based solutions on partners who sell SAP licenses will depend on their ability to adapt to the changing market dynamics, diversify their revenue streams, and capitalize on new opportunities in the cloud ecosystem. While there may be short-term challenges associated with the transition, partners who embrace the shift to the cloud and invest in building expertise in cloud technologies and services are likely to thrive in the long run.

The bottom line in any case, is SAP Partners need to carefully carve out their targeted business opportunities and then tailor the marketing and sales programs to align with the audiences, deal volumes, margins and sales engagement processes needed to succeed.

Learn more about how Resource Boxe can help SAP Partners succeed.

Jim Hunt

Jim Hunt

Jim has executive level experience on both the client and agency sides, with deep skills in strategic business positioning along with creation of hundreds of targeted content pieces. There’s nothing he likes more than mapping out the intersection of new disruptive technologies and their optimal market positioning.