Navigating Digital Transformation and AI with SAP

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all right welcome to another episode of the CTO advisor podcast and we'll publish at least a portion of this my all of it in video you know what the and now that I have access to all of future I have this really unique capability now to bring in super interesting guests this week's guest Diane Heathcliff Diane this is what your third week third week at the internal group yep and you lead our CIO practice first introduce the audience to you because I don't think you've ever

been on the podcast we've known each other years now but you've never been on the bike yeah yeah so I've known you Keith for a long time but I've done a lot of work in the IT industry I've been in the industry 30 years I'm an ex-practitioner so I built really big systems been chief architect for a couple of very large organizations delivering very very difficult things I know the buy side the delivery side real well but right now I focus really at the CIO level

IT strategy digital transformation everything from budgets to innovation and because the chief information officer is becoming the chief innovation officer and so that's really what I'm working with to build the future MCIO community and so great to be on the show Keith thanks well I'm honored to one have you on a show and it to more most importantly when I get with that you might be working with the seat with the future group the CIO practice within the seat future group I got really excited there's

nothing like respect and I think the audience will see that was we do a recap one of your first events or rather your first event with the future group covering the future group was SAP Sapphire we both I believe met each other at Sapphire many moons ago and the message the message from Sapphire has been consistent in an aspect of like what where they want to go the technology has shifted a bit and of course AI has kind of thrown a wrinkle in all of this

I'd love to get your insights from a CIO perspective and then as a CTO advisor I would follow that up with kind of what will it take to get there so what the strategy and what you heard from a strategic perspective and then what I heard from a technology perspective to meet that strategy yeah absolutely Keith so yeah SAP had a very interesting show because the world has changed as you know Keith AI is on the CIO agenda CIO is getting a lot of pressure from

the board to do something a competitive significance you know they don't put AI in the core of their business that the competition will maybe new digital gazelle will and just and eat their lunch and they see that as a threat and that's that's a board level of responsibility and so they're breathing hot and heavy on the CIO and SAP knows this and so the message very clearly you know and it was a Christian Klein show for sure you know he came out in the beginning and

really immediately jumped into AI here's all the use cases here is we have two things that we're doing we're putting AI into all of our products we're enabling specific use cases and we built this this intergalactic ecosystem of strategic partners who are going to build best-of-breed SAP implementations of AI use cases so everything from you know maintenance to customer service and presumably marketing they said they're really focusing by the end of the year to get ten really juicy you know high-value use cases in each business

domain that they serve at each main business domain so about a hundred really move the needle use cases and these are from you know big partners like Accenture and Deloitte and things like that they had a who's who list up on the stage and that was the primary message and and so one is putting AI throughout their product and the other one is they've got a co-pilot that is an expert on ERP and building an own model around this so they were really coy about what's

going to be in that model as opt-in and so the customers can train it on their data so that it is really relevant to them but it's an opt-in thing they don't make you do it and it talks to Microsoft's co-pilot so there's still only one co-pilot so that was the other really big message it's called jewel and so the like the energy unit not like the the gem right so but I think that's supposed to play you know a dual kind of a dual plan

words if you will and and so there are many more announcements but that was the lead-up in the very beginning Christian Klein came out so if you're doing you need to do AI SAP is going to deliver it for you and that was they just beat everybody over the head for that and rightfully I think the audience was expecting that so so that was that was my impression we can go into a lot of the other announcements I'd love to hear but what you thought about

from a practical standpoint what's this kind of mean for for customers at that as you have to actually implement this yeah so you know it if you're been around the SAP ERP space for a while you know that these large ERP companies especially SAP has been pushing their user base to the cloud I remember managing SAP way back in 2015 to 2017 basically or 2014 to 2017 practically and that whole time period SAP was pressuring us to move our SAP operations to the cloud but there

was very little business value back then it was understood like why they would want us to move to the cloud from their perspective but from a customer perspective I didn't understand it or I didn't buy the reasoning today AI you know you you know this from a CIO perspective we don't want to do these projects on-premises if we can avoid we got enough challenges from a infrastructure perspective managing the infrastructure around traditional technologies cloud technologies AI is yet another technology to manage and the push to

cloud makes a little bit more sense the challenge and every CIO CTO knows this this is not a technology problem in itself it is absolutely a people and process challenge in order to get to the cloud getting to that clean core which is what we heard a lot this this we've heard it previous Sapphires getting to that clean core where we're not using customizations and preventing the move to the cloud that was the biggest barrier that I heard to getting to that vision we can talk

about the specifics around the advantages and some of the opportunities and challenges around specific features within AI but AI being what I walked away thinking wow this is the first time the SAP has had a compelling stick and carrot to get people moved from on-premises instances of SAP s4 or or previous versions of SAP to the latest version and not just the latest version the latest version in the cloud well I thought I like the clean core messaging too and they were very clear about that

that that is if you want to be able to move fast with SAP you better get a clean core that's the approach and I asked their SAP customers what they may give me special access to a few of them and I asked them about clean core and they're all signed up for it but but Keith here's what I really want to know from you so you know I'm an SAP customer I let's say I buy in that AI is gonna save me a bunch of money

in customer service and doing predictive maintenance in my factory I like these use cases and now I'm running AI all the time all day long operationally that's gonna take a lot of compute power you know doing inference requires access to a lot of GPUs and my research is showing that it doesn't always make sense if you have a lot of very hot always on a high-intensity you know HPC style workload HPC meaning high-performance computing and you're running AI all day long this public cloud really make

sense I know SAP is actually not pushing both sides I got grow and rise both you know to say I will you know you want in prem will give it to you that you want public cloud will give it to you you're covered either way but in practical terms what does it mean Keith our company's gonna run these workloads and do it affordably yeah that's an insightful question and I think one of the challenges challenging questions is and this is not just across SAP you know

if we're talking about SAP adjacent and competitors Salesforce and every SAS offering that national needs to have a some type of AI K interesting capability and being able to get close to your data you know all of the big equipment OEMs will tell you this is the opportunity for them to shine for you to put your equipment in a colo or somewhere close to the cloud so that you can optimize for not just cost because cost is a legitimate concern as you mentioned capability is a

legitimate concern across the the different data sets but also latency of data like if your data is sitting in Salesforce in the Salesforce cloud if your data is sitting in on-prem in flat files in your NAT traditional NAT services in SAP in the cloud that latency matter and that's ability to get to business intelligence the value what Dale will call though borrowed Dale's term the AI factory getting from your data to intelligence all of this is concerned so from an enterprise architect head as I look

at the data where my data resides where I need to put the AI closest to the data in order to get those results these challenges come to mind so rise becomes kind of the opportunity for a technology perspective to say hey how do I put my data close to the how do I put my AI close to the data and get the value out of it with worthwhile controlling cost SAP was like on that messaging on what how to get AI close to the data sets

and rise and to and what that cost model will look like so I'm anxious to kind of understand that hybrid approach I agree they were not explicit about what the costs were going to be they were saying some of the right things like you you know I heard you know them saying in private sessions that we had that were not NDA that you know if you're not going to use a model that cost $8 to answer a question when you can use an AI model that

cost two cents to generate an answer right so it was they're making sense about that but didn't clear about how they're going to deliver it to the customer and so I like the AI messaging and in terms of their they're showing that they are investing at a world-class level at you know a top-tier vendor level they're investing enough to be able to deliver AI strategically for large swaths of the business they're not covering everything you know I think you know I think they are going to

get the customer experience the ISAP does have a customer experience product and they talked about marketing and some customer care and things like that but you know when they talk about finance and they're talking about you know factories you know that's where SAP has a credibility I expect that they are going to deliver the values for their customer it's clear they're very committed in that they've oriented the whole company around it but that wasn't the only message that they had for by any means you know

at you know they've really been talking about as well a lot of strategic collaboration because they can't everything's now built with everything these days and we're all building on the shoulders of giants so they had like the new CEO of AWS up there that was a big proof point he came up up early in that in that keynote you know Garmin who said you know they really committed how they're they're gonna bring the Graviton chips to to bear so that that special sauce because Graviton that's

something that AWS is not selling they're only renting it to the market you cannot get a Graviton chip as you well know Keith but then they had Meta and they had Mistral up there Nvidia they had the course the CEO of Nvidia come in call call in some from Taiwan and they say the SAP basically runs their supply chain and they're you know they basically he was he was saying that they brought almost the entire capabilities of Taiwan Nvidia has to bear on the AI problem

but all of that is being run by SAP it that was compelling and that got a that got an almost standing ovation it's the show how you know not only is SAP delivering on AI for their customers but they're enabling the AI revolution itself right so all those I think came across really really well really good but now the delivery parts coming and that's I think this is these questions you now are having about how do they actually do it you know how are they gonna

make this cost-effective yeah and this is one of the things that they've I want to say stumbled on in the past the messaging around cloud and partnerships you know you could go all the way to back when they partnered with what became a subsidiary of EMC and all the way through the start and stops with the previous cloud providers I don't get the sense that SAP believes that they can go at this alone anymore the you know before I thought they really wanted to control cloud

not just from a architectural design perspective but from a relationship perspective they knew they know the value of the relationship SAP has had the challenge that once the solution is deployed they lose that relationship with the spots with that initial sponsor the person that drives the strategic value as a CTO or as an architect SAP can come to me all day and talk to me about the value of clean core okay yeah I get it that's awesome I want to do it but if I can't

get the business to come along with that journey with me because that requires transformation this was a conference about transformation if you know if I had to wrap it up in one word it was transformation technology process people all wrapped up in the bubble of AI and getting to AI and SAP as an organization what I heard with those partnerships was a transformation which was we're going to play nicer with AWS with you know what was the last time they had a hardware vendor at all

on stage as a two-year you know that that's the thing that that the the solutions provider provides what are where it's going to run on to have NVIDIA on stage was a huge deal well and it shows you how important chips are are critical again because getting the compute to do AI and doing it cost-effectively is really becoming one of the major challenges but Keith I'd be curious to know also your standpoint I'm a big proponent of low code I think I'm not I don't even

just think I now have evidence I collect because I collect it that CIOs are now looking at low code as a way of of catching up and doing digital transformation much faster SAP actually cited a number I can't remember off the top of my head what it was saying that most business processes are going to get touched this year to have AI added or otherwise transformed and we see things like SAP build SAP integration suite and then they had showing up there that's their co-pilot AI

modifying SAP processes in a very low code fashion it was it was really impressive and in creating new integrations they were demonstrating this in keynotes I couldn't tell if they were live I mean they looked real but yeah you know this is this is the holy grail this is what people need to transform fast and that was the message you heard over and over again if you're gonna touch all of your processes soon because you have to add AI to them and a bunch of other

things you need to integrate everything the jewel is gonna help you do it we're saving two hours per SAP developer per day using jewel now developing going forward I thought that was an interesting proof point and that pays for that will pay for it if I do a back-of-the-envelope computation that will pay for jewel most likely just by itself but if the the question I have is how fast now can users really get this can CIOs get this to market because I'll tell you the dirty

secret Keith is a clean core is great but that most of their customers didn't start with that approach so they still have this big tangled mess everyone going forward new customers are sitting pretty because their customizations are compartmentalized but the reality is I talked to CIOs and there are two three four five versions behind an SAP because they have all their customizations mixed in with the core and so I don't know it's great to talk about these things they were really important announcements on my worries

still it will take years for most customers to do this yeah so if you look at the common problem between CIO CTOs resources yeah where are the people that need to take the business logic and convert that into some type of application or technology that is the problem I can go out and hire a hundred developers but if these developers don't know my business I am going to create more friction than I do potentially capability there's gonna sit there even the year or two learning their

business before they get anything useful done right yeah I've been an ideal world I have these Excel superstars who are just their line of business users who learned how to use Excel out of an necessity to do their business process whether it's Excel smart sheet or some adjacent technology that sits around SAP they built business process on top and around of SAP so you add customizations to that and now you have turtles all the way down you know I have I've built this process using third-party

tool in my department that is based off a customization within SAP and now you want to go to a clean poor take away that customization from me and now my business process is broke on two levels one I might have to change my business process then to this customization that I built within my department now has to change where is the resource to help me make that change this is the promise of Jewel right that they're hoping is Jules gonna be able to dig people out

of that hole then is that you know and we've seen some evidence of this in traditional Python Rust goal in other languages folks who are not application developers they're process experts being able to talk to these co-pilots ask for cold and cold is spit out they gave a demo of about cold being generated via jewel I'm like whoa s doesn't carry to give a business user access to SAP's core programming language to keep the create customizations but that's the need right we need process experts who

have low friction access to tell the system what they want from a from a business outcome perspective and then that to be just generate well and I do bring up a very good point so where does those system process experts come from I believe SAP is hoping that customers are going to opt-in let jewel get trained up on on their entire code base and then be able to make modifications based on that I mean I'm virtually certain that's what their plan is and say you've got

it you've got a train you've got do the opt-in process and then you'll move at light speed because jewel can just write all you know all the change orders whatever change orders come on down you can take it you literally give it copy and paste the change order into jewel and it will generate the changes that's you know that's revolutionary and if organizations can get there if jewel can be used to move people to clean core so they can start it you know deconflicting that that

those those you know those problems because I'll tell you that here's the issue keep is a lot of CIOs are still versions and versions behind they can't run all this new stuff because they've got everything hardwired together into a giant you know diet spaghetti code you know speedy code base and so you know could you imagine as a CIO could you imagine being you know on you know pre Han yes man I'm doing I remember that all the time yes you all the time just pre

Han I'm not talking about you know r4 or I mean yeah r4 or you can be even before that in the r3 some some customers might yeah there's a couple I know of a couple yes and one of their you know board level folks went to Sapphire thinking wow I've SAP had one of their board members kind of advocating for this board level change and you're a CIO and that board member comes to you that said all of this that I saw at at Sapphire that's

exactly what I want Diane to go out and make it happen that would be a nightmare scenario yep and that's where the where I advise CIOs to to to try and plant the seed ahead of time say you're gonna see a bunch of stuff at Sapphire we've been asking you for 50 million dollars to get into a modern version of SAP that has the ability to really help me do and keep me on the clean core you know so beware that there is a cost of

entry and that's because that that's that's the reality is technical debt is pretty high and and one of the things SAP did is always been good at but they were very good at this at Sapphire was they had lots of customers up on stage singing the praises of how fast they could implement SAP or how fast they could migrate or whatever and that was great but there was there was really a shortage of clean core examples I think they had one one customer up there expanding

it the problem is is that approach is just it's too new for most CIOs and I would say many CIOs are not yet there to the point where they can get that so that's the gap in SAP has to close they're running a lot of checks that people want to cash but a lot of people just aren't there on the place that within their in their enterprise technical debt bank account to do it to get the actual all the stuff are so Diane it was great

having you on I'd be remiss without saying that I've gone through the clean core experience moving from multiple instances of SAP Global at SAP V2 consolidated down to a single instance in a single this is clean core wonderful outcome but the pain of getting there and that's 50 million dollar number for a V I'm this is a t-shirt size low so the network the size of a V that's a you know that's just a low so it varies for comp but that's a middle of the

road number I agree without that without the without the number just though I can't I can't understress the amount of work and just attention that this needs from your staff like this is a all-hands-on-deck we're putting almost every other project related to the business on hold as we do this because that asked from a partnership between IT in the business line teams is not small it is tremendous and that for me is more was was the greater learning than the technology journey itself it was absolutely

it had to it they had to have more level buying in for what is because of the dollars and here's that here's the dirty secret Keith if the number average number of ERP systems that a fortune 500 company has as risen from an average of eight per company to 20 that's did I collect because they're acquiring companies and they can't integrate them as fast as they acquire them it takes take years to justify that that to integrate an acquired company so they're all in one standard

ERP king and so I know one sports manufacturer who's acquired all these little companies he's got 33 ERP systems he's never I don't know what he's gonna do and so remember this is not this is not a question of platform versus platform it can be the same platform SAP yeah not clean core SAP clean you still got integrated it takes work you got to integrate them that is it is and it is a good challenge in this why folks like us exist Diane thank you so

much for joining the podcast I am so it was thrilled that you invited me I think so much yeah we're gonna do a lot more of these of you know CIO CTO lenses and this is just the first and I think it's probably the perfect example of the partnership yep totally agree thanks so much all right if you want to know more about the future group you can find us on the web the future group dot well future group calm we're the future group on X

not confusing at all if you want to learn more about me I'm on X at CTO advisor and I still run the CTO advisor comm which is where you get the more technical content versus the future group Diane you're pretty active on X yeah I am you can find me at D Hinchcliffe which I am everywhere on all social channels and and elsewhere so looking forward to getting this out and I love to spark discussion in the industry about these topics this is this is well

it's front and center right now all right we spent a little extra time on this episode but I think it was worth it because this is a heavy topic that a lot of folks are challenged with talk to you next CTO advisor podcast