Live from SAPinsider: Ivo Bauermann on the Digital Imperative

SAPinsider FIN-GRC 2016 keynote speaker Ivo Bauermann, Global Vice President and General Manager, Enterprise Performance Management, SAP, joins SAPinsider Studio at the event to discuss how SAP is helping companies make a digital transformation and run a “live” business. Topics covered include SAP S4/HANA, Central Finance, and Finance’s evolution into a strategic arm of the business.

This is an edited version of the transcript:

Ken Murphy, SAPinsider: Hi this is Ken Murphy with SAPinsider. I am at the SAPinsider FIN-GRC 2016 event in Las Vegas. Today, I’m pleased to be joined by Ivo Bauermann, who is the Global Vice President and General Manager for Enterprise Performance Management, SAP. Ivo is also the keynote speaker at this event. Ivo, thank you for being with us today.

Ivo Bauermann, SAP: Pleasure to be here.

Ken: There’s a lot of buzz these days about companies going digital and the digital enterprise. One of the things you spoke about at yesterday’s keynote was that we’re already there; the economy is already digital and it has created the need for the “Live” business. Can you address to what extent the SAP technology roadmap is (due to) customers telling you about new mandates to be data-driven?

Ivo: Yes, absolutely, it is here. And I think it’s a push and a pull. Yes, the market is telling us that this is where we’re going. In fact, I saw a report where they predict that next year, 2017, 10% of companies will already commercialize their data which is amazing. And not just the Ubers and the Netflix and what we’ve seen and what I talked about in my keynote was that those are the front-runners; but even traditional business. Companies with sensors generating data – you have apparel companies like Under Armour and what they’re doing now is putting sensors in their apparel and becoming more of a health data company, for personal use and maybe for who knows what else – health and insurance companies to track and measure the data for their customers. So, yes, we’re definitely seeing that and that is a pull. Part is also a push. We’re building technology in order to get customers there and I think that’s very important because we see a lot of customers that are maybe taking a wait-and-see stance and what we like to do is show them what is possible – you don’t have to wait, the technology that we have is already there and it’s usable right now. You don’t have to become an Airbnb per se overnight – those are very unique cases. But I think what we have to offer in technology is to show that there are already things possible and you can get started today.

Ken: Speaking about the technology, obviously a big component of that is SAP S/4HANA. What is the significance of SAP S/4HANA Finance being the first module in that new simplified architecture? And maybe address why it’s so important for finance to take the lead in becoming digital?

Ivo: Actually it’s very simple. Everything starts and ends with Finance; when we invest we need Finance, and when we measure achieving our goals financially whether for the company itself or shareholders, it starts with Finance. There are three things we’re seeing in Finance that are critical; one is Finance is taking a more expanded view and becoming more of a business partner to the business. Finance has always played that pivotal role within the organization, but mostly from a financial standpoint. But what we’re doing with S/4HANA and the technology allows Finance to play that bigger role where it can help the business understand their business. So that’s one. Second is Finance transforming from a traditional let’s say data analyst to an information provider. So how can Finance analyze the business from multiple different angles and provide that information and insight? And therefore we’re also seeing the CFO often playing a more critical and pivotal role in a boardroom for example, and advising the CEO on a business direction. Within SAP we see the same thing. There are a lot of Finance people within SAP that take more of an operational and business role; I think it’s a very natural progression. And third, something that we’ve just come to realize is that companies have to adapt to technologies that they use for the next generation of professionals. We’re seeing the millennials now coming into the finance function as well bringing different expectations. That’s why if we look at technology innovation, the need for Finance to drive and help the business get to this new digital economy, plus then the finance professionals themselves looking for new technology, that’s where we saw a very natural focus on Finance first.

Ken: And so how has creating a digital core and the need to act on or create a live business changed the importance of collaboration? Can you address how SAP S/4HANA facilitates that?

Ivo: That’s an interesting question, because it might be the other way around. Maybe the need for collaboration has put the focus on the core – because as I said Finance is expanding their view and if you want to move into more of a digital business one thing that is abundantly clear what we need in order to be able to commercialize that and run a digital, live business – there’s one common theme and that’s analytics. You need to be able to analyze all the data; it doesn’t make any sense to collect and capture all the data and then not be able to analyze it. Now, in order to do that well you need to collaborate. You need to see all the pieces coming together; you need to get an integrated view across the enterprise. So I’d say the collaboration is actually the driver for us to change the core, to make sure that we can support collaboration. If it’s still in functional silos and fragmented and spread out, that collaboration cannot happen and you cannot do the analysis and you can’t run a digital, live company. By reinventing the core, making it faster and bringing all the data together at a more granular level that’s where we’re going to facilitate the collaboration.

Ken: For the company running Suite on HANA or BPC on HANA, why wouldn’t they already have taken that step to create a digital template or start to achieve the digital core? How does S/4HANA and the architecture advance that digital framework?

Ivo: That’s an evolution. I think companies on Suite on HANA and BPC on HANA have already taken the first step in that direction. That is a good first step; to my earlier point what we’re trying to facilitate is evolving into this digital transformation – it doesn’t have to be a big bang. You heard it from New York Life in the keynote – for them it’s a couple years in order to get there but it’s absolutely worthwhile and they can already take steps now. The one thing you don’t want to do is to have inertia. I always recommend and encourage customers to look at that first step. Now what S/4HANA provides in addition to that – and for many customers that could actually be the first step, is that on top of what we do with Suite on HANA to make it faster and simplify the architecture , in addition to that – with S/4HANA Finance what you can do is then bring everything together much faster and run it in maybe putting different instances on HANA, there’s something we call Central Finance which means you can take all the data and replicate it into one central environment. That’s one step, and once you’ve done that that’s where you can start to do interesting things like integrated planning. You have everything in one environment, an expanded view, and you can do integrated planning across all these different functions because all the data is there. Other things you can do is things like a soft close – you’ve brought everything into one single environment that has all the data and it’s fast, you don’t have to wait until month-end to close your books. You can already have a proxy close, if you will, and in retail or a bank it could be day-by-day. Or every week – but it gives the CFO and the business already some insight what the results could be at the end of the month. In short, it’s a first step in that direction for many companies which is fine – they can evolve then into S/4HANA Finance or S/4HANA Finance can be a first step and then they can take other steps into integrated planning, more advanced analytics, soft close and what have you.

Ken: One of the things you closed yesterday’s keynote presentation was with SAP’s “Simple Promise”. To that end, a customer might be wondering what the first steps are. How does SAP help mitigate the barriers to becoming that true digital enterprise?

Ivo: As I said, we realize that it can be a big undertaking. Therefore, in order to get people started, we offer simpler solutions to begin with – like I said with Finance, you don’ t have to do everything at once. You can start smaller and grow into it. Other companies take a much faster step, but I think that’s the benefit of SAP. We have so much experience in so many different industries and companies of so many various sizes that we can find a custom solution – even though it’s standard technology, we can find a custom solution in order for them to get started. And in Finance there are three things we then focus on: One, and I talked about this, is providing instant insight, second is simplify operational processes and third is very simple – going back to what Finance is all about – is to optimize working capital. And that’s where things come into play like where can we do integrated planning to provide that instant insight? Many companies want to do more financial planning and analysis but the majority can’t. Research has shown that 75% of companies cannot spend more than 50% of their time on FP&A. So that’s already taking away one barrier to be able to do that analysis. Second, simplifying operational processes – getting rid of all the reconciliations, let’s get rid of all the manual work that won’t help you get to the digital age for sure. So we can already mitigate that. That’s our expertise; we’ve done that many, many different times. And then last but not least, optimize your working capital. Make sure that you can have a very quick cash cycle because in this digital economy – we talk about the technology, but we’re still living and breathing by cash. So our solutions are also very much focused on making sure that you have a very quick cash cycle, you can make sure that you have excess to supply a network which is where business networks come in , where you can improve your discount rates – we have companies get better discount rates by 50% – so that saves a lot of cash. Now if you add it all up, you remove a lot of the barriers to take the first step into that direction. That is the Simple Promise.

Ken: Ivo, thanks for joining us.

Ivo: You’re welcome. Thank you.