Paradigm shift

Why S/4 Hana?

"I was sitting with colleagues at the end of last year talking about SAP's new developments, and the name S/4 Hana hadn't even come up yet"

Herbert Vogel, CEO of Itelligence, recalls in an E-3 interview the first information about SAP Business Suite 4 SAP Hana.

"We discussed, but we quickly became sure that we were dealing with a real paradigm shift here, so we decided to launch the first S/4 industry solution at CeBIT this year."

With an entrepreneurial type like Herbert Vogel, founder of Itelligence, with his experience in the midmarket, you can talk about making the right gut decision on this occasion. Itelligence turns 26 this year.

But how many paradigm shifts occur in IT per year? What does Wikipedia say? The term paradigm shift was coined by Thomas S. Kuhn in 1962 and, in his writings on the theory and history of science, refers to the change in fundamental framework conditions for individual scientific theories, e.g., preconditions "in terms of concept formation, observation, and apparatus," which Kuhn refers to as paradigms.

In colloquial language, the term "paradigm shift" is more often used in a non-specific sense. Either scientific developments considered to be particularly important are meant or, for example, a change of attitude to life (e.g. concerning fundamental values) or also upheavals in other life-world or professional contexts. (end of quote)

Top or Flop

It feels like there are a dozen paradigm shifts in IT every year, but Herbert Vogel is not referring to these, of course. Rather, he shares the view of Hasso Plattner, who once again explained the historical reference to the current development at this year's Sapphire in Orlando:

After the R/2 mainframe era and R/3 with client/server computing, in-memory computing is now the current technology. In his keynote speech, SAP CEO Bill McDermott explained that "S" comes after "R" and "4" after "3", so logically the latest SAP product must also be called S/4.

Plattner reacted deeply shocked to the question whether now Hana will conquer and penetrate the market as a representative of the in-memory computing technology or will remain only an interesting hobby!

He angrily asked how many times he would have to explain the technology and Hana before it was understood that there was no way around in-memory computing. Thus, Herbert Vogel's opinion and statement is confirmed: "S/4 Hana is a paradigm shift."

Itelligence generated total revenues of EUR 556.8 million worldwide in 2014, and EUR 255 million in the German-speaking countries of Germany, Austria and Switzerland alone.

This makes Itelligence the SAP consulting company with the highest revenues in Germany and worldwide for the midmarket. For 2015 as a whole, CEO Herbert Vogel and CFO Norbert Rotter expect revenue growth of well over EUR 600 million, corresponding to an increase of more than 10 percent.

A further disproportionate improvement is expected in earnings. The background to this success? The early adaptation - as an early adopter - of new technologies and quality awareness at all levels in the projects, from implementation and maintenance to the globally standardized managed services and Itelligence's own hosting offerings.

Who are the winners? Who are the losers?

It is already easy to see that intelligent SAP partners such as Itelligence, which are early adopters of S/4 Hana, not only have the strategic vision, but will also be among the few winners. The German IT weekly Computerwoche (IDG Verlag) wrote after Sapphire in note to McDermott's "Run Simple":

SAP - the damn complicated simplicity. And Hasso Plattner also sensitized the SAP community to the complex algorithms of an in-memory computing database in his Sapphire lecture. It is therefore far from "simple", and it is to Itelligence's credit that it familiarized itself with the complex technology in good time - as early as possible.

Herbert Vogel gave the go-ahead for the development of an S/4 industry solution long before the name "S/4 Hana" was born. That was no problem, because Hana was available as a platform. (For the experience of Itelligence customer Rösler Oberflächentechnik, see page 50).

If the development envisaged by Hasso Plattner comes to pass, the laggards without Hana skills and possibly also infrastructure suppliers could be among the losers.

If storage space and servers are no longer required in the familiar R/3 scope, then not only the expenses for existing customers will fall, but also the revenues for hardware suppliers. In any case, Itelligence is proving to be a forward-looking partner to the SAP community here as well:

"We have invested massively in our data center capabilities and will continue to do so"

explains Herbert Vogel.

This means that all options are open to existing and new customers at Itelligence. SAP can be operated traditionally on premise, but customers can also move to a private or hybrid cloud.

At Itelligence, the knowledge for all operating models is available and, in terms of data protection and data security, the local data center offering under the management of an SAP partner is of course particularly attractive. With this broad offer of being able to operate S/4, Itelligence customers will not be among the losers either.

More likely to be among the winners, as demonstrated again at Sapphire in Orlando in May, where Itelligence was awarded the "SAP Oscar", the Pinnacle Award: Global Cloud Value-Added Reseller of the Year. For Herbert Vogel, the most important award:

"After all, these awards are more than just nice trophies; this Cloud Pinnacle Award in particular shows we are very focused on developing future-proof offerings for our customers.

SAP honors that, and I'm pleased about that. We are making very targeted investments in technology and, of course, in the consulting expertise of our employees. With a topic like this, I would like to be 25 years old again and at the end of my computer science studies.

I would take advantage of the opportunities at Itelligence because digital transformation and Industry 4.0, that's happening with us and our customers."

Not only Hana

Is it worth the effort? In recent years, SAP has acquired numerous companies, some for very high sums. A manager like Herbert Vogel naturally sees such developments from a business and organizational perspective.

In the E-3 conversation, he says that he already had worry lines in some of the actions. Now that the whole picture is visible, and with it the synergies, he is convinced of the SAP way and already notices considerable potential for his own company.

"E-commerce may have seemed like an innovative fringe topic at the beginning, but we have since implemented the SAP Hybris solution at very conventional mid-sized companies"

Vogel, the analytical computer scientist, almost goes into raptures and immediately moves on to the next topic.

"I personally didn't know Concur, although I then discovered that some Itelligence offices abroad were already using the solution internally. We now see significant business potential here as well."

Herbert Vogel's market observation also coincides with the SAP strategy now presented at Sapphire in Orlando: the development of a business network based on Hana, which is to include Ariba, Concur and Fieldglass in the first expansion stage.

Hybris and SuccessFactors are Hana-ready and are also to be integrated more closely.

"Machine builders handle their spare parts business with Hybris"

Herbert Vogel reports from the field.

These prospects did not exist in the R/3 era and thus the SAP solutions offered by Itelligence are of great interest to both existing and new customers - a door opener for Itelligence.

"Against the backdrop of these upheavals, we will be giving our customers a comprehensive overview for the first time. On September 8 and 9, we will be presenting a kind of SAP and Itelligence performance show.

Compact in two days, interested parties can learn about the best strategies in Industrie 4.0, Cloud and S/4 Hana at our conference center at Itelligence World."

Cloud for Customer

In mid-April, Itelligence announced that it had started the new fiscal year with revenue growth of 40 percent. In the first quarter, revenues rose accordingly to MEUR 160.4, compared with MEUR 114.6 in the same period of the previous year.

This increase is attributable to both organic growth (19.8 percent) and the companies acquired last year (20.2 percent).

Herbert Vogel:

"The sales growth in the first quarter was a first good and important step for 2015. Our goal remains to grow by more than ten percent for the full year, and we have already laid an excellent foundation for this. We believe we are excellently positioned internationally to continue on our successful course."

For this year, Herbert Vogel wants to focus on Hybris, Cloud for Customer and SuccessFactors in the cloud environment. In the E-3 interview, however, he qualifies that the development in the SAP community is very dynamic and that further topics such as the aforementioned travel management Concur could be added.

S/4 future

Based on past experience and trusting Hasso Plattner's words, the in-memory computing database Hana has become an indispensable tool in IT and especially in the ERP environment. The same can be expected for the first S/4 component, Simple Finance.

Herbert Vogel thus has anticipation and high expectations for an upcoming S/4 logistics solution. From his own experience with SAP APO (Advanced Planner and Optimizer), he knows the importance of integrated planning.

"If planning components already exist here as a component on the Hana platform, you will be able to calculate and control very differently in the future"

the Itelligence boss goes into raptures again.

The background to the development is the Hana architecture presented by Hasso Plattner in Orlando at the beginning of May: in principle, any SAP software can run on Hana because the in-memory computing database is also a standardized SQL database.

This means that Hana does not behave much differently over long distances than Oracle, IBM DB2, Microsoft SQL Server, Sybase ASE and MaxDB - but sometimes, of course, much faster.

According to Plattner, the true benefit will only become apparent over the next twelve to eighteen months as existing SAP business processes, such as logistics, are gradually adapted to Hana's enhanced capabilities.

For SAP partners such as Itelligence, this will result in an enormous competitive advantage. Because they already have the knowledge of the Hana platform in-house, the move to S/4 business processes will be easier.

"If this comes out the way SAP says it will, it will be very good"

Vogel is firmly convinced. But he also sees this as a huge challenge for the entire SAP community.

What can the transfer look like? Itelligence has developed a so-called Value Check for this purpose, in which customers check their prerequisites for the transfer in a workshop.

Herbert Vogel is aware of the opportunities and risks: SAP is firmly tied to the fate of the Hana database. For him, it is the aforementioned paradigm shift in the community in which he sees a very successful future for Itelligence.

Herbert Vogel also sees a risk in the need to fully commit to the Hana database - which is especially true for new customers:

"If you're a new customer and you choose Hana, you better be sure, because it's going to be a longer-term commitment."

But Herbert Vogel also knows that it can't just be the speed of an in-memory computing database:

"In the future, efficiency improvements must be visible to everyone. That's the only way to convince!"

In the midmarket, with its complex and individual characteristics, a standardized platform such as Hana is an excellent prerequisite. Herbert Vogel is therefore also firmly convinced that it will be easier for Itelligence in the future if there is no discussion about databases and other platform technologies, but instead S/4 is the set basis and it will be possible to fully dedicate itself to the wishes and needs of the users.