Episode Transcript
[00:00:00] Okay everybody, here's my update on SAP.
[00:00:04] After two and a half very action packed days at SAP Connect and Success Connect. As I mentioned in the article I wrote this week, SAP is really rocketing ahead in AI for HR and business applications. Now there's been a lot of debate and discussion in the technical community about what the future of enterprise applications is in the world of AI. And lots of startups are arguing that these big systems like SuccessFactors, SAP Workday, Oracle, HCM, UKG, et cetera, will be obsoleted by highly intelligent agents. Well, that's turning out not to be true. Because if you take SAP as an example, and I think they're probably the best example, they have essentially integrated all of their applications across most of the major functions of a business into a completely integrated data cloud called the Business Data Cloud, obviously appropriately named, and have applied AI all over the system.
[00:01:07] So all over SAP in dozens and dozens, I think probably hundreds of places. There are now AI optimizations going on in the integrated suite of applications in SAP. So for example, if you are a manufacturer and you're selling a whole bunch of widgets and all of a sudden your margins go down and you're worried about your end of that, if you keep closing deals, your profitability could drop even though your revenue would go up. The SAP system could analyze your supply chain, find you an alternative supplier, and help you restructure those contracts to fix your margin problem. If you're a healthcare company or a utility or another company with lots of contingent workers and you suddenly see your cost of labor going up relative to your revenue, which by the way, you wouldn't probably see if you didn't have an integrated system anyway, and you're not sure why the system could show you exactly why this labor cost has gone up, maybe it's due to overtime and you might say, well, let's stop understaffing that, let's hire more contingents or let's ratchet back on that part of the operations to get costs back into line. Or let's, you know, reduce contingent labor and go back to fixed labor and move people around internally, which could also be visible through SAP. And if you're about to hire somebody, you could literally go into the SAP success factor system and say, before we hire this person, who are the people in the company that have a more than a certain number of years that have related skills that we could train for these jobs? Give me their names and their managers because I'd like to talk to them. I mean, there's hundreds of Things like this, including self optimization, where the system would make recommendations to you on a variety of decisions that could be made in your sphere of control on how to raise sales, improve margin, understand your lead flow better, better close deals with customers, on and on and on. Because SAP is a completely integrated system across spend, finance, supply chain, manufacturing and human capital and customer processes, it can find the relationship between all these data elements and either optimize the system, make recommendations, or explain to you why the company's not running or your business or your little team is not running the way you wanted to. Great for CFOs, great for senior business people, great for mid level managers, all sorts of stuff. And then you look at Joule. Now, when Joule was first announced, it was kind of a good idea, but we didn't know what it was going to be. Well, now it's a complete agent system that supports more than 40 different LLMs. So it doesn't only use one, it uses the right one for the right application. There are agents within Joule designed for specific user groups, types of users, like different ones for HR people or supply chain managers or sales execs and so forth. And then there are assistants within the agents that are essentially mini applications that allow you to maybe set somebody's goals or do a performance review or create a development plan directly from data and success factors without you having to figure out how to do it by hand. And a tool sets, you can do this yourself. So you can basically turn Joule into your development environment and build apps all over your company for different user groups that maybe SAP hasn't built yet. And we're now working directly with SAP to integrate Galileo into this. And we demonstrated a use case where somebody is in Joule working with an employee doing their development planning and you wanted help building a meaningful development plan. And Galileo taught the user how to build a meaningful development plan and gave them examples of other companies that had done this. So we're going to turn Joule into the world's best HR business partner and the world's best management coach within this wonderfully designed integrated SAP experience. So these guys have really done a lot of work and they're very capable and very customer focused. There were lots of customers in these meetings and I could see and watch and observe the SAP people digging into the use cases in the applications and the data issues that all these companies have. So, you know what I've always loved about SAP is they tend to bite off on some of the toughest business software issues and data issues we have and they don't mind building a long term architecture and implementing it over time because their target customers are big, highly profitable, highly scalable businesses that can afford to buy a system like SAP, not because it's cheap to use or easy to use, but because it gives you so much insight and information and data and tools about how your company works. Every single company, even our company, is complicated. We don't know the profitability of every customer. We don't know why sometimes revenue goes up versus down for different kinds of customer sets, by location, by geography, by time of year based on economic cycles. There's a whole bunch of unknowns in running a company and SAP eliminates many, many, many of those unknowns by giving you all sorts of integrated insights into your intelligent enterprise and how to run it better, how to be a better manager, how to be a better employee, salesperson, marketing person, et cetera. So I'm really impressed with these guys and we are really excited to be working with them directly. The Jewel version of Galileo will come out next year, but basically running and we can show it to you. And if you are an SAP customer and you want to talk to us about it, just get ahold of us and we'll explain it to you. And you can buy Galileo now and then switch over to the Joule version next year when it comes out. Okay? That's what's new there. Now. You know, there's been a lot of activity in the agent world. Many, many startups are getting massive valuations for building agents, for legal recruiting agents, L and D agents, employee service agents, agents that do many, many other things. And when you see a vendor like SAP move so aggressively. By the way, OpenAI, as I mentioned yesterday, is also doing the same thing in their little world, which isn't so little, it makes you wonder whether you really should be buying a lot of third party agents when the big guys are now getting their act together. And you know, I only want to talk about SAP on this podcast. I don't want to talk about Workday or Oracle right now, but I think this threatens a lot of other vendors. There were also several other announcements. Dan Beck, who's the president of SuccessFactors and a really amazing leader, also talked a lot about the new enterprise service module which competes directly with ServiceNow, a major upgrade to their workforce scheduling system that competes with ukg. Lots of features in Smart Recruiters that make it one of the most functional hiring and recruiting and ATS systems in the market. And the entire architectural philosophy of Joule, which is that JOULE interoperates with other agents through MCP and A2A protocols. Read the article I just published on this if you want to understand that stuff or you can look it up on the web. But basically SAP strategy is not to dominate your eyeballs, but to give you a great system that can interoperate with other things. It'll interoperate with the Microsoft Copilot, it'll interoperate with your custom chatbot that you may have built. But I think over time Joule is going to be the front facing system for many of these large companies because it has so much data in it and really is a whole development environment now. So. And you know, and then the other thing about SAP is this is a really culturally strong company. Most of the people I've known that work at SAP have been there for many, many years. They have great relationships with their customers, great relationships with each other.
[00:08:47] Of course, no piece of enterprise software is perfect. So you know, customers always have issues and things they'd like fixed or improved. And you look at people like Dan Beck and the product team and many of the people I met and I know SAP listens to all of this and works with these companies. These are complex systems. If the system is simple, then the value it provides is low. If the system provides lots of value and information, it by nature is going to be more complex. And the whole structure of SAP, from the very early days in the 1970s and the 80s when I first ran across it at IBM, is to try to model an entire company. The data, the workflows, the applications, the optimizations in every industry. No other vendor has ever, ever tried to do that. And they've been doing this for 50 years. So. And they are very comfortable with a massive sh.
[00:09:46] They went from on prem to the cloud. They're going from cloud to AI about as aggressively as anybody else, probably more aggressively. And they always do it in an architecturally sound manner. So even though the system may be filled with lots of different components, they are building for the future all the time. And so not only are the customers I met here happy, but quite a few customers who used to be on competing products like Workday and Oracle have moved to SAP now. So I think the momentum is really strong in SAP's direction. So take a look at the article I just published. Call us up if you'd like to talk about it. We're pretty comprehensively informed about everything they're doing and all the different modules and we'd be happy to help you think through your own AI strategy. Relative to HR tech, and I will see a lot of you in Paris in about a week and a half at the Unleashed Conference for more on the same topic. Bye for now.
