SAP Sees Silver Lining in the Cloud

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Migration of ERP apps to the cloud may accelerate as organizations try to optimize processes while simultaneously conserving liquidity.

SAP is forecasting a steady flow of organizations that have been transitioning enterprise resource planning (ERP) applications into the cloud will soon accelerate. In fact, despite the financial upheaval caused by the COVID-19 pandemic, SAP recently reiterated its goal of expanding its profit margin by one percentage point per year through 2023 as more customers shift to the cloud.

The company also reported a 1% gain in quarterly operating profits for its more recent forecast but cut its earnings forecast this year by between 1% and 6%.

See also: Getting Started on the Road to the Autonomous Enterprise

From supply chain to finance applications, organizations are rushing to gain greater visibility into business processes at a time when many employees may now be working from home for an extended period of time, says Oliver Betz is senior vice president and head of product management for SAP S/4HANA at SAP SE.

Some employees might not ever make it back to an office. A recent survey of 305 finance leaders in the U.S. conducted by PwC finds that nearly half of the respondents (49%) say in the wake of the COVID-19 pandemic they are planning to make remote work a permanent option for roles within their organizations that allow for it.

The challenge organizations have is they need more granular visibility at a time when revenue projections are difficult to make with confidence. As such, organizations are trying to optimize processes whenever possible while simultaneously conserving liquidity.

“Cash is king,” says Betz.

The latest 2005 release of SAP S/4HANA Cloud addresses that issue by, for example, providing tighter integration between cash management and bank account management modules in the finance applications to provide a single source of truth regarding cash flow along with an order-to-cash dashboard for tracking sales and services revenue within the sales management module.

Many organizations are also looking to automate more processes because they may not have as many employees to manage them when layoffs around the world are now measured in hundreds of millions.

In some cases, that also means accelerating nascent digital business projects that are now suddenly at the core of a larger business continuity strategy on which the very survival of the business may now depend. Organizations that are just now launching such efforts in the wake of the pandemic are likely to find themselves at a significant disadvantage.

Of course, SAP is making a case for a broad portfolio of packaged applications delivered via the cloud to jumpstart those efforts. SAP also expects the appetite for customizing those applications is likely to be sharply reduced, adds Betz. Many organizations will conclude at a time when funding for such projects is limited that the cost of customizing a business process will be prohibitive, notes Betz.  

It’s too early to say to what degree organizations will transform themselves in the wake of the COVID-19 pandemic. The one thing that is clear is more applications will be moving into the cloud at a faster rate now that organizations realize personnel might not be able to come into the office should there be another similar event.

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