Why SAP surprised us
A playbook to unlock change and a digital mindset in midmarket private equity manufacturing and industrial companies.
Summary
Industrial companies in the midmarket are typically laggards when it comes to evolving and adopting digital strategies. Most of these companies are privately held or private equity and investment backed.
While larger companies have spent significant percentages of their top line implementing digital capabilities, including ERPs, since the height of Industry 3.0 — “Automation” — their midmarket counterparts have struggled keeping pace.
Midmarket companies’ digital definition is complicated by distinct internal challenges. But they are not entirely at fault — the technology system options available to the midmarket have had their own challenges, as well.
SAP has been one of the cornerstone ERP packages automating large companies, and it has grown its capabilities organically and via acquisition to meet the process and functional requirements of its customers.
At the same time, Industry 4.0 — “Digitization” — has evolved from the business-to-consumer market into the business-to-business world. Smaller companies in straggler industries who wish to compete as part of the supply chain need to spring-board past automation into this interconnected, data world.
When we were engaged by one of our customers to find their digital platform, we wondered how well SAP had evolved.
Our approach
Our approach includes important non-IT, business elements which affect the deployment and adoption of technology. We focus on this because profitable growth requires digitization — increasing digital maturity across all aspects of a company, not just IT and systems.
We find that most organizations struggle first with questions like “what is digital?”, defining “ERP”, and what adoption success looks like, long before they struggle with getting value from the capabilities they select and implement.
Our perspective: midmarket challenges
When we evaluate software solutions for our customers, we evaluate them on their ability to solve more than just their technology requirements.
First, the solution should provide a competitive advantage by increasing the speed, accuracy and reliability of data across the enterprise. It should enable the creation of a “digital twin” of the organization — a simplified data usage view from the most valuable, external interactions to the simplest, internal processes.
We also believe companies in the midmarket should focus on reversing negative technology inertia by transitioning to owning their data and not their technology systems. This can be achieved by adopting the technology processes embedded in mature technology solutions and moving away from the “our way” mentality. Technology ownership has become exponentially more complex, and it’s cost prohibitive to do it well. Negative technology inertia must be overcome to digitize.
Point solutions, including traditional “ERP” providers who have grown through acquisition, have complicated the decision. At the same time, companies have invested in point solutions to solve separate, distinct “functional” challenges. Companies cannot afford the costs of “connecting” disparate point repositories of data in order to extend their internal data to the supply chain and contribute to data-driven decision-making.
Midmarket themes
| Theme | Midmarket challenge | Requirement for a midmarket technology |
|---|---|---|
| Strategy | Doesn’t consider tech a competitive advantage | Drives advantages in the market; end-to-end data |
| Mindset | Primitive data-driven decision-making | End-to-end data and process |
| Culture | “Our way” and tech spend inertia | Quick adoption, minimal-to-no changes, investment is understood |
| Process | Lacks customer and supplier digital engagement | Increases engagement, offloading internal operations to the outside |
| Systems | Technology is one-and-done, fragmented | Grows with the company, not limited to ERP, delivered as SaaS |
| Data | Fragmented, difficult to use | Limited integration technologies, AI-ready |
Very few software providers can satisfy these requirements for midmarket, high-growth companies.
What about SAP?
Prior to engaging SAP for a recent midmarket company, we didn’t consider SAP to be a provider in the midmarket, as we believed they struggled with enabling quick adoption, evolving to new demands, being a clear and acceptable investment, growing with the company, and delivering as SaaS.
Because it’s SAP, right? Big, rigid, costly?
We recently engaged SAP as a digital capability option for a midmarket, high-growth CPG company. During the process we learned about “Grow with SAP” and discovered that SAP, like Perpetua for C-level technology services, has also evolved its capability, delivery and pricing for Industry 4.0 and the midmarket, high-growth company.
What is “Grow with SAP”?
Grow with SAP provides a complete offering of SAP Cloud ERP, SAP Business Technology Platform, adoption acceleration services, community support and learning modules, so any size company can successfully adopt SAP S/4HANA Cloud. SAP Cloud ERP covers a broad spectrum of business needs — from mission-critical operations to business model innovation. Whether customers are implementing an ERP for the first time or migrating from an existing ERP to the cloud, it delivers a complete modular solution with the AI and analytics capabilities to move businesses forward.
- Includes proven best practices and business processes for your industry
- Provides real-time, personalized business insight available from anywhere
- Enables intelligent automation across end-to-end operational processes
- Supports sustainability and regulatory requirements with company-wide controls and in-depth reporting
- Built-in global standards for compliance and security
- A scalable platform and global network of partners
Our experience
Grow with SAP at a high-growth, midmarket CPG company.
SAP is a competitive advantage. We evaluate our ecosystem partners on the value they provide to our customers. SAP simplifies the technology footprint and provides a singular point of truth — a company’s data — making it easier to optimize internally while simultaneously winning externally in the market with customers, suppliers and employees.
Our customer needed SAP’s “big” capability: a singular, enterprise capability to manage data. Perpetua worked with the SAP Midmarket Strategic Initiatives team to demonstrate SAP’s investment value creation and capture to the customer’s ownership and executive leadership.
SAP fosters a digital mindset and engagement. Not just a business mindset or a technology mindset. Fast, reliable, accurate data to foster collaboration externally, as well as robust platforms to automate the movement and visibility of data internally. Both of these core tenets increase the accuracy of data-driven decision-making, a critical foundation element for artificial intelligence.
Our customer values SAP’s discipline and rigor, the layer of business analytics and the ability to extend processes to the market. Finding resources and skills is challenging beyond choosing IT. You need a partner to manage IT to allow you to grow your business.
Grow with SAP helps overcome tech inertia. Evolving a SaaS composite of business systems, including ERP, organically and through acquisition were only the starting point. Combining the technology with capabilities for rapid adoption, a SaaS deployment offering, an emphasis on digital learning and evolving the workforce, and a digital community for collaboration replace the old guard of big, heavy modules, capital licensing and infrastructure investments, as well as the lengthy, disruptive implementations and instructor-led training.
Our customer could not succeed without SAP’s investments in adoption, speed to benefits, and a pricing model that makes digitization affordable for midmarket, high-growth organizations. There is a danger in saying “I picked my software solution, now I can grow and scale.” The technology is just one part; the process is just as important.
What we learned
Perpetua Advisors was founded to bring up-market, C-level technology leadership experience to midmarket, high-growth companies in lagging industries and evolve their digital approach. These companies need continuous care and feeding. They need experience from people who know what it means to run and execute, not just advise and consult.
They need experience of the road traveled to avoid the pitfalls of evolution, combined with a strategy to operate in the digital arena.
We know SAP traveled those same roads in the up-market. But what we learned is that SAP evolved its software capabilities and adapted its approach to meet this same challenge for midmarket, high-growth companies — and that it has an Industry 4.0 playbook which allows these companies to focus on owning their data, not their systems.
Based on what we learned, Perpetua Advisors has made the decision to be part of the SAP Technical Advisory Program, and will nominate SAP for consideration when advising our clients.
For midmarket, high-growth companies, SAP is now one of the few.
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