 It's theCUBE, covering Sapphire Now. Headlines sponsored by SAP HANA Cloud, the leader in platform as a service. With support from Consolink, the cloud internet company. Now, here are your hosts, John Furrier and Peter Burris. Okay, we are live back here at Sapphire Now. This is SiliconANGLE Media's flagship program, theCUBE, where we go out to the events and extract the signal for the noise. And I want to do a shout out to our sponsors that helped us get here and present great content. SAP HANA Cloud Platform, Consolink, Capgemini and EMC. Thank you very much for the sponsor. I'm John Furrier with Peter Burris. Our next guest is Rodolfo Cardinudo, who's the president of Global Channels, company-wide for SAP, as well as the general business, which is the SME, as they talk about in the industry. Welcome to theCUBE. Thank you, John. Thank you, Peter. Good to be here. So Juan, congratulations. We've had a lot of your folks on theCUBE and this area of the floor is buzzing with action. Yeah. But real meat on the bone, as we say. It's real, it's just sizzle and the steak is here. So, and they had beer here yesterday. So German companies, we always like to see the Heineken beer out here. But it was bad beer. It was good to have Heineken out there, it's good. Some good beer. So give us the update. I mean, you guys have had growth. Share with us and the folks watching just some where you guys have come from because SAP has always had a strong ecosystem. You go back to the ERP days back in the late 90s. Certainly that revolution is 25 years ago when SAP came out of the woodwork and you got Oracle. These companies were born. They had an ecosystem. They had people deploying and delivering software. It's changed now. So the dynamics are different. Talk about the dynamics and some of the growth that you guys have. I think it's better to position the organization. GB, as you well said, general business, the SME space. Our ecosystem that we built historically was very focused on the enterprise to support the business suite, to support the enterprises to implement, et cetera. And now we are building in the last 10 years we started to build a very focused, strong ecosystem for the SME space. That's what we're doing. And I was just sharing with you we just kick off a Sapphire now last Monday with the 2,000 of our partners with us kicking off the Sapphire 2,000 of a GB partners that serve this segment for us. So I said yesterday on the closing, I mentioned this to you and you corrected me. I want to get this out there and clarify the record. You know, you bolt on the partner summit with the end user conference, which is a huge show, 25,000 plus, whatever the number is, massive. Well, everyone's here, so it makes sense. And I was saying that this has been so important that you should have to break out your own partner event. So it's that people feel like a first-class citizen in that partner world. And you had corrected me. So share with the correction that you guys do partner events. Obviously, this is the big tent event. So why not have everything here for that? But you guys are doing events. Just clarify that. Yeah, just to give you an idea, I said we came up from the partner summit last Monday with 2,000 of our partners kicking off the South fire now. But we do have a partner summits here in North America and U.S. We have partner summits in Latin America. By the way, the next one is going to be in Punta Cana, a los amigos de Latino America. Nosotros estamos en Punta Cana con ustedes in the partner summit para Latino America. We have partner summits in Europe, APJ, Greater China. We do have a series of a partner summits. Do you do those partner summits in native tongue or in the cube tongue? Well, the native tongue, if I speak, yes. Well, we have to get a whole new crew for the cube. We're looking for some hires down there. You're watching since you brought that up. Okay, so let's get down and dirty. Okay, channels are great. The leverage of channels, the leverage of the cost per order draw for SAP from your perspective is phenomenal. And that's a great business, indirect sales, combined with direct sales, phenomenal approach. What's changing though? Because at the end of the day, people in the channel have an attitude of, what's in it for me? They're running a business. They also serve on the front lines with customers. What's changed in the channel today? Is it the same challenges, training, product? Is it different? Do you see different configurations? Well, it's changing a couple of things. And I'll try to summarize here, but the fundamentals I changed are changing from on-prem to cloud. Because we were, you very well said, historically on on-prem company, the fundamentals of the on-prem are changing out to the fundamentals. The economics are changing from on-prem to the cloud. And the second thing is specialization. We were a company that was built on the ERP, and now we are a company, as you saw here from Bill McDermott to Rob Anzling, Bern Leuker, et cetera. We are a company of HCM, Ariba, or Supply Manufacturer, SRM, or CEC. So we have a lot of specialization. So the economics are changing for the channel as much as they are changing for us. And the specialization, you require a lot of specialization. One of the things that we are here listening clearly from our customers is the specialization with integration. You saw Yola here from Bill McDermott and Rob Anzling and Bern Leuker talking today about these integration. And we are doing a lot of our effort with our channels also to specialize, but at the same time to integrate with SAP Core. So there's something in application development that's been around for probably 40, 50 years called Conway's Law, which suggests that the application that gets built is, or the complexity of the application that gets built is a reflection of the complexity of the organization that built it. When we talk about all enterprises of all sizes wanting simpler, faster, more integrated, more convenient, more natural to use, a lot of your partners are at the vanguard of thinking about how to make it simple because they don't have the institutional and organizational complexity to make it complex. So is SAP learning from your partners as opposed to just your partner's learning from SAP as we move into this digital world that has such a focus and emphasis on simplification? Peter, great insight. I think not only learning, we have to listen to that and react to that because if we react in a complex way to serve our partners, they cannot serve our customers because in the end, they're serving our customers. And as you said, they don't have the infrastructure or they cannot afford complexity, period. They cannot afford. So they need to be simple by nature. And if we are complex to serve them, they're not going to work with us. They're going to pick another one, the application and everything. So we need to build an organization that is fast and agile and as simple enough to work with our channels. I'm not saying we are there. We're not there yet. But we are in our, for instance, our theme is partners first, run life and win together. Partners first is all about the partners. Everything that I do in my organization, all programs, products, solutions is about with the partner mentality. Is this good for the partner? Is this good with business model? It's simple enough for that. It's a business partnership. It's a business, and it's a partner ready because if it's not partner ready, it doesn't fit my model. Run life is about the customer. And win together, it's SAP, the partner, and the customer. The customer should be comfortable enough that we are serving them with this partnership. Take us through some meetings internally at SAP because that's a really great point. You got to meet the channel's requirements on how they do business. Because they have a business and you get a partnership. So that means, you know, you're the favorite guy in town inside the company. Hey, here's my product. Go sell it to the channel. Yes. I'm oversimplifying. I'm not saying they say it. But that's kind of a, that's the knee-jerk reaction. I want a historical norm. That's a historical norm. Hey, boom, here's some product. Go just do some training and give them a cheaper. But now you have to hold the line. You're the safeguard for the customer. What are some of those conversations? Because you now have to be a forcing function to the product groups. And we're seeing so much transformation. SAP, SAP for HANA, HANA Cloud Platform, all these enabling technologies are as a gold rush for the partners. So you have to hold the line. Share some internal color. I'm going to... Without getting in trouble. No, no, I have no problem with being in trouble. But I'm going to illustrate that with a simple case. You just mentioned, S4 HANA. S4 HANA is the flagship of a product for the large enterprise. You saw Nestle today with Rob Anseling. Nestle, one of the largest corporations in the world. 350,000 employees, $80 billion worth of a... Pretty large. Pretty large by any metric. Pretty large. And they use S4 HANA. My job, and I have an organization, my organization, we package, we price, we enable, and we support the channel to sell and to support the S4 HANA for the SME market. We are 60% of the S4 HANAs for SAP. If you get all S4 HANAs, 60% goes through the channel that we manage. So, we package. It comes with number of installations? Yeah, 60% of the S4 HANAs today that we sold are sold through the channels that we manage in the SME, in the GB space. So that's the job. It's my job to package. You're giving money away. You're canning people money. No, yeah. Here, here's the business. It's my job to package, to price, to enable the channel and to support the channel to actually make an S4 HANA available for the GB space. So that's what we do. So we do that two folds. Of course, I have no organization to do that and I have also to educate the other organizations. Okay, as you said, oh, here's my product. It's perfect for SME. Go and sell. Okay, let's have a conversation. Let's package. Is it channel ready? Exactly. Run, so run life, that means it's got to be turned. Yeah, we call it the package price enable and support because you need a different package. It needs to be much more simpler than enterprise. You cannot go to a Chinese menu for the GBs. So it has to be templates, price, very specific price for the GB. It needs to enable the channels. Who's going to enable the channel? Technically, pre-sales, sales, et cetera. And we need to support the channel on the sale or during the process. This is my organization. That's why I educate the other organizations. So there is not a company on the planet that has mastered the fine art of raising. Other than us? Other than you. Well, you said you got more work to do. There's not a company on the planet, you're getting closer, that has mastered the fine art of reaching the general business population of companies. Increasingly also, as we move more into digital business, your biggest customers want to use software and digital interfaces and technologies to reach their small and medium-sized business customers. Are they coming to you and saying, how can we start bringing your platform, your go-to business, and coupled with our SAP back-end to facilitate the process of helping to reach? In other words, are you going to be able to catalyze a global change in the approach to reaching small businesses because of the SAP platform? Well, I don't know if we can do that, but I think it's a good vision for us to pursue, Peter. We do have an organization that has from inside sales, digital sales, social sales. We use social to reach out to our customers. We use digital to reach out to our customers. We have feet on the street, direct sales. We have our, you know, today, I think 13,000 partners ecosystem that reach out to our customers and they are divided by territory, by industry, by solution. So we can map, you know, get the word and map it by territory, by solution, by industry, the partners that we have, and we use a lot of new methodologies and social sales, digital sales, a lot of things. So we are building the infrastructure to support any kind of products from SAP. We are very well-serving in terms of portfolio for the market from SAP, so we have a lot to digest. So one of the things, we talk to a lot of channel partners and SIs, down to the, you know, ISU, DAVVAR, as you should be called. And we hear the following from them. I want to get your take on this and how you're addressing this. We want a partner that's going to be with us from cradle to grave, through the lifecycle of our partnerships, the things you said. The other thing that was interesting was we want to increase our gross profit and services is 100% gross profit. So me as the partner, I make money on professional services, whether that's like fix in the old days or architecting clouds, integration. So that's a big part of their growth revenue. So they want to make money. That's the code word for money. So how are you guys shifting the economics to enable the partners to wrap their own unique services, certainly makes sense in foreign markets, but across the globe, that's a big challenge. How are you rolling out for them at the same time bringing the big accounts to them? So how are you enabling me to wrap my services around them? And that's, I'm going back to your point to your first question. When I said the economics are changing, so we need to follow up the new economics. The channels, as you said, they make a big, a good part of their business is about implementation. Once you go to the cloud, though, the part of this part of the business is reduced by one third because in the cloud you have a less of a share of other service. So the service share is reduced by one third. So what you need to do is to compensate that with what we call it ARR, annual recurring revenue from the cloud. So we are building business model. I launched that last Monday, our cloud business partner, new business model, which is giving the partners ARR, annual recurring revenue. So because service is good because it's recurring revenue. Once you sign a service SLA, right, a service contract, you don't have anything, but you have a recurring revenue with that. But this is going to be reduced in the cloud. So we will compensate that. And that's the- So you're shifting the dollars into the same consumption model, the cloud. Yes. With some sort of subscription-like or recurring revenue model. I'm willing to cut a share of my revenue with my partners from the cloud. Well, you might be able to get it back longer term, but it's that up front. Yes. So typically you sell up front, you pay for the sales guy up front, and a lot of these partners- I can't afford to wait for the- Now it's more of a recurring revenue battle. So I'm willing to get a share of that, to split that with my partner for more business. So you're financing their business model transition. Well, they're- Transition. That's the word. They're fear that this transition, it's because they're on paper, they're getting cut. So they have to have an immediate pop, you know, change. So you're financing that over the long term for the relationship. Well, we are willing to have this conversation. The new business models that we are developing and we introduce it here, they actually address that in a very, very programmatic way. It's not a one by one. It's not a, you know, opportunistic. And by the way, you said the channels, we are getting channels on. We have only 15% of our business from the channel. My business only 15% is opportunistic that you come with that transaction. 85% is predictable. 85% is loyal, it's a bio loyalty. Exactly, I want to invest in the channels that are here for the long run. So it will support that business model transition. So that's a good loyal base. So they probably give you very candid feedback. Yes, please. What did they say? No, they do. If you have a loyal base, they'll tell you the truth, right? What are they saying? What's the feedback of the new business model? What are some of the examples? Well, they love it. And after I presented on stage and we had the conversation, I had, as you can imagine, a dozen of conversations with the specific partners that are willing to adopt and sign off. You know, it's just for us to start to roll out. Of course, to roll out the new business models, you need a lot to think about countries, a lot of the only specifics, but we expect that in the next six months to have a whole lot of work over. That's great. And you got the events coming up. Thanks for clarifying that. Well, we really appreciate those coming on theCUBE and sharing your insights. Thank you. You're very dynamic and great guests that come on theCUBE. Certainly, we'd love to have you again. And if you need us down in the other summits, let us know. It would be my pleasure. Channel is big. The ecosystem is a competitive advantage and you guys are looking good as they say off the tee. This is theCUBE here live in Orlando. I'm John Furrier with Peter Burris. You're watching theCUBE. We'll be right back. There'll be millions of people in the near future that want to be involved in their own personal well-being and wellness. Nobody wants to.