 Two, 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, welcome back. We are here live in Orlando, winding down day two of three days of wall-to-wall coverage of live coverage of Sapphire Now. This is theCUBE, SiliconANGLE's flagship program. We go out to the events and extract the signal for the noise. Want to give a shout out to our sponsors who allow us to get here and do all this massive programming. SAP HANA Cloud Platform, Consolink, CapChemini and EMC. Thanks for sponsors, really appreciate it. Our next guest is Roger Quinlan, Senior Vice President, Global Head of the Partner Managed Cloud at SAP. Thanks for joining us, welcome to theCUBE. Thanks for having me, this is great. We love it. So explain what is the Partner Managed Cloud? Just to kind of make sure we get the definition out there because you get the Partner Ecosystem, but this is the Managed Cloud, Partner Managed Cloud. Right, so basically it allows our partners to create cloud offerings, private cloud offerings, that they can offer to their clients as software as a service. And obviously SAP technology enables the inside of that, the guts of it. And we typically structure the agreements in anywhere from two to seven year, most of them are five year agreements, so it's a long-term agreement, good for the partners, helps our clients get into the cloud quickly and easily. Explain who those partners are and give an example of how that works. Because SAP, you had partners many, many years delivering the apps, but now this platform game with the cloud changes the business model. Who are some of the people that are implementing this? Yeah, so Capgemini is a great example of one, NTT Accenture, the players that you might think of. And there's even some smaller ones, some smaller SIs that maybe are not household names, but are doing very good work. A specialty boutique kind of domain expertise. Yeah, and even some that are fairly large, but are not maybe household names in the US, but are big names in Europe, like T-Systems as an example. Great, and the vision around this was just to get simplified on the delivery cycle, so with cloud, the goodness of SAP now can be tailored for the end client, because these guys are smart, they have data scientists, they have a lot of programming capabilities, they have cloud knowledge, but they have to deliver a solution to the customers, because they are a trusted advisor to your customers. Is that the main reason? What's the push behind all this? Yeah, the main reason for us is really to allow us to get into market niches that we don't serve today. So if you think, I'll give you a great example. There was a niche in with hospitals, smaller hospitals in Southern Africa, and they needed infrastructure to manage the operations of a hospital, they wanted to modernize, they wanted to do the digital transformation to use the modern buzzword. And so one of our partners had a very good relationship with a couple of these hospitals and went out and said, hey, if we built a solution, would you use it? And they said, sure, so they went out and built it, and they started off with one, two, by the time they had it all built, they had three, quickly they had seven, they're now up to 16 hospitals. And it allows us to provide great technology to these hospitals, they can provide better healthcare to their constituents in a market that we otherwise would not be able to serve. So that's one good example of accessing a market that maybe SAP would not have access to. But the integrator, which was T systems in this case, has great relationships in that community. So it really is leveraging a relationship they already have. So I can see the benefits to the customers and the partners, because it's clear, partners can make more money, they have great differentiation to their customers. What's the impact of the SAP sales force? Do they get comped on it? Is there a channel conflict? Cause that's going to probably come up. It's funny. So you know our market space well enough to know if that's an issue or not, right? And it always is, right? So what we've decided to do is, you know, basically the sales organization that has the end customer, they basically get basically compensated on it. So they're not, they're incentive to play ball. Absolutely. There's no, there's no disincentive. It's kind of the same as if they sold it directly themselves. How does the partner managed cloud support the new S4 HANA? Cause that's the big story here. Talking about Sharpie, modernized up. It's a big, all the discussions around that are everyone's jazzed up about it. All the hardcore SAP customers are all like, okay, wow, how does that impact this? Yes, so S4 becomes the technology that most of our partner managed cloud offerings are utilizing. So what we find a lot is customers out there want to, they want to do something new. Maybe they're a hybrid customer today or they're an Ariba customer today. But now they need to modernize their core. They need to do an ERP. Maybe they didn't have one or maybe they had an old one and they want to modernize it. S4 is a perfect way to go deliver that in the cloud to the end clients. And so I would say, you know, maybe a third or 40% of the transactions that we're doing in the partner managed cloud space are our S4. A lot of your partners, especially some of these big guys are trying to evolve their business models away from ours to IP. So I presume a big part of this is to try to get them to build that IP proximate to the SAP platform. How are you encouraging them to do that? Are you underwriting? Are you financing it in any way? Are you sharing it? How are you getting them, other than just the raw business opportunity, what kind of new business models are you putting in place? So the value accretes to your platform from these guys faster. Yeah, we're really focusing on verticals and on geographies so that we don't have overlap. That way it creates a unique differentiator for that particular systems integrator. I talked about the example in Southern Africa, but another example would be in Japan in the real estate market. We did a similar thing with a totally different systems integrator, and that allows them to have a unique approach to the real estate market inside of, primarily inside of Tokyo. So what we try and do is try and make sure that we don't have a lot of overlap in geographies and overlap in solution areas, so that they get some sort of a competitive advantage and get some runway to run with this for a while. And at what point in time do you find yourself, John asked a question about, at least channel conflict with your sales guys, but the goal is to have the entire ecosystem work really well together in being encumbered with enormous transaction costs of how these different parts come together. At what point in time does SAP start to have a direct relationship with some of these folks? For example, are you taking responsibility for sending down updates? Are you working to bring new extended or extending the ecosystem into a customer, or is all that going through the partners that you're working with? So I'll answer that a couple of different ways. So first of all, the primary relationship is really between the partner and the end client. It is their kind of SaaS offering to the client. We provide the technology underneath. So that's one way we do it. The other part of it that kind of keeps this close to SAP is the back end, the maintenance and support. Level one, level two is still handled by the partner, but we handle level three. So there's still a relationship, and when they get stuck and things go wrong or something needs to be fixed, we end up getting involved. But the primary support happens between with the partner. And most of them are very well skilled at being able to handle that level of support. But are you also then bringing your ecosystem and your set of partners to them as well? Absolutely. Okay, so it's not just the, you know, the SI world, right? So some of these partners really want to be in this game, but they don't have hosting capability. So we'll do Azure, we'll bring in AWS. And that's a mechanism that's already in a good place for us. Well, and also they have a multi-vendor view anyway, so they're going to broker the different clouds and inter-cloud them together. And I think to your point there, I think it's worth double down on them because that was important. Virtustream came out of that concept. So what Virtustream was sold to EMC, with billions of dollars, billion dollars, that ultimately filled the same gap that you guys are doing with this program. They essentially did SAP Cloud and did some tooling up. Now you're offering essentially SAP tech to everybody. So okay, that's cool. So just for the folks out there, just want to make sure they capture it because that's how big it is in my opinion. Can I follow up one quick point, John? So let's say the extension, the partner extension programs that you guys have, that allow your Salesforce to sell third-party software from the SAP ecosystem into customers. If a large customer or if a large partner is a partner of yours and you're standing them up, are they also able to pick you back in those arrangements and start bringing, oh, do they all have to have separate business arrangements with everybody in the ecosystem or is it kind of a master agreement that you're bringing to bear so that everybody plays better together because you're kind of overriding the whole thing? Yeah, so we like to make this as easy as possible. So we take into the 4,000 items or whatever on our price list. We enable that through this partner-managed cloud. That way they don't have to go get individual agreements if they want to, maybe want to do open text or something like that. So you're bringing the whole portfolio to their cloud. Yes. Tell us about the IoT, how this plays into this. That's a real sexy market everyone's going after. We heard that's going to be on the second half of the year. You mentioned some things that are on that. That's a big focus. And a lot of people are using the, I say hype cycle now, which it's a legitimate hype, but the apps are coming on a couple of years down the road, so the architecture is going on now. So people are setting the table for IoT today. Does that fit into this? Absolutely it does. And you heard a little bit about, when you talked to Mark right before I came on, he talked a lot about the platform, HANA Cloud Platform that his group is responsible for. And really that becomes a leverage point. So HANA Cloud Platform can be part of this. And oftentimes they want to do the enablement on top of that HANA Cloud Platform because they want to be able to extend. The great part about S4 is that it's standard and it's industry specific and it's simple to operate. But that also means that some companies have a lot of customizations that need to be part of their solution to their end clients. And so how do you do that? You do that with HANA Cloud Platform and sometimes that becomes an IoT play as well. Yeah, that enables them to at least have some headroom. Yes. Future proofing, whatever term they want to use. Okay, tell us about the vision of digital transformation because this really becomes an interesting business model question. How does a digital transformation vision that SAP as a company is going down relate to specifically your area? And how does that relate to the business model for the customers? What are you guys doing? Is there any kind of new things? Is it incentive comp? Obviously the sales gets comp, options to the customer, where's the margins at discounted sliding scale? All these are the questions that are popping through my head right now. If I'm the partner, what's in it for me? I got to make some cash, so. Yeah, well, so what's in it for the partner is they get a long-term relationship with the end client. And oftentimes they bring a relationship with that client already and now they're extending it. And it's a very sticky relationship because when you start on an SAP program, it's not like that's not something you switch in and out every couple of years. And so that's one of the benefits to the partner. And I will say the part about digital transformation, everyone wants to transform their business. Not everyone is able to, but most companies want to do that. This becomes the digital core, right? You use S4 as the digital core and you can get into it quickly. And if it's an industry-based solution that this partner is now providing to multiple clients, they can implement it quicker. So if you think about it. They can standardize on it. Yeah, they can standardize on it and then they can do hospital one, hospital two, all the way to hospital 16 a lot quicker, right? One or two maybe take you some time. But by the time you get to the 16th or 17th, it's going really fast. So it enables a faster time to market for the end client. And the digital is all about speed. Yeah, they're building Lego blocks and they build their own, they cast it out and they build more of them. Yeah. And just ship them out. You mentioned another item. There's some customers that have been using SAP solutions for a long time. And maybe they're not using all of them anymore or maybe they've gone off maintenance, right? That's a topic. We've been able to use this tool as a way to bring the customers back. So maybe they ran ERP way back when it was released for 4.5 back in the 90s. They got away from it for whatever reason. But now they're really excited about S4 and they want to come back. This is a mechanism to allow us to do it and do it quickly. And also they get basically rebooted or reset on the new platform. Yep. But also you get net new customers out of this. So it's not like you're recycling the same SAP customer. Certainly the churn might be helped a little bit. That's the thing that I'm going to look at is those new customers. And I think they're going to be attracted to things like the Apple announcements. How does that impact you? Are you affected by that? Certainly the afterglow of the announcement will be good. It's pretty cool, isn't it? But does it directly affect your business? It will absolutely affect it because the whole concept about that agreement is to develop applications that enhance the user experience. And to the extent that we can leverage all of that better user experience in a faster time to market, get to the cloud quicker. That's all goodness for the end client. We're finally going to have a remote desktop on the phones that actually works seamlessly. Yeah, real rendering as opposed to shadow rendering. All right, final question. What's your take on SAP this year? Thoughts, share with the audience. Who couldn't make it? They might be watching this live or on demand. What's 2016 Sapphire now all about? Well, 2016 Sapphire now, in a lot of the keynotes, was really about kind of exposing a more honest, more upfront conversation. We saw it in the keynotes. Bill McDermott, our CEO, put his email address out on a keynote with 30,000 people in the crowd and then 100,000 or so watching, right? That's a pretty bold thing to do. And so I think you're seeing SAP trying to become more human, trying to have more empathy. You know, we're a big company, we do some very cool things. We run a serious business, right? But being able to do that in a very human way is what I'm seeing here on the show floor. Final question, final, final question, because that was the second final question. What KPIs are you going to look at on the scoreboard to benchmark your success? We say, hey, we hit a grand slam. You know, is it the number of partners? What are the simple measures to give you an indicator that you're winning, you're achieving your objectives? What are some of the things that you look at to kind of get a feel for if it's working or not? Yeah, I want to see, you know, multi-client agreements that we put together where they have more than one client. Well, we've established what the multi-client agreement is going to be, and we actually are executing against that. That's one. Two, I want to see customers going live and getting productive results out of it. And revenue growth is obviously always something we watch, but that's kind of tertiary to the first two. And if we do the first two, the partners are going to be successful. They'll get sticky with their clients. The clients will be happy because they get a faster time to market. And that's how this grows. Who stands up what solutions is really going to be the benchmark? And focus on, it's all new markets for us, I think. Roger Cleveland, thanks so much for coming on theCUBE. Really appreciate the insight. You got a big job, exciting. I think it's going to be a green field opportunity with your existing clients in a new way, a new business model innovation. Congratulations. Great, thanks for having me. Okay, we're on theCUBE here. You're watching day two coverage of SiliconANGLE Media's theCUBE. I'm John Furrier with Peter Barris. Thanks for watching. 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 age in a way that we're bound to a chair or a bed.