 It's the Cube, covering Sapphire Now 2017. Brought to you by SAP Cloud Platform and HANA Enterprise Cloud. Journey to the cloud requires empathy, requires transparency. We both kind of chatted about empathy is kind of an interesting thing. We don't necessarily hear a lot of CEOs talk about that. They also really talked about and drove home the point that software is now a strategy. Being open is a game changer. So a couple of things I wanted to kind of recap with you is there was two initiatives that they, SAP launched or announced today, reinforcing the pledge to listen to customers. And one of them is the SAP Cloud Trust Center, this public website that offers real-time information on the current operations of cloud solutions from SAP. Along the lines of empathy and transparency and really listening to the customers, what in your take is the SAP Cloud Trust Center and what does it really mean? Okay, maybe start with an analogy. We used to call people who did not want to outsource their infrastructure, we called them server huggers. You know, they wanted to own their infrastructure and part of allowing your software, mission-critical software, to migrate off your, out of your data centers, off-prem. Requires a certain amount of trust that takes a while. It takes a while to earn because you're going from infrastructure that you've tuned and that only supports your app to infrastructure in the cloud that's shared and that's a big change. So, essentially, SAP is saying, we'll give you a window onto how we operate this so that we can earn your trust over time. You know, sort of like a marriage, like through thick and thin, richer for poorer, because there are going to be hiccups and down times. But ideally, SAP is taking responsibility and risk off the customer. And over time, that should be, since they know better how to run their software than anyone else, that should work. So they're taking what they believe is a very reasonable risk in saying, we'll show you how well we do, and we'll show you we do it better than you. So they are, right now, there will be three operations, three services that will be visible, where customers can see planned maintenance schedules, four weeks of historical data, as well as real-time availability, security, and data privacy. You brought up a great point that I think in many, many contexts, this transcends industries, this transcends peoples, that trust has to be earned. Does this set SAP apart or differentiate them in the market? I actually think that this was the sincerest form of flattery in terms of copying Salesforce.com, because they've had this for a while. And SAP is far more mission critical, because it's sort of your system of record. It keeps track of everything that happens in your business, whereas Salesforce, it's not really a transactional system, it's more of a keeping track of your opportunities and your customers. If SAP goes down, your business goes down. Right, right. So another thing that they announced regarding, or along the same lines of this pledge to customers about being empathetic, about being transparent, is the transformation navigator. Now this came actually directly out of comments that Bill McDermott made at SAP Sapphire 2016, where the SAP really wanted to start looking at the world through the customer's perspective through their lens. So talk to us about the transformation navigator. Who is it for, what does it do, and what can people or companies expect to get from it? I think that one way to look at it is SAP made a bunch of very large and very important acquisitions, like concur for expense reporting, success factors for like HR measurement and talent management, and Ariba for procurement. And I don't think they had put together a compelling case for why you buy them all together. And I think that was the first objective of the transformation navigator, because it says it outlines the business value, helps you with transformation services, explains how all the cloud apps, which are the ones they bought, integrate with the existing ERP, whether on-prem or in the cloud, and shows you a roadmap. So it sounds to me like it's their first comprehensive attempt to say, buy our product family. I would say that the empathy part, the cloud trust center is a much deeper attempt to say, hey, we're going to make all this stuff work together. The first is a value proposition. Right, we should mention that there are two sessions at SAP Sapphire now that attendees can take advantage of under the auspices of the SAP Transformation Navigator. There is a session on digital transformation, a concept session, and there's also digital transformation deep dive sessions. So if you're around and you've got time, check those out. Another thing that we talked a lot about today, and that we heard a good amount of today, George, was this expanded Leonardo that was brought up in the keynote on main stage this morning. And we know that Leonardo was really the brand for IoT, but now it's got new ingredients. It's got these new systems of intelligence, machine learning, artificial intelligence, analytics, blockchain. What are the keys of getting value from these technologies with this new expanded Leonardo capability? I guess one way to think about it is, so the SAP core, which they called, I believe they called the either digital core or just core, which is the old system of record. And then all these new capabilities around it, which is how to extend that system of record into a system of intelligence. Again, used to be just, or last year it was IoT, but now there's so much more richness that goes around it. These are all building blocks that customers can sort of ultimately mix and match. Like you could use blockchain as a way of ensuring that there's no tampering or fraud from the bananas in Peru all the way till the grocery store in New Jersey. But if you use that in conjunction with supply chain, machine learning, replenishment, you get a much better asset utilization. I guess they're trying to say, we have your system of record, we have your mission critical data and business processes. Now it's easy to build around the edges, around the edge of that, to add the innovative processes. So it sounds like from a value perspective by embedding Leonardo into business applications, there are innovations that customers can achieve. Asset management, you talked about that. So there's clear business value. As you mentioned, it's maybe like a pick and choose that customers can decide which of these new systems of intelligence that they need, but there's clearly a business value derivation there. You could think of, yeah, where all these new services enable transformative business outcomes, the old system of record was more, as we've talked about before, was about efficiency. So it makes sense to position these capabilities as transformative. And to say that they leverage the system of record core makes SAP appear to be the more natural provider of these new services. So in this route, they did announce that they're partnering with Deloitte. What do you think they're doing here? What's the advantage that that provides to SAP's install base? So when you're embarking on these transformational business outcomes, there is severe challenging change management that has to be done. It's not just that we always have products, processes, and technologies, or people products and technologies. Here, your processes and your people have to go through much more radical change than they would in an efficiency application, which was the old system of record. And I mean, we all remember, you know, back when SAP R3 was taking off, the big system integrators got spectacularly wealthy over the change management requirements to do the efficiency rollouts. Now to do the transformational ones are far more challenging right now. So another thing that we chatted about earlier was that SAP has embedded machine learning into a new wave of applications. What are those applications and what is this really for SAP as a business? Well, my favorite analogy is something, I guess I heard from one of the SIs back in the heyday of the original SAP R3, which was traditional business intelligence and reporting was really like about steering a ship by looking backwards at its wake. And machine learning is all about predictive answers and solutions, and so you pivot now. And we've heard a lot about this concept of softwares eating the world, but now data is eating software because it's the data that programs and software about how to look forward. And some of those forward looking things are figuring out how to route a service ticket, like if something goes wrong, where does it go into the support organization? A really important top line one is customer retention, where you predict if a customer is about to churn what type of offer do you have to make, then there's a cash application, which to me is kind of administrative where it makes it easy to match and receivable like an invoice with a bank statement. Still kind of clerical, and yes, you get productivity out of it, but it's not like a top line thing like the customer churn function. There's a brand impact one where it's like, I've spent X amount to promote my brand at a sporting event, use machine vision to find out like how many logos were out there, and did it have impact that I can measure? There are a whole bunch of applications like this, and there will be more. And when I say more, I think that the more impactful ones that relate to like supply chain, where it's optimizing the flow of goods, choosing strategic suppliers. So this may be with SAP embedding machine learning into this new wave of apps. It's like a positive first step entry level for them to get up the chain of value. Yes, yes. The first ones look to be sort of like baby steps, but SAP is in a position to implement more impactful ones, but it's worth saying though, that in the spirit of data is eating software, the people who have the most data are not the enterprise application vendors. They're the public cloud vendors, and they are the sort of unacknowledged future competitors, mortal competitors for machine learning apps. Okay, interesting. So another thing that I wanted to switch here, see if we can get a couple more topics in before we wrap here. The digital twin for IoT devices. So relaunch, the relaunching of Leonardo as SAP's digital brand, they've expanded this definition. What does that mean? What is the digital twin? Okay, so digital twin is probably the most brilliant two word marketing term that's come out of our industry in a while, because GE came up with it to describe with their industrial internet of things any industrial asset or device where you took a physical version and then you created a very high fidelity software representation of it or digital representation. I don't want to say replica because it'll never be that perfect, but they would take the design information from a piece of CAD software, like maybe PTC or Autodesk. So that's as designed, there would be information from how it was manufactured. That particular instance, in addition to the, let's say all aircraft engines of this. Each instance, then how it was shipped or who was sent to, how it was operated, how it was maintained. So then you could, the aircraft engine manufacturer could provide proactive fleet maintenance for all the engines. It would be different from the, very different from having the airlines looking in their manuals saying, okay, every 50,000 miles I got to change the oil. Here, the sensors and the data go back to the aircraft engine manufacturer and they can say, well, the one that's been flying in the Middle East is exposed to sand, so that needs to be proactively maintained at a much shorter interval. And the one that's been flying across the Atlantic that gets very little gunk in it can have a much larger maintenance window. So you can optimize things in a way that the current capabilities wouldn't allow you to. And they showed an example of that with the Arctic Wind Pilot Project, which was very interesting. Yeah, where it showed windmills and not just the wind farm. You saw the wind farm, but you also see the different wear and tear or the different optimizations of individual windmills. Right. And that's pretty interesting because you can also reorient them based on climate conditions, microclimate conditions. Exactly. So last topic I wanted to dig in with you today is blockchain. So you and I chatted about this, kind of chatted about what is blockchain, this distributed ledger technology. In the simplest definition, a reliable record of who owns what and who transacts what. So from what we heard today and from our conversation, it seems like maybe SAP is dipping a toe into the water here. Give us a little bit of insight about what it is that they're doing with blockchain and maybe a couple of key use cases that they shared in supply chain, for example. Okay, so the definition you gave, I think distills it really well with one caveat, which is if it's a record of who owns what, who's done what, in the past we needed an intermediary to do that, the bank. Like when you're closing on your house, someone puts the money in, someone signs the contract and only when both are done does it exchange hands. With a blockchain, you wouldn't need someone in the middle because the transaction's not complete until on one part of the ledger, someone has put the money in, on the other part someone's put the title in. And not to sound too grandiose, but I've heard people refer to this as the biggest change in how finance and trust operates since Italian double entry bookkeeping was invented in like the 1300s or somewhere way, way back. And so if we take it to a modern usage scenario, we could take foodstuffs that are grown, let's say in Southeast Asia, they get put in a container that's locked. And then we can know that it's tamper proof because any attempt to open that would be reflected as a transaction in the blockchain. There are other probably better examples, but the idea is we can have trust in so many more scenarios without having a middleman. And so the transaction costs changed dramatically and that allows for much more friction-free transactions and business processes than we ever thought possible because having someone like a bank or a lawyer in the middle is expensive. Right, and I'm glad that you kind of brought that back to trust as we wrap up. That was kind of a key theme that we heard today and a lot of great announcements. So George, thanks so much for spending the day with me, analyzing day one of SAP Sapphire now 2017. Thank you, Lisa. And we thank you for watching. George and I will be back tomorrow, analyzing day two and talking about great things that are going on. Again, coverage from SAP Sapphire now 2017. For George Gilbert, I'm Lisa Martin. We'll see you next time.