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What does industry cloud really mean? Thoughts on the Cloud Wars Battleground

If you listened in to the Industry Cloud Battleground session hosted last week by Bob Evans of #CloudWars, you know that SAP, Oracle, Google, IBM, Workday, Salesforce, and ServiceNow are competing to provide industry cloud solutions to a variety of industries. These solutions range from retail to professional services to life sciences and other process manufacturing industries such as chemical companies.

What you might not have thought about before this event – as I had not – is precisely why everyone is making such a big deal out of industry cloud solutions.

One simple reason emerged quite clearly in the introduction to the Battleground presentations: as companies adopt cloud solutions that are increasingly standardized, especially public cloud solutions, they worry that industry differentiation will be lost and that “one size fits all” won’t work for them.

It’s one thing to say that industry boundaries are shifting or blurring and that any company can benefit from business capabilities developed for another industry. That is, in fact, true. But no one can offer a full range of industry-specific functionality for all industries in one cloud solution. SAP’s industry cloud portfolio offers flexible solutions for this challenge, which is even more pressing if the public cloud solution you are adopting or considering adopting is your core ERP system.

Take SAP. We have public and private editions of SAP S/4HANA Cloud. The private edition allows customers to adopt industry-specific best practices, provided by SAP or implementation partners, and create their own customer-specific configuration. The public cloud offering currently provides cross-industry configuration suitable for some industries and does not allow customers to configure their own business processes from scratch.

As for “custom development,” you can still do custom development inside a private cloud deployment (such as extending the material master or sales order objects), but the long-term cost of ownership goes up with every one of these changes, so increasingly customers are sticking with standard. In the public cloud offering, of course, that sort of custom development within the core system is not possible.

So where do companies go if their cloud ERP deployments don’t include support for an industry business process? They look to niche vendors who are process experts. This doesn’t sound dramatically different from the old SAP R/3 software days, when companies routinely adopted third-party solutions that they integrated – or didn’t – with the SAP ERP application.

But in fact, the situation is different now. SAP’s industry cloud portfolio provides the following:

  • Core chemical industry processes enabled in SAP S/4HANA Cloud, public edition – support for these processes will be delivered soon, with many road map items scheduled for Q4 of this year

  • A curated set of industry-specific apps for each industry – some provided by SAP and some by partners – and ongoing co-innovation with customers to keep adding support for additional industry processes, with the app selection process helping ensure integration with SAP solutions

  • A way to develop custom functionality that integrates with cloud solutions, private or public, without impacting core code or impeding regular upgrades of those solutions

That’s the real story behind the figure below, which shows how the applications layer of SAP’s Intelligent Enterprise includes a range of solutions from SAP S/4HANA Cloud to public cloud solutions such as SAP Digital Manufacturing Cloud or SAP Integrated Business Planning for Supply Chain solutions. These solutions extend core business processes to other industry-specific cloud solutions from SAP and partners that are included to support additional industry- and customer-specific requirements. For each industry, different solutions in each bucket apply, but in a general sense, all these solutions combine to provide an industry cloud for a specific industry.

Figure: Applications Layer of the Intelligent Enterprise

In the figure, the layer for SAP Business Technology Platform underneath the applications layer is the platform for developing and integrating these industry cloud solutions. This platform is used by SAP, partners, and customers and provides robust functionality to enable application of intelligent technologies such as machine learning, intelligent robotic process automation, and AI to business problems faced by a specific industry. It is this platform that supports SAP’s co-innovation with customers to grow our industry cloud portfolio.

As you may realize, SAP’s industry cloud portfolio for each industry is evolving rapidly, and industry cloud solutions for the chemical industry are not yet completely defined. However, with recent developments, we are very close to creating an industry cloud solution that is tailored to processes specific to chemical manufacturers. These include the planned release of core chemical functionality in our public cloud offering, SAP S/4HANA Cloud, onboarding new partners specializing in predictive quality and asset management (such as TrendMiner and AsInt), and ongoing co-innovation with chemical companies around mass/balance solutions (with the GreenToken by SAP solution).

I hope this blog provides some insight into SAP’s strategy for the industry cloud portfolio, especially for the chemical industry. I welcome any insights and comments to take this discussion further. For more information on SAP’s industry cloud, visit SAP Community.
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