SoftwareOne’s Strategy for SAP Clients in DACH

In a June 2024 discussion with SoftwareOne’s DACH (Germany, Austria and Switzerland) leadership, TBR came away with three observations on what might make SoftwareOne a potentially unique player in the SAP ecosystem. At a minimum, SoftwareOne in DACH appears to be taking a different approach to the market opportunities created by the confusion around RISE with SAP, GROW with SAP, migrations to S/4HANA, and the 2027 deadline for the end of ECC support. From the presentation by and discussion with SoftwareOne’s Stephan Timme, president DACH; Vincenzo Boesch, sales leader for SAP Services; and Oliver Berchtold, service director DACH, TBR noted that:

• SoftwareOne remains focused on customers’ current SAP environments and helping those customers get to S/4HANA and to the cloud. SoftwareOne is decidedly not focused on business processes. TBR believes that distinction, while subtle, matters because almost every other IT services company and consultancy in the SAP ecosystem of SoftwareOne’s scale and larger starts with identifying business problems and processes that need to be fixed and then declaring, “Hey, look at that, SAP RISE is a perfect solution to fixing these problems!” SoftwareOne does not dance around the business issues but instead gets straight to what it excels at: solving the SAP challenges of licensing, migrating and maintaining.
• SoftwareOne recognizes SAP customers have been struggling with the confusion and costs around S/4HANA and RISE, along with all the other changes wrought by the end of support for ECC coming at the same time as the rise of generative AI (GenAI). During the SoftwareOne analyst event that TBR attended in Austin, Texas, in April, PF Grillet, SoftwareOne’s global SAP leader, told us there has “never been a more complex time for decision-making around SAP.” SoftwareOne’s answer to the confusion is a value proposition rooted in four promises: fast, easy, agile/flexible and cost-effective. TBR would summarize that value proposition and SoftwareOne DACH’s overall approach to clients in one word: And TBR suspects DACH clients value pragmatism.
• When TBR noted the absence in SoftwareOne’s presentation of the SAP catchphrase “clean core,” Vincenzo Boesch explained that for him and his colleagues, SoftwareOne’s readiness services provided a comprehensive approach to what SAP calls clean core, emphasizing the need to prepare for migration, migrate only what is needed, and then maintain the benefits of a clean core throughout the transition and ongoing functioning of SAP within the client’s environment. SoftwareOne aims to remove complexity and streamline a customer’s environment, modernize and prepare customers for innovation, and then adopt an iterative transformation approach, more focused and agile, to continue the move to full clean core over the time frame best suited to the customer’s needs and capabilities. SoftwareOne recognizes few customers will have the means and the appetite to do it all in one go. In short, SoftwareOne is honest about the challenges, does only what is necessary and sets the client up for sustained success.

On the last point, TBR believes this approach to clean core likely fits the needs of small and midsize businesses with less complex IT environments. In follow-on discussions with TBR, SoftwareOne explained that the company is not targeting all customers but rather focusing on those customers that have limited need for business transformation, already have efficient business processes, and are driven to modernize their ERP and remove the mainly technological limitations of ECC. With enterprise clients migrating complex and highly customized SAP instances, SoftwareOne’s focus purely on SAP runs the risk of discounting business process change management cost and potentially pushes complex and problematic processes into the future, setting clients up for aggravation, not success. Failure seems unlikely given SoftwareOne’s overall track record of success with SAP. A more likely outcome for SoftwareOne would be selling additional consulting services related to complex migrations.

Stepping Back to Look at the Bigger SAP Picture

Just as there has “never been a more complex time for decision making around SAP,” as Grillet said in April, there also has never been a better time for a services firm to take a pragmatic approach to helping small to midsize businesses migrate to S/4HANA. As of 4Q23, GROW with SAP had amassed only 700 customers, which pales in comparison to the estimated 24,000 customers on ECC, 14,600 on S/4HANA and 8,800 in S/4HANA Cloud. Furthermore, GROW’s install base skews toward new logos, suggesting many legacy SMB customers have been comparatively slow to adopt the offering.
 
SAP will look to change this trend, primarily through its ecosystem, which will present opportunities for partners focusing on the SMB segment. The partners that succeed will recognize the oversized impact that cost and complexity have on SMBs, which are more likely to be resource-constrained in technical staff relative to larger enterprises. These customers are more apt to pursue the simplest path to the cloud possible, aligning closely with how SoftwareOne is positioning its services.
 
The contrast between SoftwareOne’s pragmatic approach and the strategies of much of the rest of SAP’s services ecosystem is becoming more stark. While RISE and GROW still hold S/4HANA migration at their core, SAP has become vocal about the offerings’ ability to drive multiproduct sales motions. In 1Q24, SAP released new add-on packages for RISE that bundle line-of-business (LOB) suites in finance and supply chain, and the company will look to partners to lead the charge in their adoption.
 
Yet, cross-selling initiatives risk adding to the complexity of an already challenging migration and implementation process. In the coming years, efforts to encourage business AI adoption will add to the noise for customers simply looking to bring their ERP deployments to the cloud. Many customers, especially SMBs, will appreciate a service provider whose value proposition is a fast, easy, agile/flexible and cost-effective migration. This will be a key differentiator for SoftwareOne as the vendor positions as a services provider capable of cutting through the noise and guiding customers toward the path of least resistance.

Minding the Minefields Before Stepping in Them

During the early days of robotic process automation, some IT services companies and consultancies advised clients to automate their processes before evaluating the efficacies and benefits, betting that automating even less-than-optimal processes would generate cost savings. Predictably, that bet did not always pay off.
 
Two considerations for SoftwareOne: First, the company should ensure that its message and what it delivers reinforces the pragmatism of speed, flexibility and value. In other words, promote this really well to ensure SoftwareOne’s approach and value proposition stand out in a large and noisy market. Second, in TBR’s view, while Boesch and his colleagues presented a compelling value proposition for SoftwareOne’s DACH clients, this approach will not necessarily apply to the customers that need a broader business process transformation.
 
For more than a decade, many consultancies and IT services companies have been stressing a business-first and technology-second mindset, but TBR believes SoftwareOne’s approach will appeal to clients – maybe especially in but certainly also outside of DACH – that are similarly focused on pragmatic, technology-first outcomes.

SoftwareOne’s leadership hosted about 20 analysts for presentations, client briefings and breakouts dedicated to specific SoftwareOne solutions and services. In addition to attending the formal program, TBR analysts met one-on-one with select SoftwareOne leads. The following reflects both summit presentations and TBR’s ongoing research of and discussions with SoftwareOne.

Simplify access to technology

In the year since TBR attended SoftwareOne’s inaugural analyst event in Milwaukee, the company has refined its value proposition and further established its place in the market, in large part by expanding its IT services capabilities and revenues.

During his event opening presentation, Duffy outlined five client priorities that SoftwareOne intends to tackle, all of which echoed the company’s value proposition:

1. Simplify access to technology
2. Maximize ROI on technology spend
3. Enhance workforce productivity
4. Accelerate cloud adoption
5. Fast-track results in the AI and generative AI (GenAI) era

The first two priorities align with TBR’s Voice of the Customer research, which shows that IT services and consulting buyers want to get more from their IT investments and expect new technologies, in particular GenAI, will be complementary, compatible and immediately additive in relation to existing technologies.

Overall, in TBR’s view, SoftwareOne has captured the current market vibe and positioned itself well to continue its transformation from a VAR, primarily involved in cloud and software resale, to a truly full-service IT company.

SoftwareOne: “We can predict when they are going to do what”

During the opening presentation, Duffy said that SoftwareOne understands when a client bought their various IT components, how much they paid, how happy they are with IT performance, and when their licenses are up for renewal. In short: “What do clients own and how do they build things?”

That insight, combined with SoftwareOne’s overall approach, allows the company to look at the market through a “customer’s lens” and not through SoftwareOne’s own delineations of its offerings. In TBR’s view, this distinction — which starts with a recognition of how customers think — often becomes clouded by organizational constraints and sales demands within many IT services companies and consultancies. Starting with the client’s business challenges in mind is relatively easy; gaining intimate knowledge of their IT environment and spend is not.

Schlotter, in his presentation, noted that SoftwareOne can “predict when [clients] are going to do what,” because the company has tracked patterns — including software renewals, adoptions, and wholesale changes — across its vast client base. Thomson deepened that point by saying that for SoftwareOne, “IT portfolio management is our value proposition.” Importantly, SoftwareOne sees self-funding innovation as the flywheel that takes the company’s understanding of a customer’s IT environment, including opportunities to optimize that environment, and turns it into new value.

Through initial software cost takeout, ongoing IT asset management (ITAM) services and a focus on licensing expenses, SoftwareOne helps CIOs free up capital to reinvest in technology modernization. As Thomson noted, “Licensing costs were last year’s problem,” so SoftwareOne leads with the value that will come through enhanced technology but always makes explicit that funding will come through savings around licensing. In TBR’s view, this is SoftwareOne’s defining strategic advantage. Full stop.

One last point on SoftwareOne’s thinking about the market and the company’s place in it: During her breakout presentation, Burke emphasized the continuing need to recognize regional differences at client facilities and managing, selling and delivering to all clients in a local manner. The technology, by its own nature, may be region-agnostic, but clients are, by their own nature, local. SoftwareOne, therefore, embraces a be-local, stay-local culture. One can see the echo of intimate knowledge of a client’s IT environment in being enmeshed in a local environment.

Sustained growth is an alliance play

Berry, a recent addition to SoftwareOne, explained the company’s new approach to running partnerships “like a business.” While potentially overly transactional, Berry framed SoftwareOne’s approach as being “proactive with a set of prioritized [strategic partners]” whereby SoftwareOne would invest in joint solutions and joint go-to-market support, while “continuing to support clients gaining access to many software vendors.”

To evangelize within SoftwareOne, alliance partner managers would be the face of that partner while also externally educating the partner on SoftwareOne’s value proposition and capabilities. According to Berry, the alliance partner managers would maintain strategic relationships while also operating “as a business” and supporting and influencing sales efforts.

Recognizing that SoftwareOne’s client base differs from those of the giant IT services companies and global consultancies, Schlotter said that while the majority of customers have already made a commitment to one cloud or another, the corporate (not enterprise) market has less mature cloud environments and remains open to “re-migration” advice — i.e., move to another cloud — from SoftwareOne.

In TBR’s view, having the capability to serve those chance encounters with a willing cloud-hopper should not distract from the overwhelming reality that most corporate and enterprise clients have already made some kind of commitment to a cloud provider.

On specific alliances, Berry and Schlotter noted Microsoft’s importance to SoftwareOne’s revenues and long-term strategy, including the short-term opportunities around Copilot. In Schlotter’s view, “Copilot is a door-opener because now the CIO needs to talk to us.” From the hyperscalers’ perspective, according to Schlotter, among SoftwareOne’s values is the company’s ability to make hyperscalers’ value even “stickier” at a client.

In TBR’s view, no single nonfinancial metric has been more passionately sought by consultancies, IT services companies and hyperscalers than client retention.

During informal discussions and a breakout session with Grillet, two points struck TBR as particularly relevant to SoftwareOne’s partners in the SAP space. First, out of SoftwareOne’s 400 SAP specialists, only 32 reside in the Americas, providing an opening for SoftwareOne’s partners to bring opportunities and greater scale. Second, Grillet noted that around half of SoftwareOne’s new SAP leads come from the company’s own ITAM business, demonstrating — to SAP — a clear differentiation for SoftwareOne. One final note: TBR has reported previously on SoftwareOne’s SAP practice and continues to view the company’s strategy as exceptionally well-suited to SoftwareOne’s capabilities and market position.

Not every superhero wears a cape

TBR’s event perspectives typically include extensive recapping of companies’ client stories, product demonstrations and performance metrics, but we left those elements out of this report. During the event, SoftwareOne provided numerous client stories, extensive details about its capabilities and numbers to support its growth, but we wanted to emphasize that SoftwareOne represents a different kind of competitive threat and partnering opportunity, independent of the usual evaluation metrics. Intimate knowledge of a client’s IT environment, to include licensing challenges and opportunities as well as usage and costs, provides a superpower potentially significant to technology partners and threatening to competitors, especially as we move into a better analyzed and more transparent GenAI era. Forewarned is forearmed, as they say.

Vibrant, Multinational and Driving Change: India and PwC India

Consensus among presenters and attendees that India will be a massive growth market for PwC over the next few years underscored every aspect of the early May event, tempered only, perhaps, by the sentiment expressed by a number of PwC leaders and clients that India is a great growth market right now.

A shared assumption among the analysts and PwC leaders and professionals, based on the presentations and numerous sidebar conversations, was that today’s investments in India-based talent and technologies will be considered, in 10 years, to have been foundational and strategic for PwC. In short, everyone presenting was bullish on India as a market in its own right. Coincidently, The Economist published a special report on India the week before the analyst event and noted, “Since 2012, India has been the world’s fastest-growing large economy” and “the number of new business registrations in India has tripled since 2015.”

Martin Scholich, PwC’s deputy global advisory leader, described India as an “open, fast-growing, technology-driven market.” Arnab Basu, advisory leader for PwC India, added that the Indian economy has spurred the development of more “vibrant, large, multinational Indian companies,” clearly a plus when it comes to expanding PwC’s India client base.

Ritu Rekha, a partner and leader of finance transformation and a co-leader of business transformation for PwC India, noted the recent expansion of Global Capability Centers (GCCs) in India and explained that the value proposition of GCCs was evolving from cost savings to capabilities expansion to innovation, with PwC facilitating those changes and enabling growth. Basu added that the changing nature of the work completed at these centers provides a greater opportunity for PwC to bring consulting value to clients.

PwC India Chair Sanjeev Krishan noted the Indian government’s desire to see GCCs expand beyond traditional IT hubs and call centers into facilities focused on engineering services and innovation. Krishan added that PwC India is aligning with India’s road map and the priorities outlined by the Indian government, to include a sharpened focus on certain industries, and supporting the domestic market (India businesses built to serve India clients).

Krishan rounded out his talk by asserting that disruption around the world could be a net positive, as India is ahead of the curve in not only adapting to technology and business shifts but also mitigating other countries’ supply chain challenges. Excitement and growth mixed with opportunities that are based on chaos elsewhere but grounded in increasing internal stability are a good recipe for a country as well as a professional services firm.
 

Discover What Lies Ahead for IT Services and Consultancies in the Era of GenAI: Watch the Video Below Now

GenAI for the Many Indias

When talking about generative AI (GenAI) — whether in a breakout session dedicated specifically to the technology, during an individual client case study or as part of a larger discussion about the firm — PwC’s leaders repeated a consistent refrain around skills: The technology itself is not a challenge, but people can be.

PwC needs professionals skilled enough to not only develop the GenAI-enabled solutions that clients want but also bring in the right expertise to meet a client’s broader-than-technology goals. In short, GenAI has further accelerated training imperatives across the full spectrum of everything PwC delivers. GenAI is not replacing people but challenging the firm to make everyone more valuable.

During a panel session, Scott Likens, PwC’s global AI and innovation technology leader, explained that the firm adopted a “people-first strategy” with respect to all AI, with an emphasis on safety and responsibility. He further noted that within PwC at the partner level, training around GenAI has been greater quantitatively than any other nonmandated training, a sentiment echoed by other PwC partners in attendance.

Turning from internal to external support, Likens said that because “everyone can use GenAI,” the firm “must reskill and upskill,” while adding that PwC’s clients have looked to the firm for help in training clients’ own professionals. Likens also noted that while GenAI tools can be global in nature and application, they — and the professionals using them — must adhere to local standards and regulations, echoing one of the recurring themes throughout the event that global solutions and capabilities need to be tailored to the local audience.

To that point, Rajnil Mallik, partner and leader of GenAI at PwC India, reminded analysts, “There’s not one India; there are multiple Indias,” with companies of all sizes across every sector operating in vastly different regions and markets. Mallik continued to explain that PwC’s clients have been seeking advice primarily around GenAI use cases, data management, risk and necessary organizational changes and the firm has been recommending that more mature clients create an internal GenAI lab where they can focus on all AI and analytics efforts. Mallik cautioned that “for GenAI to reach [its] potential, must have some regulation” and made a comparison to the regulations and oversight of the oil and gas industry.

In a presentation focused on PwC India’s work with the government of India on a federal GenAI strategy, Santosh Misra, PwC India Partner, said the government’s priorities around GenAI started with compute power and data. The government of India understood the urgent need to address future skills with current investments, intended to fund multiple AI innovation centers and vowed to work with the GenAI startup community.

Along with these priorities, PwC was advising the government on fully embracing Trusted AI, a sentiment circling back to Likens’ “people-first strategy.” In TBR’s view, the GenAI discussions during the event provided a continuation of PwC’s strategy and story from the last few years, including the firm’s emphasis on people (skills) and client needs (not just related to the technology). The new elements in May 2024 were PwC’s close alignment with the government of India’s GenAI strategy and the firm’s responsiveness to the realities of the Indian market.

A Hunger for Partnership: Why Clients Want to Work with PwC

Notably reviving one successful component from PwC India’s 2019 analyst event, the firm once again included eight separate and diverse client use cases, including manufacturing tires, providing financial services, and enhancing government operations. While each client story provided unique perspectives on PwC’s capabilities and strengths, three common threads stood out to TBR.

First, the clients who presented were almost all techies: CTOs, heads of IT, chief information security officers (CISOs), and one exceptional client who was both the CFO and head of IT at her company (an almost perfect persona for PwC). While every use case included some traditional consulting services, the underlying current remained centered on the technological capabilities and partnerships that PwC could bring to its clients. In TBR’s view, who PwC now serves demonstrates the long-gestating shift across the entire firm, from technology-agnostic professional services to technology-imbued consulting.

Second, the use cases themselves demonstrated the breadth of PwC’s consulting capabilities, from cybersecurity managed services to cloud migration to RISE with SAP to blockchain platform building. Again, PwC and its clients mentioned traditional consulting services, such as assessment and road mapping, but the variety of use cases highlighted the diversity in PwC’s capabilities and offerings.

Lastly, every client — including the greenfield RISE with SAP example — described a long-standing relationship with PwC and included cultural fit and shared values in their reasons for selecting the firm for their specific use case. In TBR’s view, those longitudinal relationships explain the kind of answers clients provided to the question, “Why did you work with PwC?” which included the following:

• PwC displayed a “hunger for partnership.”
• “Cultural match, speed and technology capabilities.”
• Experience, capability, availability and consistency

TBR recognizes that PwC does not have a monopoly on the multidisciplinary professional services model and that any collection of eight client use cases from a PwC peer could be as diverse. Not being unique does not detract from the impressiveness of a wide-ranging set of capabilities and offerings and the execution needed to bring those services to clients at scale.

Seamless Execution, or the Satisfaction of a Job Well Done

In contrast to consultancies that mostly sell road maps, continually add on services to extend an engagement, or sell the A team and then send in the C team, PwC is believed by its clients and own staff to be the firm that gets the job done.

PwC leaders in India, both the PwC India partners and the global partners, repeatedly echoed each other in their commitment to delivering tangible results, not just planning and talking. As Krishan expressed during his keynote address, “How can I make [clients’ and PwC professionals’] execution seamless?”

As the consulting business model continues its slow and uncertain evolution, with PwC peers like EY and KPMG also searching — globally — for the best strategies and clients looking for more results and reduced spending on tech, PwC’s adherence to getting things done should resonate across the ecosystem and allow the firm to both retain its most important clients and expand, particularly in fast-growing markets such as India.