CEC Cloud Transformation 2017 - Presales - Session1

Successful Cloud Business
Cloud Economics
Jöran Schumann
SAP Hybris Global Partner Enablement
(June, 2017)
Agenda
Digital Transformation Context
Partner Opportunity
Transformation Roadmap
Planning Discussion
© 2017 SAP SE or an SAP affiliate company. All rights reserved. Internal & Partners 2
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Digital Transformation Context
Unprecedented pace of change as the World Becomes Digital
5B
middle class
1B Millennials
will transform
customer demands and
growing to 5 billion people in social network the workplace
will strain resources will rewire business New +
and personal
boundaries Disruptive
business models
will accelerate change
and innovation
15B
web-enabled devices
Data
Doubling 75%
are creating an New enterprise IT spend
intelligent, connected every 12 months will be cloud-based or
create opportunities hybrid by 2016
universe
and risks for value
creation
©©2015
2017SAP
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affiliatecompany.
company.AllAllrights
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reserved. 66
A Fundamental ‘Consumption Transformation’ is Under Way
All businesses are exposed

Business as we know it is permanently changing
From “Purchases” To “XaaS”

 Long (Capital) Decisions  Short (Opex) Decisions
 Long time to Value (TCO)  Quick time to Value (TTV)
 Customer Takes Risk  Provider Takes Risk
This Shift Changes How Customer Buy and Sellers Deliver
Implication: The Merger of Services, Support and Up-Selling
Buyers Will Sellers Must

 Buy more things in smaller quantities  Sell in fast & with immediate value
 Move Consumption from Central to  Commit to a Platform enabling Decentralized
Distributed Purchasing Consumption & Delivery
 Expect Consumer grade User and  Focus on Adoption and Engagement
Customer Experience & Service
 Automate Customer Engagement for
retention and upsell
Customers Turn to Cloud for Agility and Innovation
Agile deployment,
More frequent configuration, and Rapid
Faster deployment innovation updates integration Time to Value
 Full deployment in weeks  Multiple innovation releases  Rapid process configuration  Lower initial solution and
 Mobile grade user per year  Faster adoption deployment fees
experience = less training  Customer feedback a  No lengthy upgrade cycles  No maintenance or upgrade
cornerstone of updates costs
 Packaged integration
 Prepackaged integrations
Technology Consumption is moving to the LOBs
Partner Opportunity
SaaS Platform is Creating New Valuation Outcomes for IT PS Shops
Revenue Total New

100%
Other Services
10-20% 1. Hosting SaaS Product
2. Managed Services Revenue
(Co-Innovation)
SaaS Product
Revenue 90%
SaaS Product
Consulting Services Resell Revenue
90-80% 1. T&M
2. Fixed Fee
3. Retainer
Consulting Services
1. T&M
2. Fixed Fee Consulting Services
3. Retainer
1. T&M 10%
2. Fixed Fee
Traditional System Cloud Value Added SaaS Independent

Integrator (SI) Reseller (VAR / SI) Software Vendor (ISV)
1.1 – 1.2x Revenue 2.0 – 4.0x Revenue 5.0 – 8.0x Revenue
Increasing Shareholder Value
The Importance of Taking Action…
Corporate
Governance
Only SAP Can

Effectively Core Business
Deliver At Private
Every Level –
Processes
Cloud/Hybrid
A Huge
Advantage
Force.com
HCP PaaS
Shared Services/LOB Services Migrating to

SF Public Cloud
SCM CRM
C4C HCM Procurement
Transformation Roadmap
Becoming A Cloud Company is not just a Technical Challenge
Technical challenge Commercial challenge Business challenge

 only one code line  deferred recurring revenue  anticipate the customer need
scheme
 access through web UI  best practice based value
 churn, loyalty and termination proposition
 one day upgrades for all
flexibility
customers  Understand the change in the
 customer satisfaction and customer’s behavior and decision
 enhancements with business
retention process
continuity
 quick onboarding of customers  Transform the operating model
 in bite size functional modules \
 hybrid landscapes \
 Self demo - One click try out
Cloud Transformation Mandate
Transformations Mandate Transformation Areas
A. Business Model/Offerings
 Changes are compressive and touch
most aspects of the business B. Go to Market
Marketing Sales Delivery
 Change needs to happen holistically in

C. Operating Model
multiple areas Organization and
Processes and Roles
Governance
 It cannot be incremental, or fragmented D. Financials

 It must be driven by CXO leadership Investments Revenue, Cost, Profit KPI’s & Metrics
Two Primary Business Models Options for Transformation
Installed
Extend – Base
Extension of current On-
Prem business to include
hybrid Cloud
Transformation
Models
Grow –
Creation of a stand alone
Public Cloud business New
Customer
Partners that engage in an Extension can migrate over time to a Growth model
Customer Success / Account Management
Customer Success Management will be a new role for most resellers and is focused on
managing Churn
 The selling motion never really “ends” –
Upsell/cross sell and incremental
services strategy
Sell
(Hunter Role)
 Change management and Solution Adoption
are critical to help address Churn
 Success Management will contribute up

to 50% of LTV
Transform Deliver
(Farmer Role) (Planter Role)
“First 5 Deals”
The “First 5 Deals” are critical in establishing Cloud DNA

Consisten
Emphasize: t Method-
Pre- ologies
Packaged
1. Climbing the sales and delivery learning curve Offering
2. Establishing a foundation for the offering and building

a repeatable model Reusable
Content
3. The focus should not be on margin
Establish a Repeatable
Offering Model
Marketing’s Role in the Buying Process is Expanding
60% of cloud customers have already decided on a solution before they even contact you.
Marketing
Led
Old Model: Awareness New Model
Marketing
 “Push” Research  “Pull”
Led
 Demographic  Behavior
Shop
 Capabilities  Value and best
Sales
practices
Led
 “Solution” Selling Interest

 “Value/Challenger”
 Linear
Selling
Purchase
Sales
Led
 Iterative
Enrollment Source: Norton Norris
Source: Norton Norris
Infrastructure
A repeatable digital marketing process that creates and nurtures leads is critical for success in
marketing cloud solutions
Example Digital Marketing Mix Simple Lead Nurture Process
Apps Digital demand gen

Social
10%
Leads increase 5-10x Web site (registration)
27%
Web E-mail campaign
Marketing spend
Nurture
37% increases 3-5x Webinar
Nurture
26% Tele-Qualify
Presales
Pre-Sales and Sales
Leverage “Challenger Selling” built on

how your offering can change the
customer’s business
“5 Clicks to Close”
 Emphasis up-front on business outcomes
1. One hour response to enquiries
 Pre-sales focuses on evaluating alignment to
best practices 2. Full demo in 8 hours
3. Leave them with a live instance
 Speed from lead to close is more important than
size of the deal 4. Gated 30 day pre-sales process
incorporating virtual workshop(s)
5. 30 day closing call
New Selling Motion (featuring SAP Inside Sales and Virtual Studio) New Sales Motion
Best Practices / Virtual
Studio (Replay)
Story Telling „Sales Motion“ „Demo me now“-Campaign (sap.com) Product Demonstration
Digital Whiteboarding Engagement „Turning

SAP Virtual Studio – Use cases
„Strategy live with customer“ Knowledge into Action“
New Sales Motion Tour
Virtual Studio Visit
A deeper Look into the Virtual Studio

(Berlin) Setup & Use by Michael
When: During entire Customer Engagement
(Marketing, Sales, Delivery, Service); ideal for
Deal Acceleration
Why:
• Knowledge Transfer into Customer
Meetings, adding experts, demos
• Better engage with customers and
prospects remote
• Present yourself as an innovative partner
How: Use by Sales and ePresales team
Do: Watch the Video and consider
enablement offers for “Virtual Studio Setup &
Use”, then Module 2 and “Visual Selling”,
“Virtual Sales e-Motion“ Click the link to watch the video: https://youtu.be/tc1zpM_vLSk
Delivery Best Practices
Key Success Factors
 Reduce cost of services productized package and convert

# 1 – Productized Services
these into recurring service where possible
# 2 – Fixed Fee  Price configurable productized service based on customer

Pricing Model scope and standardized deliverables
• Consultants provide business value verses technical value

# 3 – Staffing and
Skill Set and likely be business analysts and younger, more
generalists
 Manage risk at individual project level as well as against

# 4 – Risk Mitigation
overall project portfolio. Must align with fixed fee
Delivery Transformation: Illustration
Cloud Deployment offers significant benefits compared to traditional implementation.

Traditional On Prem Cloud Benefits
Productized services with
Productized Highly customized consulting Services Margin
pre-defined deliverables
Services assignments Efficiency
using standardized tools
Implementation team of min. Team of 2 – 3 Advisors Utilization Rate

Project Staffing 5 – 6 people (better mix senior /junior) Services Margin
Significant share of consulting Most activities performed Utilization Rate

Delivery Mode performed onsite remotely Services Margin
Deployment Implementation effort difficult Average project effort of Services Revenue

Effort to compress below 120 days 60 days – represent 1-2x Subs Efficiency
Enablement content embedded Cost to Entry

Enablement Training a challenge
in Cloud solution Time to Break-Even
Call to Action
1 Drive To First 5 Deals
2 Develop Repeatable Pre-Packaged Offerings and Methodologies
3 Define Your Unique Cloud Value Proposition
4 Establish Your Marketing Infrastructure
5 Hire and Train Pre-Sales and Sales Resources
6 Adopt a Value Selling Approach
Operations
Operations
The Cloud business can’t be a “side business,” it requires focus and should essentially be
treated as a start-up venture:
Critical building blocks
 There will be changes in focus and
compensation for existing roles,
and the addition of new roles
1. A single focused leader,
 The business model is disruptive, preferably the CEO who lives
expect significant push back from and breathes Cloud
entrenched teams
2. A separate organization/team for
the marketing, sales, delivery,
and account mgmt functions
3. Investment capital to hire people

in front of revenues and profit
realization
The Four Fundamentals of Cloud Economics
1. Reducing customer acquisition and

retention cost with effective marketing,
sales & success management
2. Increasing
4. Reducing
average
churn through 5. Driving increases
recurring
increases in
revenue per Value in growth, profit,
“loyalty” and and valuation
customer
stickiness
3. Increasing Life
Time Value
per customer
How does a SaaS business make money?
Cloud Metrics (Illustrative – not to scale)
€ CAC recovery
12 – 18 months LTV
Acquire Deliver
X
CAC & Time
Delivery
Funding requirement
Costs Revenues
CAC Churn LTV ARR
SAP Delivery Margins Upsell
Cloud creates significant opportunity across a range of
revenue streams
20%+ 30%+ 30%+ 15%
Recurring
Recurring Intellectual
Service Attach is 1-5x Subscription
Services Property
Other
ACV, depending on: Revenue
• Country people costs Program and Develop and Revenue

vary On initial sale change market one from 3rd party
management offs apps
• Solution, scope, number
of countries in scope, Business
case and
Develop
On upsell formal add
• Level of back-end project
ons
strategy
integration, API’s, add-
ons Data
On renewal
• Margins can improve with migration
off-site delivery
Training and
key user
support
Using the “CAC & LTV Calculator”
Illustrating CAC & LTV for a single customer
Sheet 1: Cover & Disclaimer Sheet 3: Customer Lifetime Value
• Note that the currency selector is for display purposes 1. Select “Discount” or “Commission” (cell C9) and confirm
only. There is no currency conversion rate in row 9. (Note: In v8 the calculator cannot differentiate
• Recommended reading and research – see the web links between “new” and “renewal” transactions)
at the bottom of the sheet 2. Enter first year Y1 MSRP value for average transaction
to be modelled, and upsell % (Note: All at annual
values)
Sheet 2: Customer Acquisition Cost 3. Enter end-customer discount. Start with nil.
Capture here your combined marketing and sales costs:
4. Enter total, one-off consulting services for initial project
1. Sales organisation headcount, fully loaded cost and (all types). Add one-off services expected for each
allocation to the cloud business following year.
2. Marketing headcount, any costs for outsourced lead 5. Enter any “other” recurring revenues expected, eg.
generation and other marketing spend (events, support services, apps, etc.
campaigns, etc.)
6. In the ”Discount” model only, enter any additional,
► Now capture the number of new customer transactions customer specific discount offered by SAP
expected, per annum
7. Modify the Margins in rows 40 and 42 to reflect your
expectations.
8. Review Contribution and Margin calculations, Customer
Lifetime Value and finally the ratio of LTV : CAC
Partner Economic Model
Click the image (URL):
Planning Discussion
Current State – Discussion
 What business are you in?

– Trusted advisor? Business Market
• Revenues • Offerings
– Technology Services? • Customers • On Prem/Cloud
• Growth (3 yrs)
– Digital Transformation?
 What true core competency differentiates you?
 What are your business objectives?
– Installed base growth?
Customers Model
– New customer growth? • Segments • License/Subscription
 What are the gaps that separate you from your • LE/GB
• Installed Base/New
•
•
Pro Serv
Managed Svcs
aspirations? • Development
Implications for Value Added Resellers and Systems Integrators
• Your customers must transform around Digital

Gartner reports that Digital Business incompetency will
cause 25% of businesses to lose their market position by 2017
• IT (your customers) should step into a leadership role
• You have the opportunity to guide IT to drive the change
• Is your company leading by example (and becoming Digitally

competent)?
Call to Action
1 Delivery will change dramatically
2 Productize delivery offerings
3 Develop customer success management team
4 Develop capabilities to track key usage and other success metrics
5 Begin with a leader and change agent
6 Invest up front to learn and establish the core selling and delivery team
Key Session Take-Aways
1. Requires 100% commitment from the top

2. Take the Leap! – Learn by doing
3. Three key functions change a lot: Marketing, Sales and Delivery
– Packaging and process drive speed
– Relationship management is critical
4. Time is a precious commodity - Time to Revenue and Time to Value
– We have the installed base vs. our competition
– If we don’t position Cloud, they will!
5. We need a joint plan
Thank you
© 2017 SAP SE or an SAP affiliate company. All rights reserved.

CEC Cloud Transformation 2017 - Presales - Session1

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CEC Cloud Transformation 2017 - Presales - Session1

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Successful Cloud Business

Digital Transformation Context

SAP PartnerEdge – Customer

 Access event registration links, replays, slides &

All businesses are exposed

From “Purchases” To “XaaS”

Implication: The Merger of Services, Support and Up-Selling

Buyers Will Sellers Must

Revenue Total New

Traditional System Cloud Value Added SaaS Independent

Increasing Shareholder Value

Only SAP Can

Shared Services/LOB Services Migrating to

Technical challenge Commercial challenge Business challenge

Transformations Mandate Transformation Areas

 Change needs to happen holistically in

 It cannot be incremental, or fragmented D. Financials

 Success Management will contribute up

The “First 5 Deals” are critical in establishing Cloud DNA

2. Establishing a foundation for the offering and building

 “Solution” Selling Interest

Source: Norton Norris

Example Digital Marketing Mix Simple Lead Nurture Process

Apps Digital demand gen

Leverage “Challenger Selling” built on

Story Telling „Sales Motion“ „Demo me now“-Campaign (sap.com) Product Demonstration

Digital Whiteboarding Engagement „Turning

A deeper Look into the Virtual Studio

Key Success Factors

 Reduce cost of services productized package and convert

# 2 – Fixed Fee  Price configurable productized service based on customer

• Consultants provide business value verses technical value

 Manage risk at individual project level as well as against

Cloud Deployment offers significant benefits compared to traditional implementation.

Implementation team of min. Team of 2 – 3 Advisors Utilization Rate

Significant share of consulting Most activities performed Utilization Rate

Deployment Implementation effort difficult Average project effort of Services Revenue

Enablement content embedded Cost to Entry

1 Drive To First 5 Deals

2 Develop Repeatable Pre-Packaged Offerings and Methodologies

3 Define Your Unique Cloud Value Proposition

4 Establish Your Marketing Infrastructure

5 Hire and Train Pre-Sales and Sales Resources

6 Adopt a Value Selling Approach

3. Investment capital to hire people

1. Reducing customer acquisition and

• Country people costs Program and Develop and Revenue

Click the image (URL):

 What business are you in?

• Your customers must transform around Digital

• IT (your customers) should step into a leadership role

• You have the opportunity to guide IT to drive the change

• Is your company leading by example (and becoming Digitally

1 Delivery will change dramatically

2 Productize delivery offerings

3 Develop customer success management team

4 Develop capabilities to track key usage and other success metrics

5 Begin with a leader and change agent

1. Requires 100% commitment from the top

© 2017 SAP SE or an SAP affiliate company. All rights reserved.

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