SAP has introduced the industry cloud as part of the intelligent enterprise architecture for multiple reasons.
Among these are to enable organizations, partners, and SAP itself to extend the end-to-end processes of the intelligent suite and the business network with modular cloud solutions for the core business of SAP’s customers in their industries.
This post provides an overview of the strategy and the key concepts of SAP’s industry cloud.
Industry Cloud Strategy
SAP Business Technology Platform (SAP BTP) is the technical foundation for the intelligent suite and SAP’s industry cloud, which support comprehensive business processes inside the enterprise and beyond using the capabilities of the business network to connect to customers, suppliers, and service partners.
A new element of the intelligent enterprise, SAP’s industry cloud is based on the architecture of SAP BTP and is designed to extend the best-practice business capabilities in SAP’s business applications with innovative, new, modular solutions built by SAP and SAP’s partners.
The following key drivers and goals motivate the industry cloud strategy.
Speed of Innovation
New business models and processes require innovative capabilities. New releases of large applications like SAP S/4HANA Cloud benefit customers as long as they adopt them regularly. In the meantime, organizations often use non-SAP platforms to create new business practices and then try to integrate them, resulting in a fragmented system architecture, inconsistent UXs, and high total cost of ownership (TCO).
Adding capabilities to the applications of the intelligent suite and the business network requires an architecture that enables modular extensions by SAP and by partners that support the core business of organizations.
Ecosystems form on platforms that are open and offer all participants business value and growth potential. The platform with the best value proposition wins. The intelligent suite and the business network, in combination with the digital technologies on SAP BTP, are a compelling combination of key assets to build innovative business solutions.
Shifting Industry Boundaries
Organizations often work across industries with shifting boundaries. They continuously reevaluate their value chains, suppliers, customers, and even the needs of the customers of their customers to discover new growth potential and develop new business models. Shifting the boundary of an enterprise often requires adopting new capabilities from other industries.
The design of SAP’s industry cloud reflects the needs of enterprises to continuously evolve or even disrupt their core business in their industries. Business leaders can find a compelling selection of industry cloud solutions to extend the processes of the intelligent suite and the business network with innovative capabilities to achieve the following goals:
- Rapidly respond to new business requirements—and opportunities
- Optimize and transform the business
- Extend E2E best practice processes
- Adopt best practices from adjacent industries
Industry cloud solutions are intuitive to discover, subscribe to, and use with unified UXs, familiar design paradigms, and plug-and-play integration. These solutions complement the intelligent suite, which offers support for best practice and comprehensive processes for industries as the foundation for efficient operations of finance, material management, supply chain management, or asset management.
Next-generation practices that move the needle for the core business of enterprises emerge from the co-innovation of SAP with their customers and partners. These practices are built as industry cloud solutions that extend E2E processes and can be adopted by organizations at their own pace in the business areas where innovation for efficiency and growth matters most.
The scenario changes at the “vertical edge,” where new business opportunities are created by players who reinvent themselves and their markets—inspired or powered by digital innovation, interaction with customers and partners, or new product and service ideas.
Rapid innovation at the edge is enabled by adopting best practices from other industries by using existing industry cloud solutions—or by creating new custom solutions that use machine learning, analytics, and business networks. Speed matters in this risk versus reward environment: building on the capabilities of the intelligent suite and the business network enables rapid development and evaluation of innovative solutions that explore new opportunities at the vertical edge. Many innovative ideas may fall by the wayside, but the rewards are blockbusters that create new business models or enable disruptive business practices.
Textbooks show supply chains as a neat, linear row of companies in their industries, from raw materials to the retail shelf, connected by strands of material and money, as shown in this figure.
The reality is messy. Every day, a consumer products company tries to bypass retailers to get closer to consumers. Retailers retaliate by developing their own brands to create added value for customers. Financial services organizations wedge themselves into spaces where they see demand for their offerings.
As a result, dynamic value networks continuously change. Boundaries between industries are shifting continuously, partnerships are forged and broken, and competitors turn into partners or customers (or vice versa). This environment shapes the next business practices.
Enterprise systems need to rapidly adapt to those dynamics without sacrificing the efficiency and robustness of E2E processes and while staying open for disruptive innovation at the edges. SAP’s industry cloud enables enterprises to combine robust E2E processes with disruptive innovation at the vertical edge of their current and future business models and operations.
Business innovation starts with ideas: how to fix a problem or how to discover and unlock new value. Translating an idea into a business process and into a solution to support this process needs an innovation space that includes all the tools and content required to build and deliver quickly and predictably, allowing developers and business users to focus on getting things done and on pushing new solutions out of the door. What those innovators are less vocal about is that not every fantastic idea and fancy solution survives contact with everyday reality, so introducing an application without causing lasting damage is easily done if this application is a modular extension that doesn’t modify and add complexity to enterprise systems. A key result: enterprises dare to be more experimental and entrepreneurial if they know that experiments on a living enterprise have a reliable undo function.
Standalone applications that deliver relevant business value are few and far between. Enterprise applications always need access to essential business domains such as products, cost centers, employees, or customers. SAP solutions provide direct access to business domains and processes in the intelligent suite through APIs, while business and technology services provide the tools and infrastructure to create and run innovative industry cloud solutions.
Key Concepts of SAP’s Industry Cloud
Innovative industry cloud solutions need simple access to business domains and processes of the intelligent suite and to business networks that connect customers and suppliers. The API framework of the industry cloud provides transparent access to the key entities of the intelligent suite, simplifying the development of innovative industry cloud solutions.
Exploring and understanding an API framework can be frustrating. SAP Graph makes it simpler to access the business domains of the intelligent suite and of business networks with basic create, read, update, and delete (CRUD) operations, as shown below.
Developers building industry cloud solutions need a clear understanding of the business domain and data model that describes which entities exist in the intelligent suite and in other industry cloud solutions that have already extended the intelligent suite and the business network, as shown in this figure.
An easy-to-navigate and easy-to-understand business domain model is essential to rapidly design, build, and test new solutions. The data model, the domain model, and APIs are important to give industry cloud solutions access to the comprehensive processes of the intelligent suite. Understanding the effects of invoking an API that creates, deletes, or changes an object in the intelligent suite requires a process model that describes the side effects of those operations.
For example, before you use an API to increase the volume in a sales order, the solution designer needs to understand what will happen in the intelligent suite: Will the customer be notified? Is there an ATP check, and what happens if that comes up empty? Will the invoice be updated and the transportation order checked? The process model must provide answers to these questions based on configuration assumptions.
SAP provides SAP Reference Business Architecture as the foundation to help developers design, build, test, and validate industry cloud solutions. These industry cloud solutions also come with configuration content that describes the required configuration of the intelligent suite to enable a plug-and-play industry cloud solution.
Industry cloud solutions have access to a broad range of business and technology services that make the life of industry cloud solution developers easy. These services range from simple business services, such as currency or unit conversions, to leading-edge AI and machine learning libraries. UX libraries help solution designers give users a smooth experience in running processes that span multiple industry cloud solutions and the intelligent suite.
Subscription management, invoicing, usage monitoring, and application support are also managed through integrated central services to give users a unified experience that makes them and their business owners come back for more industry cloud solutions.
Think about SAP’s industry cloud as an operating system like Apple iOS or Microsoft Windows. Operating systems expose a wealth of reusable services to application developers, from basic file handling to network and UI functions to speech recognition. The business and technology services follow this paradigm and create an environment that fosters rapid innovation, reduces adoption hurdles, provides a unified and enjoyable UX, and offers low total cost of operations.
Each industry cloud solution comes with information about the intelligent suite and business network environment required to run the solution. This information includes the set of individual SAP and partner products and solutions—for example, SAP S/4HANA Cloud or Ariba Network.
If applicable, industry cloud solutions also provide content for integrating, customizing, and configuring intelligent suite and business network products and solutions. This content helps ensure that organizations can easily find out whether their solution environments are already suitable for plug-and-play adoption of an industry cloud solution or whether preparatory steps are required to ensure that an industry cloud solution fits in.
Editor’s note: This post has been adapted from a section of the book SAP S/4HANA Cloud: An Introduction by Thomas Saueressig, Jan Gilg, Uwe Grigoleit, Arpan Shah, Almer Podbicanin, and Marcus Homann.