Tuesday, September 18, 2018

How hybrid cloud deployments gain traction via Equinix datacenter adjacency coupled with the Cloud28+ ecosystem

The next BriefingsDirect hybrid cloud advancement interview explores how the triumvirate of a global data center hosting company, a hybrid cloud platform provider, and a global cloud community are solving some of the most vexing problems for bringing high-performance clouds to more regions around the globe.

We will now explore how Equinix, Microsoft Azure Stack, and Hewlett Packard Enterprise (HPE)’s Cloud28+ are helping managed service providers (MSPs) and businesses alike obtain world-class hybrid cloud services.

Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or  download a copy.

Here to explain more about new breeds of hybrid cloud solutions are David Anderson, Global Alliance Director at Equinix for its Microsoft alliance, and Xavier Poisson, Vice-President of Worldwide Services Providers Business and Cloud28+ at HPE. The discussion is moderated by Dana Gardner, Principal Analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: There seems to be a paradox when it comes to hybrid cloud -- that it works best in close proximity technologically yet has the most business payoff when you distribute it far and wide. So how are Equinix, Microsoft, and HPE together helping to solve this paradox of proximity and distribution?

Anderson: That’s a great question. You are right that hybrid cloud does tend to work better when there is proximity between the hybrid installation and the actual public cloud you are connecting to. That proximity can actually be lengthened with what we call interconnectedness.

Interconnectedness is really business-to-business (B2B) and business-to-cloud private network Ethernet connections. Equinix is positioned with more than 200 data centers worldwide, the most interconnections by far around the world. Every network provider is in our data centers. We also work with cloud providers like Microsoft. The Equinix Cloud Exchange connects businesses and enterprises to those clouds through our Equinix Cloud Exchange Fabric. It’s a simple one-port virtual connection, using software-defined networking (SDN), up to the public clouds.

That provides low-latency and high-performance connections -- up to 10 Gigabit network links. So you can now run a hybrid application and it’s performing as if it’s sitting in your corporate data center not far away.

The idea is to be hybrid and to be more dispersed. That dispersion takes place through the breadth of our reach at Equinix with more than 200 data centers in 45 metro areas all over the world -- and so, interconnected all over.

Plus, there are more than 50 Microsoft Azure regions. We’re working closely with Microsoft so that we can get the cloud out to the customers fairly easily using the network service providers in our facilities. There are very few places on Earth where a customer can’t get from where they are to where we are, to a cloud – and with a really high-quality network link.

Gardner: Xavier, why is what we just heard a good fit for Cloud28+? How do you fit in to make hybrid clouds possible across different many regions?

Poisson: HPE has invested a lot in intellectual property in building our own HPE and Microsoft Azure Stack solution. It’s designed to provide the experience of a private cloud while using Microsoft as your technology’s tool.

Our customers want two things. The first is to be able to execute clouds on-premises, but also to connect to wider public clouds. This is enabled by what we are doing with a partner like Equinix. We can jump from on-premises to off-premises for an end-user customer.

The second is, when a customer decides to go to a new architecture around hybrid cloud, they may need to get reach and this reach is difficult now.

So, how we can support partners to find the right place, the right partners at the right moment in the right geographies with the right service level agreements (SLAs) for them to meet their business needs?

The fact that we have Equinix inside of Cloud28+ as a very solid partner is helping our customers and partners to find the right route. If I am an enterprise customer in Australia and I want to reach into Europe, or reach into Japan, I can, through Cloud28+, find the right service providers to operate the service for me. But I will also be hosted by a very compelling co-location company like Equinix, with the right SLAs. And this is the benefit for every single customer.

This has a lot of benefits for our MSPs. Why? Because our MSPs are evolving their technologies, evolving their go-to-market strategies, and they need to adapt. They need to jump from one country to another country, and they need to have a sustainable network to make it all happen. That’s what Equinix is providing.
Learn How Cloud28+ Accelerates
Cloud Adoption Around the Globe
We not only help the end-user customers, but we also help our MSPs to build out their capabilities. Why? We know that with interconnectedness, as was just mentioned, that they can deliver direct cloud connectivity to all of their end users.

Together we can provide choice for partners and end-user customers in one place, which is Cloud28+. It’s really amazing. 

Gardner: What are some of the compelling new use cases, David? What are you seeing that demonstrates where this works best? Who should be thinking about this now as a solution?

Data distribution solutions

Anderson: The solution -- especially combined with Microsoft Azure Stack -- is suited to those regions that have had data sovereignty and regulatory compliance issues. In other words, they can’t actually put their data into the public cloud, but they want to be able to use the power, elasticity, and the compute potential of the public cloud for big data analytics, or whatever else they want to do with that data. And so they need to have that data adjacent to the cloud.

Same for an Azure Stack solution. Oftentimes it will be in situations where they want to do DevOps. The developers might want to develop in the cloud, but they are going to bring it down to a private Azure Stack installation because they want to manage the hardware themselves. Or they actually might want to run that cloud in a place where public Azure may not yet have an availability zone. That could be sub-Saharan Africa, or wherever it might be -- even on a cruise ship in the middle of the ocean.

There's a lot of legacy hardware out there. The need is for applications to run on a cloud, but the hardware can't be virtualized. These workloads could be moved to Equinix and then connect to a cloud.
Another use case that we are driving hard right now with Microsoft, HPE, and Cloud28+ is on the idea of an enterprise cage, where there is a lot of legacy hardware out there. The need is for applications to run to some degree on a cloud, but the hardware can’t be virtualized. But these workloads could be moved to an Equinix data center and connected to the cloud. They can then use the cloud for the compute part, and all of a sudden they are still getting value out of that legacy hardware, in a cloud environment, in a distributed environment.

Other areas where this is of value include a [data migration] appliance that is shipped out to a customer. We’ve worked a lot with Microsoft on this. The customer will put up to 100 TB of data on the appliance. It then gets shipped to one of our data centers where it’s hooked up through high-speed connection to Azure and the data can be ingested into Azure.

Now, that’s a onetime thing, but it gives us and our service providers on Cloud28+ the opportunity to talk to customers about what they are going to do in the cloud and what sort of help might you need.

Scenarios like that provide an opportunity to learn more about what enterprises are actually trying to do in the cloud. It allows us then to match up the service providers in our ecosystem, which is what we use Cloud28+ for with enterprise customers who need help.

Gardner: Xavier, it seems like this solution democratizes the use of hybrid clouds. Smaller organizations, smaller MSPs with a niche, with geographic focus, or in a vertical industry. How does this go down market to allow more types of organizations to take advantage of the greatest power of hybrid cloud?

Hybrid cloud power packaged

Poisson: We have packaged the solutions together with Equinix by default. That means that MSPs can just cherry pick to provide new cloud offerings very quickly.

Also, as I often say, the IT value chain has not changed that much. It means that if you are a small enterprise, let’s say in the United States, and you want to shape your new generation of IT, do you go directly to a big cloud provider? No, because you still believe in your systems integrator (SI), and in your value-added reseller (VAR).

Interestingly, when we package this with Equinix and Microsoft, having this enterprise cage, the VARs can take the bull by the horns. Because, when the customer comes to them and says, “Okay, what should I do, where should put my data, how can I do the public cloud but also a private cloud?” The VAR can guide them because they have an answer immediately -- even for small- to medium-sized (SMB) businesses.
Learn How Cloud28+ Accelerates
Cloud Adoption Around the Globe
Our purpose at Cloud28+ is to explain all of this through thought leadership articles that we publish -- explaining the trends in the market, explaining that the solutions are there. You know, not a lot of people know about Equinix. There are still people who don’t know that they can have global reach.

If you are a start-up, for example, you have a new business, and you need to find MSPs everywhere on the globe. How you do that? If you go to Cloud28+ you can see that there are networks of service providers or learn what we have done with Equinix. That can empower you in just a few clicks.

We give the access to partners who have been publishing more than 900 articles in less than six months on various topics such as security, big data, interconnection, globalization, artificial intelligence (AI), and even the EU’s General Data Protection Regulation (GDPR). They learn and they find offerings because the articles are connected directly to those offering services, and they can get in touch.

We are easing the process -- from the thought leadership, to the offerings with explanations. What we are seeing is that the VARs and the SIs are still playing an enormous role. 

So, it’s not only Microsoft, with HPE, and with the data centers of Equinix, but we put the VARs into the middle of the conversation. Why? Because they are near the SMBs. We want to make everything as simple as you just put in your credit card and you go. That’s fair enough for some kinds of workloads.

But in most cases, enterprises still go to their SIs and their VARs because they are all part of the ecosystem. And then, when they have the discussion with their customers, they can have the solution very, very quickly.

Gardner: Seems to me that for VARs and SIs, the cloud was very disruptive. This gives them a new lease on life. A middle ground to take advantage of cloud, but also preserve the value that they had already been giving.

Take the middle path

Poisson: Absolutely. Integration services are key, application migrations are key, and security topics are very, very important. You also have new areas such as AI and blockchain technologies.

For example, in Asia-Pacific and Europe, Middle East and Asia (EMEA), we have more-and-more tier-two service providers that are not only delivering their best services but are now investing in practices around AI or blockchain -- or combine them with security -- to upgrade their value propositions in the market.

For VARs and for Sis, it is all benefit because they know that solutions exist, and they can accompany their customers to the transition. For them, this is all also a new flow of revenue.

Gardner: As we get the word out that these distributed hybrid cloud solutions are possible and available, we should help people understand which applications are the right fit. What are the applications that work well in this solution?

The hybrid solution gives SIs, service providers, and enterprises more flexibility than if they try and move an application completely into the cloud.
Anderson: The interesting thing is that applications don’t have to be architected in a specific way, based on the way we do hybrid solutions. Obviously, the apps have to be modern.

I go back to my engineering days 25 years ago, when we were separating data and compute and things like that. If they want to write a front-end and everything in platform-as-a-service (PaaS) on Azure and then connect that down to legacy data, it will work. It just works.

The hybrid situation gives SIs, service providers, and enterprises more flexibility than if they try and move an application, whatever it is, completely into the cloud, because that actually takes a lot more work.

Some service providers believe that hybrid is a transitory stage, that enterprises would go to hybrid just to buy them time till they go fully public cloud. I don’t believe Microsoft thinks that way, and we certainly don’t think that way. I think there is a permanent place for hybrid cloud.

In fact, one of the interesting things when I first got to Equinix was that we had our own sellers saying, “I don’t want to talk to the cloud guys. I don’t want them in our data centers because they are just going to take my customers and move them to the cloud.”

The truth of the matter is that demand for our data centers has increased right along with the increase in public cloud consumption. So it’s a complementary thing, not a substitution thing. They need our data centers. What they are trying to do now is to close their own enterprise data centers.

And they are getting into Equinix and finding out that the connectivity possibilities and -- especially in the Global 2000 enterprises -- nobody wants cloud vendor lock-in. They are all multicloud. Our Equinix Cloud Exchange Fabric solution is a great way to get in at one point and be able to connect to multiple cloud providers from right there.

It gives them more flexibility in how they design their apps, and also more flexibility in where they run their apps.

Gardner: Do you have any examples of organizations that have already done this? What demonstrates the payoffs? When you do this well, what do you get for it?

Cloudify your networks

Anderson: We have worked with customers in these situations where they have come in initially for a connection to Microsoft, let’s say. Then we brought them together with a service provider and worked with them on network transformations to the point where they have taken their old networks – a lot of Multiprotocol Label Switching (MPLS) and everything else that were really very costly and didn’t perform that well -- and ended up being able to rework their networks. We like to say they cloudify their networks, because a lot of enterprise networks aren’t really ready for the heavy load of getting out to the cloud.

And we ended up increasing their performance by up to 10, 15, 20 times -- and at the same time cut their networking costs in half. Then they can turn around and reinvest that in applications. They can also then begin to spin up cloud apps, and just provision them, and not have to worry about managing the infrastructure.

They want the same thing in a hybrid world, which is where those service providers that we find on Cloud28+ and that we amplify, come in. They can build those managed services, whether it’s a managed Azure Stack offering or anything else. That enables the enterprise IT shops to essentially do the same thing with hybrid that they are doing with public cloud – they can buy it on a consumption model. They are not managing the hardware because they are offloading that to someone else.
Learn How Cloud28+ Accelerates
Cloud Adoption Around the Globe
Because they are buying all of their stuff in the same model -- whether it’s considered on-premises or a third-party facility like ours, or a totally public cloud. It’s the same purchasing model, which is making their procurement departments happy, too.

Gardner: Xavier, we have talked about SIs, VARs, and MSPs. It seems to me that for who we used to call independent software vendors (ISVs), the former packaged software providers, that this hybrid cloud model also offers a new lease on life. Does this work for the applications providers, too?

Extend your reach

Poisson: Yes, absolutely. And we have many, many examples in the past 12 months of ISVs, software companies, coming to Cloud28+ because we give them the reach.

Lequa AB, a Swedish company, for example, has been doing identity management, which is a very hot topic in digital transformation. In the digital transformation you have your role when you speak to me, but in your other associations you have another role. The digital transformation of these roles needs to be handled, and Lequa has done that.

And by partnering with Cloud28+, they have been able to extend their reach in ways they wouldn’t ever have otherwise. Only in the past six months, they have been in touch with more than 30 service providers across the world. They have already closed deals.
If I am only providing baseline managed information services, how can I differentiate from the hyperscale cloud providers? MSPs now care more about the applications to differentiate themselves in the market.

On one side of the equation for ISVs, there is a very big benefit -- to be able to reach ready-to-be-used service providers, powered by Equinix in many cases. For the service providers, there is also an enormous benefit.

If I am only providing baseline managed information services, how can I differentiate from the hyperscale cloud providers? How can I differentiate from even my own competitors? What we have seen is that the MSPs are now caring more about the application makers, the former ISVs, in order for them to differentiate in the market.

So, yes, this is a big trend and we welcome into Cloud28+ more and more ISVs every week, yes.

Gardner: David, another concern that organizations have is as they are distributing globally, as there are more moving parts in a hybrid environment, things become more complex. Is there something that HPE is doing with new products like OneSphere that will help? How do we allow people to gain confidence that they can manage even something that’s a globally distributed hybrid set of applications?

Confident connections in global clouds

Anderson: There are a number of ways we are partnering with HPE, Microsoft, and others to do that. But one of the keys is the Equinix Cloud Exchange Fabric, where now they only have to manage one wire or fiber connection in a switching fabric. That allows them to spin up connections to virtually all of the cloud providers, and span those connections across multiple locations. And so that makes it easier to manage.

The APIs that drive the Equinix Cloud Exchange Fabric can be consumed and viewed with tools such as HPE OneSphere to be able to manage everything across the solution. The MSPs are also having to take on more and be the ones that provide management.

As the huge, multinational enterprises disperse their hybrid clouds, they will tend to view those in silos. But they will need one place to go, one view to look at, to know what’s in each set of data centers.

At Equinix, our three pillars are the ideas of being able to reach everywhere, interconnect everything, and integrate everything. That idea says we need to be the place to put that on top of HPE with the service providers because then that gives you that one place that reaches those multiple clouds, that one set of solid, known, trusted advisors in HPE and the service providers that are really certified through Cloud28+. So now we have built this trusted community to really serve the enterprises in a new world.

Gardner: Before we close out, let’s take a look into the crystal ball. Xavier, what should we expect next? Is this going to extend to the edge with the Internet of Things (IoT), more machine learning (ML)-as-a-service built into the data cloud? What comes next?

The future is at the Edge

Poisson: Today we are 810 partners in Cloud28+. We cover more than 560 data centers in more than 34 countries. We have been publishing nearly 30,000 cloud services in only two years. You see how fast it has been growing.

What do we expect in the future? You named it: Edge is a very hot topic for us and for Equinix. We plan to develop new offering in this area, even new data center technology. It will be necessary to have new findings around what a data center of tomorrow is, how it will consume energy, and what we can do with it together.

We are already engaged in conversations between Equinix, ourselves, and another company within the Cloud28+ community to discuss what the future data center could be.

A huge benefit of having this community is that by default we innovate. We have new ideas because it's coming through all of the partners. Yes, edge computing is definitely a very hot spot.

For the platform itself, I believe that even though we do not monetize in the data center, which is one of the definitions of Cloud28+, the revenues at the edge are for the partners, and this is also by design.

Nonetheless, we are thinking of new things such as a smart contracting around IoT and other topics, too. You need to have a combination of offerings to make a project. You need to have confidentiality between players. At the same time, you need to deliver one solution. So next it may be solutions on best ways for contracting. And we believe that blockchain can add a lot of value in that, too.

Cloud28+ is a community and a digital business platform. We are thinking of such things as smart contracting for IoT and using blockchain in many solutions.
Cloud28+ is a community and a digital business platform. By the way, we are very happy to have been recognized as such by Gartner in several research notes since September 2017. We want to start to include these new functions around smart contracting and blockchain.

The other part of the equation is how we help our members to generate more business. Today we have a module that is integrated into the platform to amplify partner articles and their offerings through social media. We also have a lead-generation engine, which is working quite well.

We want to launch an electronic lead-generation capability through our thought leadership articles. We believe that if we can give the feedback to the people filling in these forms, with how they position versus all of their peers, on how they position versus the industry analysts, they will be very eager to engage with us.

And the last piece is we need to examine more around using ML across all of these services and interactions between people. We need to deep dive on this to find what value we can bring from out of all this traffic, because we have such traffic now inside Cloud28+ that trends are becoming clear.
Learn How Cloud28+ Accelerates
Cloud Adoption Around the Globe

For instance, I can say to any partner that if they publish an article on what is happening in the public sector today, it will have a yield that is x-times the one that has been published at an earlier date. All this intelligence, we have it. So what we are packaging now is how to give intelligence back to our members so they can capture trends very quickly and publish more of what is most interesting to the people.

But in a nutshell, these are the different things that we see.

Gardner: And I know that evangelism and education are a big part of what you do at Cloud28+. What are some great places that people can go to learn more?

Poisson: Absolutely. You can read not only what the partners publish, but examine how they think, which gives you the direction on how they operate. So this is building trust.

For me, at the end of the day, for an end-user customer, they need to have that trust to know what they will get out of their investments.

Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or  download a copy. Sponsor: Hewlett Packard Enterprise.

You may also be interested in:

Wednesday, September 12, 2018

How data analytics-rich business networks help close the digital transformation gap

The next BriefingsDirect thought leadership discussion explores how intelligence gleaned from business applications, data, and networks provides the best new hope for closing the digital transformation gap at many companies.

A recent global survey of procurement officers shows a major gap between where companies are and where they want to be when it comes to digital transformation. While 82 percent surveyed see digital transformation as having a major impact on processes -- only five percent so far see significant automation across their processes.

How can business networks and the cloud-based applications underlying them better help companies reach a more strategic level of business intelligence and automation?

Listen to the podcast. Find it on iTunes. Get the mobile app. Read a full transcript or download a copy

To find out, BriefingsDirect recently visited SAP in Palo Alto, Calif. to sit down with Darren Koch, Chief Product Officer at SAP Ariba. The discussion is moderated by Dana Gardner, Principal Analyst at Interarbor Solutions.

Here are some excerpts:

Gardner: What's holding companies back when it comes to becoming more strategic in their processes? They don’t seem to be able to leverage intelligence and automation to allow people to rise to a higher breed of productivity.

Koch: I think a lot of it is inertia. The ingrained systems and processes that exist at companies impact a lot of people. The ability for those companies to run their core operations relies on people and technology working together. The change management required by our customers as they deploy solutions -- particularly in the move from on-premises to the cloud -- is a major inhibitor.

But it's not just the capabilities and the change in the new technology. It's really re-looking at -- and reimagining -- the processes, the things that existed in the highly customized on-premises world, and the way those things change in a digital-centric cloud world. They are fundamentally different. 

Gardner: It's always hard to change behavior. It seems like you have to give people a huge incentive to move past that inertia. Maybe that's what we are all thinking about when we bring new data analytics capabilities to bear. Is that what you looking at, incentivization -- or how do we get that gap closed?

Reimagining change in the cloud

Koch: You are seeing more thought leadership on the executive side. You are seeing companies more willing to look holistically at their processes and saying, “Is this something that truly differentiates my company and adds sustainable competitive advantage?” And the answer on some processes is, “No."

And so, we see more moving away from the complex, on-premises deployments that were built in a world where a truckload of consultants would show up and configure your software to do exactly what you wanted. Instead, we’re moving to a data-centric best-practices type of world that gives scale, where everybody operates in the same general business fabric. You see the emergence of things like business networks.

Gardner: And why the procurement and supply chain management folks? Why are they in an advantageous position to leverage these holistic benefits, and then evangelize them?

Koch: There's been a ton of talk and innovation on the selling side, on the customer resource management (CRM) side, such as our announcement of C/4HANA at Sapphire 2018 and the success in the cloud generally in the CRM space. What most people stop at is, for every seller there's a buyer. We represent the buy-side, the supply chain, the purchasing departments. And now from that buy-side we have the opportunity to follow the same thought processes on the sell-side.

The beauty at SAP Ariba is that we have the world's biggest business network. We have over $2 trillion of buy-side spend and our ability to take that spend and find real insights and real actionable change to drive value at the intersection of buyers and sellers. This is where we’re headed.

Gardner: It seems like we are moving rapidly beyond the buy and sell being just transactional and moving more to deeper partnerships, visibility, of understanding the processes on both sides of the equation. That can then bring about a whole greater than the sum of the parts.

Understanding partners 

Koch: Exactly. I spent 10 years working in the consumer travel space, and my team in particular was working on how consumers choose hotels. It's a very complex purchasing decision.

There are location aspects, there are quality aspects, there are amenities, room size, obviously price, and there are a lot of non-price actors that go into the purchase decision, too. When you look at what a procurement audience is doing, what a company is doing, there are a lot of such non-price factors. It’s exactly the same problem.

The investments that we are making inside of SAP Ariba get at allowing you to see things like supplier risk. You are seeing things like the Ariba Network handling direct materials. You are seeing time, quality, and risk factors -- and these other non-price dimensions -- coming in, in the same way that consumers do when choosing a hotel. Nobody chooses the cheapest one, or very few people do. Usually it’s a proper balance of all of these factors and how they best meet the total needs. We are seeing the same thing on the business procurement side.
When you look at what a procurement audience is doing, what a company is doing, there are now a lot of non-price factors.

Gardner: As consumers we have information at our fingertips -- so we can be savvy and smart – probably better than at any other time in history. But that doesn’t always translate to a larger business-to-business (B2B) decisions.

What sort of insights do you think businesses will want when it comes that broader visibility?

Koch: It starts with the basics. It starts with, “How do I know my suppliers? How do I add scale? Is this supplier General Data Protection Regulation (GDPR)-compliant? Do they have slavery or forced labor in their supply chain? Where are they sourcing their materials?” All of these aspects around supplier risk are the basics; knowing your supplier well is the basic element.

Then when you go beyond that, it's about things like, “Well how do I weigh geographic risk? How do I weigh supply chain risk?” And all the things that the practitioners of those disciplines have been screaming about for the rest of their companies to pay attention to.

That’s the new value they are providing. It's that progression and looking at the huge opportunity to see the way companies collaborate and share data strategically to drive efficiency into processes. That can drive efficiency ultimately into the whole value chain that leads to a better customer experience at the end.

Gardner: Customer experience is so important across the board. It must be a big challenge for you on the product side to be able to contextually bring the right information and options to the end-user at the right time. Otherwise they are overwhelmed, or they don't get the benefit of what the technology and the business networks can do.

What are you doing at SAP Ariba to help bring that right decision-making -- almost anticipating where the user needs to go -- into the actual applications and services?

Intelligent enterprise

Koch: That begins with our investments in re-platforming to SAP HANA. That feeds into the broader story about the intelligent enterprise. Purchasing is one facet, supply-chain management is a facet, sales is a facet, and production -- all of these components are elements of a broader story of how you synthesize data into a means where you have a digital twin of the whole enterprise.

Then you can start doing things like leveraging the in-memory capabilities of HANA around scenario planning, and around, “What are the implications of making this decision?”

What happens when a hurricane hits Puerto Rico and your supply chain is dramatically disrupted? Does that extend to my suppliers’ suppliers?  Who are my people on the ground there, and how are they disrupted? How should my business respond in an intelligent way to these world events that happen all the time?

Gardner: We have talked about the intelligent enterprise. Let's hypothetically say that when one or two -- or a dozen -- enterprises become intelligent that they gain certain advantages, which compels the rest of their marketplace to follow suit.

When we get to the point where we have a critical mass of intelligent enterprises, how does that elevate to an intelligent economy? What can we do when everyone is behaving with this insight, of having tools like SAP Ariba at their disposal?

Koch: You hit on a really valuable and important point. Way back, I was an economics major and there was a core thing that I took away 20 years ago from my intro to macroeconomics class. The core of it was that everything is either value or waste. Every bit of effort, everything that's produced around the world, all goods or services are either valuable or a waste. There is nothing in between.

The question then as we look at value chains, when we look at these webs of value, is how much of that is transaction cost? How much of that is information asymmetry? How much of that is basic barriers that get in the way of ultimately providing value to the end consumer? Where is all of that waste?

When you look at complex value chains, at all of the inventory sitting in warehouses, the things that go unsold, the mismatches between supply and demand across a value chain -- whether you are talking about direct materials or about pens and paper sitting in a supply closet -- it really doesn't matter.
When you look at complex value chains ... how much of that goes into actually delivering on what your customers and employees value -- and how much of it is waste?

It’s all about how much of that goes to actually delivering on what your customers, your employees, and your stakeholders’ value -- and how much of it is waste? As we link these data sets together -- the real production planning, understanding end-user demand, and all the way back through the supply chain – we can develop new transparency that brings a ton of value. And by ultimately everyone in the value chain understanding what the consumers’ actually value, then they can innovate in the right ways.

So, I see this all dramatically changing as you link these intelligent companies together. As companies move in the same way -- into a sharing mindset – then the sharing economy uses resources in a far more efficient way, in the exact same way as we use our data resources in a more efficient way.

Gardner: This also dovetails well with being purposeful as a business. If many organizations are encouraging higher productivity, which reduces inefficiencies and helps raise wages, it can lead to better standards of life. So, the stakes here are pretty high.

We’re not just talking about adding some dollars to the bottom and top lines. We’re also talking about a better economy that raises all boats.

Purposeful interconnections 

Koch: Yes, absolutely. You see companies like Johnson and Johnson, who at their core, from their founding principles, have the importance of their community as one of the core founding principles. You see it in companies like Ford and their long heritage. Those ideals are really coming back from the decade of the 1980s where greed was good and now back to a more holistic understanding of the interconnectedness of all of this.

And it’s good as humans. It’s also good from the business perspective because of the need to attract and retain the talent required to run a modern enterprise. And building the brands that our consumers are demanding, and holding companies accountable, they all go hand-in-hand.

And so, the purpose aspect really addresses the broader stakeholder aspects of creating a sustainable planet, a sustainable business, sustainable employment, and things like that.

Gardner: When we think about attaining this level of efficiency through insights and predictive analytics -- taking advantage of business networks and applications and services -- we are also on the cusp of getting even better tools.

We’re seeing a lot more information about machine learning (ML). We’re starting to tease out the benefits of artificial intelligence (AI). When these technologies are maturing and available, you need to be in a position to take advantage of them.

So, moving toward the intelligent enterprise and digital transformation are not just good or nice to have, they are essential because of what's going to come next in just a few years.

Efficiency in the digital future 

Koch: Yes, you see this very tactically in the chief procurement officers (CPOs) that I've talked with as I've entered this role. I have yet to run across any business leader who says, “I have so many resources, I don't know what to do.” That’s not usually what I hear. Usually, it's the opposite. It’s, “I'm being asked to do more with less.”

When you look at the core of AI, and the core of ML, it’s how do you increase efficiency? And that’s whether it's all the way on the full process automation side, or it’s along the spectrum of bringing the right intelligence and insights to streamline processes to make better decisions.

All of that is an effort to up-level the work that people do, so that raises wages, it raises productivity, all of those things. We have an example inside of our team. I was meeting with the head of our customer value organization, Chris Haydon, over dinner last night.  Chris was talking about how we were applying ML to enhance our capability to onboard new customers.

And he said the work that we've done has allowed him to redeploy 80 people in his team on to higher productivity use cases. All of those people became more valuable in the company because they were working on things that were at the next level of creating new solutions and better customer experiences, instead of turning the crank in the proverbial factory of deploying software.

Gardner: I happen to personally believe that a lot of the talk about robots taking over people’s jobs is hooey. And that, in fact, what's more likely is this elevation of people to do what they can do best and uniquely. Then let the machines do what they do best and uniquely.

How is that translating both into SAP Ariba products and services, and also into the synergy between SAP and SAP Ariba?
We're just getting through a major re-platforming to S/4 HANA and that's really exciting because of HANA's maturity and scale. We're using ML algorithms and applying them.

Koch: We are at a really exciting time inside of our products and services. We're just getting through a major re-platforming to S/4 HANA, and that’s really exciting because of HANA’s maturity and scale. It’s moving beyond basic infrastructure in the way that [SAP Co-Founder] Hasso Plattner had envisioned it.

We’re really getting to the point of not replicating data. We are using the ML algorithms and applying them, building them once and applying them at large. And so, the company’s investments in HANA and in Leonardo are helping to create a toolkit of capabilities that applications like SAP Ariba can leverage. Like with any good infrastructure investment, when you have the right foundation you see scale and innovation happen quickly.

You'll see a lot more of how we leverage the data that we have both inside the company as well as across the network to drive intelligence into our process. You will just see that come through more as we move from the infrastructure foundation setting stage to building the capabilities on top of that.

Gardner: Getting back to that concept of closing the transformation gap for companies, what is it they should be thinking about when these services and technologies become available? How can they help close their own technology gap by becoming acquainted in advances and taking some initiative to best use these new tools?

Digital transformation leadership 

Koch: The companies that are forward-leading on digital transformation are the ones that made the cloud move early. The next big move for them is to tap into business networks. How can they start sharing across their value chains and drive higher efficiency? I think you'll see from that the shift from tactical procurement to strategic procurement.

The relationships need to move from transactional to a true partnership, of how do we create value together? That change involves rethinking the ways you look at data and of how you share data across value chains.

Gardner: Let’s also think about spend management conceptually. Congratulations, by the way, on your recent Gartner Magic Quadrant positioning on pay-to-procure processes. How does spend management also become more strategic?

Koch: The building blocks for spend management always come down to what is our tactical spend and where should we focus our efforts for strategic spend? Whether that is in the services area, travel, direct materials, or indirect, what customers are asking SAP for is, how do all of these pieces fit together?

What's the difference between a request for proposal (RFP) for a hotel in New York City versus an RFP for chemicals in Southeast Asia? They're both a series of business processes of selecting the right vendor that balances all of the critical dimensions: Price and everything else that makes for a good decision and that has longevity.

We see a lot of shared elements in the way you interact with your suppliers. We see a lot of shared elements in the way that you deploy applications inside of your company. We’re exploring how well the different facets of the applications can work together, how seamless the user experience is, and how well all of these tie together for all the stakeholders.

Ultimately, each element of the team, each element of the company, has a role to play. That includes the finance organization’s desire to ensure that value is being created in a way that the company can afford. It means that the shareholders, employees, management, and end-users are all on the same page.

This is the core of spend management – and the intelligent enterprise as a whole. It means being able to see everything, by bringing it all together, so the company can manage its full operations and how they create value.

Gardner: The vision is very compelling. I can certainly see where this is not going to be just a small change -- but a step-change -- in terms of how companies can benefit in productivity.

As you were alluding to earlier, architecture is destiny when it comes to making this possible. By re-architecting around, as for S/4 HANA, by taking advantage of business networks, you are well on the way to delivering this. Let’s talk about the platform changes that grease the skids toward the larger holistic benefits.

Shifting to the cloud 

Koch: It's firmly our belief that the world is moving to mega-platforms. SAP has a long history of bringing the ecosystem along, whether the ecosystem is delivering process innovation or is building capabilities on top of other capabilities embedded deeply into the products.

What we're now seeing is the shift from the on-premises world to a cloud world where it's API-first, business events driven, and where you see a decoupling of the various components. Underneath the covers it doesn't matter what technology stack things are built on. It doesn't matter how quickly they evolve. It's the assumption that we have this API contract between two different pieces of technology: An SAP Ariba piece of technology, an SAP S/4 Cloud piece of technology, or a partner ecosystem piece of technology.

For example, a company like Solenis was recently up on stage with us at Ariba Live in Amsterdam. That's one of the fastest-growing companies. They have raised a B round at $1 billion valuation. Having companies that are driving innovation like that in partnership with an SAP platform brings not just near-term value for us and our customers, it brings future-proofing. It brings extensibility when there is a specific requirement that comes in for a specific industry or geography. It provides a way a customer can differentiate. You can just plug-in.
We're now seeing the shift from on-premises to cloud where you see a decoupling of the components. It doesn't matter what the technology stack is. ... It's now about API-first business events.

[SAP business unit] Concur has been down this path for a long time. The president of SAP Ariba, Barry Padgett, actually started the initiative of opening up the Concur platform. So deep at our core -- in our roots -- we believe that networks, ecosystems, and openness will ensure that our customers get the most value out of their solutions.

Gardner: Because SAP is an early adopter of multicloud, SAP can be everywhere at the most efficient level given what the hyperscale cloud providers are providing with global reach and efficiency. This approach also allows you to service small- to medium-sized businesses (SMBs), for example, essentially anywhere in the world.

Tell me why this long-term vision of a hyperscale-, multicloud-supported future benefits SAP, SAP Ariba, and its customers.

A hyperscale, multicloud landscape

Koch: When you look across the landscape of the hyperscalers and you look at the pace of innovation and the level of scale that that they are able to deliver, our lead time is slashed. We can also scale up and down as required. The cloud benefits apply to speed compared to having boxes installed in data centers, as well as ease in workload variability -- whether it's test variability or our ability to run ML-training models.

The idea that we still suffer multi-month lead times to get our physical boxes installed in our data centers is something that we just can't afford. Our customers demand more.

Thankfully there are multiple solutions around the world that solve these problems while at the same time giving us things like world-class security, geographic footprints, and localized expertise. When a server fails halfway around the world and the expert is somewhere else, the hyperscalers provide a solution to that problem.

They have somebody who walks through every data center and makes sure that the routers are upgraded, and the switches and load balancers are working the way they should. They determine whether data correctly rests inside of a Chinese firewall or inside of Europe [due to compliance requirements]. They are responsible for how those systems interact.

We still need to do our investment on the applications tier and in working with our customers to handle all of the needed changes in the landscape around data and security.

But the hyperscalers give us a base-level of infrastructure so we don't need to think about things like, “Is our air conditioner capacity inside of the data center sufficient to run the latest technology for the computing power?” We don't worry about that. We worry about delivering value on top of that base-level of infrastructure and so that takes our applications to the next level.

In the same way we were talking earlier about ML and AI freeing up our resources to work on higher-value things, [the multicloud approach] allows us to stop thinking about these base-level things that are still critical for the delivery of our service. It allows us to focus on the innovation aspects of what we need to do.

Gardner: It really is about driving value higher and higher and then making use of that in a way that's a most impactful to the consumers -- and ultimately the whole economy.

Koch: You got it.