'Machine Learning Is A Focus Area For SAP This Year'

SAP Labs in India is the second largest R&D centre for the company after its centre in Walldorf in Germany and among the 3 hubs in SAP Labs network of 19 Labs across 16 countries. Dilipkumar Khandelwal, Managing Director for SAP Labs in India, has a dual role as he is also the Executive Vice President and Global Head of Enterprise Cloud Services for SAP. In an exclusive interview with BW Businessworld, Khandelwal talks about their focus in India, latest technologies, and SAP's focus on innovation and startups. Edited excerpts:

What is the SAP Lab's focus here? Do you focus more on the local needs to serve SAP India or do you essentially serve global needs?
SAP Labs India was founded in 1998. When we started out, we were a small team of less than 100 people and we focused primarily on localising SAP products for the Indian market. But over a period of 19 years, Labs India has evolved to become an integral part of SAP's global strategy execution plan. Our network of three offices in India at Bengaluru, Gurgaon, and Pune, and an employee base of over 7,000 helps SAP Labs India contribute significantly to SAP flagship products such as SAP HANA, the platform for next generation applications and analytics; SAP S/4HANA, the next generation business suite; and several individual applications and solutions like Hana Enterprise Cloud; industry cloud and SAP Cloud Platform. We do have a team which takes care of country localisations, but that is only 4 per cent of our overall strength.

Located within the SAP Labs India facility in Bangalore is the SAP Co-Innovation Lab (COIL). Set up in 2009, COIL provides a platform for SAP as well as its partners and customers to develop solutions on SAP technologies and applications. COIL as a platform has enabled several co-innovation projects that span among others across mobile applications, analytics, real time data platform and cloud.

How much does SAP typically spend in R&D? How much have you invested in the India Lab so far and how much are you planning to invest in expansion or hiring?
Our global R&D spend in 2016 was Euro 3.044 million. Our R&D expense as a portion of total operating expenses increased to 18 per cent. Globally our R&D headcount is around 28 per cent of our total headcount (84,100). We don't break up R&D spend by geographies or specific locations. 85 per cent of our employees are from our development organisation. Our growth has been largely organic apart from the global acquisitions SAP made. We are growing because we deliver value out of India as a location. It is not an outsourcing centre. We are partners in the success of the company which is evident from the presence of many global leaders based out the facility in Bengaluru. We are soon going to open our new facility which will accommodate 2400 people. This shows the confidence that SAP has in this location. The new facility is state-of-art and will be one of the best office campuses in the country once open. This will increase the R&D footprint of SAP in Bengaluru.

What are some of the technologies that SAP is working on? I haven't heard much from SAP around AI and machine learning unlike what I have heard from IBM where they have worked on Watson and Cognitive. Could you enlighten me on the latest technologies that SAP is working on?
We are heavily investing in upcoming technologies. The reason why you don't hear about our footprint in these areas is because we are into the Enterprise Business which is more B2B instead of B2C. Over the last couple of years, we have been investing heavily into IoT and SAP Cloud Platform. We have a big team in India which focuses on leveraging the IoT technology with our existing Supply Chain Solution. Additionally, we have ownership for the Asset Intelligence network which helps management of physical assets including their manuals, servicing and smooth operations. Machine Learning is a focus area for SAP this year. The SAP Cloud Platform gives us a strong set of machine learning APIs which can be consumed on the cloud by SAP internally and by SAP customers. This gives us the capability to completely re-think the way business processes are established and eliminate human intervention in many of the processes.

The platform which you have talked on is basically HANA?
Yes, SAP HANA is our technology. We have built a cloud platform on top of this technology which we use to build our internal applications. We have opened this platform to our customers as well so that they too can build their products leveraging our technology. The cloud platform based on HANA is a default platform and helps solve a lot of integration problems faced by our customers. On this platform we have also built services for machine learning, artificial intelligence (AI) and IoT. We have offered these open services to our customers as well.

HANA has been SAP's biggest bet over the last few years. So how do you think HANA has fared over the last few years? Oracle CTO Larry Ellison has been quoted as saying, "If SAP is not successful with HANA, SAP dies, because Oracle will kill them."
I think we can settle this debate once and for all by acknowledging that SAP HANA, the market-leading platform for real-time computing, that helps companies accelerate their business process, has evolved into a strong platform in short period of its existence. As an example, today we have over 5200 startups developing on our SAP HANA platform, over 5400 customers for S/4 HANA, our next-generation business suite and 1400 SAP HANA One customers.

Gartner has predicted that 100 per cent of all cloud ERP projects will fail by 2018, primarily because of the lack of application integration related skills. What are your views on that?
In a hybrid world, customers require a stable core to run their businesses as well as the agility to use the capabilities of new technologies in order to stay relevant and outperform their competitors. Hence integration is the biggest challenge businesses face today when it comes to ERP implementations. SAP's strategy has been to provide a strong foundation with SAP HANA and SAP Cloud Platform to help integrate applications and help companies become more agile, cloud ready and meet their need and requirements.
This platform provides the integration services that are required in today's hybrid world to knit together distributed ERP silos. Integration is a challenge that our customers are aware of and we as their ERP providers have provided them the right toolkit to overcome this hurdle.

What is SAP Labs' focus on innovation and how are you engaging with the startup community?
As a company that has been an industry leader in enterprise software for the last four decades, we are aware of the importance of startups in the overall industry ecosystem. We are closely connected with the vibrant startup scene in India. This is important because while we are a 44-year old company with our own way of doing things, technology changes outside are so rapid these days that a small startup can easily disrupt established business models. Mobile internet, cloud computing, social media, and other technologies are powerful agents of change and anyone with a new idea can use them to create big ripples.

The SAP Startup Studio, an accelerator program that we started in June 2016, is one of the ways in which we have institutionalised this interaction with startups. Through this initiative, we provide mentoring, infrastructure, and technology support to seed early-stage startup companies. The program is run out of a 75-seat facility at our Bengaluru campus and we incubate startups in select technologies and verticals for a period of one year. Beyond the first year, we provide a strongly knit mentorship program…Our first batch of seven startups have already completed their stint at the Startup Studio and the next batch is expected to come in soon. We also want to encourage the startup culture within our organisation. By observing these startups, we hope it inspires our employees as well to think and innovate like a startup.

I believe you have some kind of an intrapreneurship program where you encourage your internal employees to start on their own. Can you explain that?
Path-breaking innovation stems from a healthy ideation process. We encourage our own people to come up with disruptive ideas. About two years ago, we launched our Intraprenuership program which enables our employees to act as entrepreneurs and transform their innovative ideas into profitable business in new markets. The program supports from the articulation of the initial ideas to its successful commercialisation, through four stages - ideate, validate, accelerate and incubate. Last year, we also introduced the Sabbatical Entrepreneurship policy for our employees. We as an organisation understand that many of our employees are interested in entrepreneurship and we encourage them to pursue their dreams. Employees who have successfully completed two years or more in SAP can take sabbatical leave for up to two years. In these two years if their venture succeeds, we hope they will be promoters and aggregators for SAP in the outside world. But if they don't, we will welcome them back and learn from their experience to help us continue in our journey of innovation.