The Future of Composable Business

Paul Saunders, SAP’s Head of Product Strategy and Chief Evangelist Cloud ERP, was recently the guest of The Future of ERP podcast, talking about “Composable ERP.”

It’s a term that comes from Gartner (other analysts have similar concepts):

“Composable business means creating an organization made from interchangeable building blocks. The modular setup enables a business to rearrange and reorient as needed depending on external (or internal) factors like a shift in customer values or sudden change in supply chain or materials.”

I encourage you to listen to the full podcast recording here, but I’ve taken the liberty of streamlining / paraphrasing Paul’s remarks below, because he gives a great overview of the role of technology such as SAP S/4HANA and SAP Business Technology Platform in composable business:

“I’m the head of Product Strategy and Chief Evangelist for Cloud ERP at SAP. So I’ve been with SAP for about 18 months now, I came from Gartner, where I was an analyst covering SAP. So I’ve spent certainly most of my professional career talking to, or talking about SAP and ERP.

I’ve always said that ERP just reflects the business of the day. And today’s business requires companies to be able to adapt and respond very rapidly. And that’s why composable is really important, I think. Having that foundation of the solid core of ERP is what makes all of this work.

Composability is really a nice way of saying the ability for something to change to meet the business needs of the day. We’ve taken all of the pieces that the intelligent enterprise is made up of, like finance, procurement, HR, manufacturing, and operations. And then hey can be composed and reassembled to deliver different outcomes with the business technology platform sitting underneath.

One thing I love about composable business is it’s never claimed to be anything net new. The authors at Gartner have always said it is bringing together various things like the concept of a fusion team, and agile development, and pieces from service oriented architectures.

Everybody has gotten so excited about it. “Composable is going to fix everything”. But no one single thing is going to fix anything — and there’s nothing actually to be fixed. It’s all about how do we adapt again to the next business change.

I think that every customer out there has been told often in a condescending way that “the world is changing, the world is disruptive, the pace of change will never be this slow again and so on”. And they think “yeah, we know, we run a business, we see this every single day!” 

They know the world is complex. They want to be able standardize. They would love to be able to move to the cloud and run standardized processes. They would love to be able to innovate faster. But it’s hard because they’ve still have a business to run: they’ve still got product to ship, they’ve still got services to provide. I think what they’ve been looking for first is empathy for technology companies to say, “yeah, changing how you do stuff is hard.”

I think that’s why one of the things that attracted me to come to SAP was RISE with SAP. The thing that I liked about RISE was it was never about technology. It was always about business transformation as a service. “Let us show you and listen to you and work with you on how those steps are to transform your business.” And then to transform it again. And transform it again, and compose and decompose and recompose constantly.

In a Spotify and Apple Music world, you cannot take a cassette tape and pencil approach to your business challenges. Continuing what you have always done might work up to some point, but renovation is the key in this ever-changing world. 

You have to start with the customer experience and work your way back to technology. It’s such a simple thing, but it’s so often not done.

I would strongly recommend that every company should ask a few questions. The first one is “what does a day in the life of one of our customers, our partners, our suppliers, our employees, and so on, look like five years from now?” Don’t go any further than that because you’re probably not going get it right. And then “can we achieve what we need to achieve to meet all of their needs from where we are today? And if not, what do we actually need to change?” Then “do I have the right mindset to be able to do this? What does my industry look like? Where the industry is going?”

To be successful with composable, you have to be able to standardize on the non-differentiating pieces, because as things start to change at a faster pace, if those things are heavily customized like we used to do with ERP in the past, everything will break very quickly. 

And then there are some capabilities that really differentiate you to your customers. That might be how I do my pricing, how I do my e-commerce capability, or how I ship the product to somebody. It’s a challenge as well because everybody will say, well, “everything differentiates me”.

When you’re looking at composability, companies have to think “What’s that one thing that we’ve got that is solving a customer’s problem, and that would make them come to me over my competition? And how do I change my business to be able to do that?” The more you can think about that, then you’re going be in a much better position when your business starts to have to adapt and change and recompose. But it’s all about the mindset, to be honest. The technology piece is kind of easy — it’s the people piece that’s hard.

A core ERP provides those business capabilities that every company needs to do, and a platform upon which you can then differentiate and compose those differentiated capabilities to deliver something different.

My former colleagues at Gartner were very clear, very clear upfront that it’s composable thinking first, then composable business architecture, and then composable technology. What did we all do as technologists? We all got excited about the technology and just jumped straight in there. 

It’s like trying to build a castle on a swamp. Anything you build composable, if it doesn’t have that solid foundation, we’ll sink into the swamp. It’s as simple as that.

That’s where the governance piece comes in, the technical underpinnings, everything that you have to get right before you start talking about microservices. As soon as somebody says that you need to kick ’em out the room — that’s the wrong place to start!

To me, the future of ERP is the future of work. The reason I feel that ERP is often thought of as old-fashioned is because it no longer for many companies has reflects what their needs are of today, how their employees work, how their business works, how their suppliers work and their partners work, and so on. ERP has to be complicated because business is complicated, but I think the more that we can leverage ERP to take that complexity away from companies so they don’t have to worry about the complexity of their business, they can worry about how they differentiate and provide a great service to their customers.”

The future is about more flexible, adaptable approaches to business, with business leaders doing more of the technology innovation themselves. This will require not only technology changes, but also big cultural changes inside organizations — including “designing for loss of control”.