Workflow was invited to attend the Executive Connection Summit in Scottsdale this October and we encountered many unexpected surprises. SAP’s Kevin Gilroy, senior vice president and general manager, Global Indirect Channels and SAP Global Partner Operations was one of them. Articulate, fun and smart with an appreciation of millennials not always present among senior management, Gilroy broke down the technology inflection point for us, among other things. Words like epic, jazzed, simplicity and introspection were used, and from Gilroy they almost sound like fighting words. Please join us in the SpeakEasy.
Tell us a little about yourself.
I’m from New York and spent 24 years at HP before moving to SAP. I watched the printing business transition from dot-matrix printers to laser printers and inkjet printers and on to MFPs and have chewed some of the same dirt in the market that the imaging channel has over the years.
Give us some SAP highlights.
SAP started as an ERP company, but technology is disrupting the market and our portfolio has expanded. We offer analytics software solutions, a mobility practice; we have a huge cloud and we have HANA. We have industry expertise. We focus on 25 vertical industries in enterprise and hundreds of verticals in the SME space.
What is this “technology inflection point” you’ve been talking about?
In my experience, in 25 years, I’ve never seen a period in time where there is so much opportunity or so much danger. I think there is a great opportunity for people to create enormous amounts of wealth, for careers to skyrocket, and I think there is also tremendous risk for companies to fade out, scale down or be sold at unfavorable multiples.
I believe we are at an inflection point and typically in the IT channel, when the industry is at one of these inflection points, 40 percent of the companies go the wrong way. Another 40 percent will make some adjustments — maybe only minor adjustments — and they’ll hang on. Growth will flatten out, profits will hang on or be under pressure, but they’ll survive. Only 20 percent really take advantage of these inflection points. Remember DEC (Digital)? Data General? Kodak? Zenith? MySpace? It’s a dangerous and certainly opportunistic time.
You spoke about partnerships as being vital to survival, but it also seems that making the right choices with your partnerships is important.
It is! If you look at today’s technology world, who do you think will be left standing in the next 10 years? Certainly IBM, Cisco, Google, Microsoft, Oracle, SAP, but who else?
Picking your partnerships is critically important. Do you have concentration risk with a partner who is wobbly; who isn’t catching the curve? If I have 85 percent of my business tied to a supplier that doesn’t have vision, there is concentration risk. Is it time to diversify that concentration risk?
SAP has a partnership with IBM, correct?
We just announced a new one involving cloud and HR services with application software in the HR vertical. We have ERP partnerships with IBM, and in some areas we compete with IBM. It’s a very, very strong relationship between our two companies.
IBM is going through some transitions as well.
Everyone is. The cloud has really changed the game. This collision is forcing everyone to re-engineer their companies. This is the reason I think we are at a technology inflection point. It’s because you have the dynamics of the cloud crashing in with the dynamics of big data, mobility, social media and what wraps around all this is the millennials, who are either already running small businesses or, at a minimum, influencing small businesses. If we don’t understand the dynamics of millennials combined with the dynamics of these technologies, then we are on the wrong side of the inflection point. The next generation (NextGen) businesses that are evolving in the channel are adopting technology at an extremely fast rate. They build brands socially. They work differently. They consume these technologies differently than we’ve ever seen.
That is interesting, because I am amazed at what the SME has access to now versus even a couple of years ago in terms of scalable technology at a small relative price, due to the new business models that the cloud has afforded the marketspace. It is incredible what you can buy now to make you look like a big company when you may be just a few people.
Technology levels the playing field. NextGen businesses use technology as a competitive advantage — ERP systems like Business One, big data solutions. They are no longer local. The technology has broken down traditional trade barriers and trading areas. It’s becoming more global. People in one country can compete in other countries. People in one region of the U.S. can compete in other regions of the U.S. Technology is the equalizer of NextGen businesses, not just equalizing between peer groups, but also equalizing with larger companies. You can now compete with companies 500 times your size. Technology is their foundation of growth, their success and their ability to attract the next generation of talent.
What are NextGen businesses looking for?
Simplify, simplify, simplify the technology so they can go back to running their business. They don’t want to be IT or technology specialists. They expect their technology to eliminate those barriers that are impeding their growth.
If you can de-risk the technology decision, you win. NextGen businesses don’t want to make a major capital expenditure and be locked into a technology for 10 years, five years or even three years. They want the risk taken out in multiple ways — they want solutions that don’t impact their balance sheet and they want solutions they can un-hook from if they are not absolutely delighted with the experience. NextGen businesses want an aggregation of their technology so the solution can be simplified — they don’t want an ERP specialist, an MPS specialist and a network specialist. They want one point of contact.
It’s a democratization of business.
It is. It breaks down traditional trading areas; people can be worldwide from their basement. It breaks the competitive advantage of large companies; small companies can now compete, and they can be technology-enabled through the cloud very quickly and very inexpensively.
For a small company, cash flow is king — it’s even more important than a P&L. Running cash and understanding your cash management is absolutely critical. For most entrepreneurs, I would say they wake up in the morning thinking more about the balance sheet than about the P&L.
Entrepreneurship is the lifeblood of the American businessman, and technology is stimulating the ability to go out there and build a business from the ground up quickly and scale with blazing speed. This is going to help our economy improve.
You are spot on. One of the reasons why I am so excited about the job I have at SAP is that we have more than 11,900 channel partners around the world, many of them with a solution like FORZA, and they have that local intimacy that has a tremendous value. They have an intimacy that says “I know your business — you can call me at home, you can see me at church, you can call me 24/7, whenever you want. I know your business, I’ll keep you up and running. And right behind me is an army called SAP that’s been around 40 years and is going to be around another 40 years. So I have now mitigated your risk and you can go do what you do,” which in this case is sell office technology and solutions to local businesses.
It gives them staying power too — it’s an extra leg to stand on, having the backing of one of the largest companies in the world.
How can SAP help channel partners in this very dangerous inflection point? We overuse the word enablement, but enablement equals knowledge transfer. How do we transfer to our partners and ultimately to our end-customers? The best partners have monetized intimacy — “I know your business.”
The FORZA Business One product has been tailored to the pain points of the channel with the full backing of SAP behind it.
SAP is a German-based company, so roots in Europe, huge globally — where are you seeing the most growth right now?
Believe it or not, we are seeing enormous growth in Europe, which is different than what we normally see. We are also seeing fabulous growth rates in Asia. North America has finally made the turn, and we are starting to see a pickup there.
Are there specific sectors that are showing that growth?
The SME segment is doing extremely well.
That’s good to hear because that sector is going to be the basis for the future.
If you look at companies, one of the telltale signals that can help you tell how their SME business is doing is look for the measurement of net new customers. You don’t win net new Fortune 500 customers often — generally you just displace somebody or get a new one every once in a while. When you start seeing 2,000 or 3,000, and maybe even 4,000 net new customers in a quarter, you are starting to talk about real market penetration and you start to see early signals that the economy is doing well when you see that level of technology penetration in the SME market.
What are you most excited about right now?
I’m probably the most excited about the technology and the millennials. The millennials really jazz me. I find them to be fascinating. I love the altruistic side of them, the way they consume data, the way they want to always be learning, the way they want to change.
You don’t see millennials as superficial, selfish, kind of lazy, expecting other people to help them do their work?
Not at all. I find them to be really interesting — you do have to keep them on a learning curve. Their risk profile is different. But if you can figure out the millennials and how they consume technology, it’s really the key to success.
Over 30 years, I’ve been able to see a couple of interesting inflection points — the server wave, the laser printer wave — I was in the middle of all of those. Now I get to see the cloud world and millennials and technology smashing together for the next major inflection point and I am happy to be along on that ride. The millennials fascinate me.
OK, they fascinate you, but do they fascinate SAP?
Yes! They do.
There is a corporate culture that is also vested in the millennials?
There is. Our CEO speaks about millennials and understanding millennials with every presentation he does both internally and externally, and he’s equally fascinated by them. He believes, and I believe him, that if we can understand them it will be a big part of our future.
You have a couple of kids, right?
I have three daughters, all in college right now — one is in medical school and she is 24, one is 22 and a senior at Clemson and our youngest is 19 and a sophomore at Clemson.
So you have a very close relationship with millennials, and you see firsthand how they approach technology and use technology.
I do and I see how they communicate and I’ll ask, “who are you texting with?” and one daughter will say she is texting with another one of my daughters who is in the next room!
Believe it or not, they don’t print much at all. It’s interesting how that’s changed over the last five years. When my kids first entered high school, there were five printers in my house. There was a printer in each daughter’s room, I had a printer and my wife had a printer.
And there was probably a photo printer somewhere.
Yes, you are right — in the basement there was a photo printer. So there were six printers burning a ton of ink. Now most of those printers are shut down and when I go to my daughter’s dorm room, they have printers, but they rarely use them. There are books piled up on top of them.
Are they still reading books?
They are still reading books, but they are sending things electronically, the professors don’t want hard copies, their applications are not in hard copy anymore, their reports aren’t hard copy — it’s on a thumb drive, it’s on a disk, it’s sent electronically.
My medical records come electronically from my doctor. Just recently at the end of my physical, normally the doctor would say he’ll send my report by mail, now he just handed me a disk.
Do you prefer that?
Yes, because I can carry it with me when I travel and if I am ever sick, I can hand them my medical records and they will have my whole history on there.
The document industry is going to have to re-engineer itself too and figure out what the next evolution is for them.
What three words do you most overuse?
I say jazz a lot — “that jazzes me” (my kids are sick of hearing about it). I probably say “transformation” too much. What else? “Rock — We gotta rock this.”
If your employees were to describe you in a couple of words, what do you think they would say?
They’d probably say aspirational, maybe overly aspirational, and then maybe that I am funny but also demanding.
Those are all good words. OK, what’s your favorite rock band of all time?
My favorite rock band is Dire Straits.
Nice! So you appreciate a good guitar?
I do. I follow Mark Knopfler around the world sometimes. As I travel, I always check to see if am on the same continent as Mark Knopfler. I’m a huge fan.
Led Zeppelin’s my band, but I get the Mark Knopfler thing. I’m in.
I like Zeppelin, I like Skynyrd.
What do you see as the biggest challenges in the industry right now?
I think the biggest challenge right now is catching the curve. The change is so dynamic and so transformational — it requires a certain risk profile, it requires a certain working capital position, it requires vision, it requires change. It’s epic change — so I think that’s really the biggest challenge.
SAP’s biggest challenge is finding the right partners for us, finding the sub-set of partners that are going to really be on the front end of this curve and not lagging too far behind. That would be the biggest challenge for me.
If your customers were to describe SAP, what do you think they would say?
In the SME space they’d say we are delighted about how simple it actually is. They are surprised.
Our enterprise customers would probably say “Keep bringing it” — it’s a partnership.
Any last words on how to be on the right side of the inflection point?
Be introspective. Introspection makes you an “A” player. Be courageous. Make tough decisions; make change.
This article originally appeared in the December 2014 issue of Workflow.