SAP invited me to attend their combined Sapphire/TechEd event in Madrid last week. While there I took the opportunity to have a chat with Jeremiah Stone to get an update on the state of play in sustainability solutions.
Here’s a transcript of our conversation:
Tom Raftery: Hi everyone welcome to GreenMonk TV. We are in Madrid for SAP?s SAPPHIRE event and with me I have Jeremiah Stone. Jeremiah, you are on the SAP sustainability team. What is your role there?
Jeremiah Stone: So, I?m a senior director for solutions management and what that means in SAP is that I?m responsible for the business cases for producing our products, so developing new products. And then I work with our key customers as well in making sure that our products continue to meet their needs and that we do quite a bit co-innovation with customers and that?s my team that tends to drive that as well with our strategic customers and so really managing the business case and then we build and execution, and rollout of products.
Tom Raftery: So there is a business case for sustainability?
Jeremiah Stone: Well, at SAP there sure is. It?s a interesting aspect I think of our sustainability case that people typically are surprised by is that every single one of our investments is actually a bottom up business case just like any other piece of software at SAP where you have to build the customer business case first. So really what is the customers tangible pain, how much are they spending to deal with that pain today, what are their alternatives, how much can we generate in terms of value for the customer with some development, and then is there a reasonable value capture for us, in other words can we charge the customer a reasonable amount of money to justify us investing in the software. And so we do that for every investment that we make and so that also helps the conversation of course from a business point of view because then we?ve done all that work upfront, we can go to the customer, we can explain the customer business case that we?ve developed and we can validate that and from them to make sure that there is a return on that investment and then they can treat it like any other IT investment. And the other thing, you know with sustainability at SAP is its embedded into our business and so when I?m competing for development resources I?m competing right next to the guys who are developing for HANA, the people that are developing for HR, people for financials, CRM et cetera. So we would, be really treated just as any line of business at SAP, we don?t get preferential treatment et cetera and then really is based upon business case for each investment that we make.
Tom Raftery: Cool. And what is the hot button topic for people right now in sustainability?
Jeremiah Stone: It?s a good question, I think right now we see you know phasing of a development of the market, it continues to be really around management of risk and compliance primarily in the safety of operations. So and that goes really there’s asset intensive and asset non-intensive industries, so I?ve customers in transportations and logistics, major airlines, looking at how they can be safe and that is a bottom line number for them. Obviously if they are damaging aircraft or whatever they are not going to be performing well and so that there is really a safety org from a compliance point of view, that is access to markets. So as public and governmental toleration of eco-toxicity of hazardous materials et cetera is declining, there is this more and more transparency around products and their constituent chemicals et cetera and substances.
The regulatory bounds and burden is going up and on companies to declare the substances in their products so that they can sell them in those markets. That?s primary driver skill, we definitely see energy management is the fastest growing area and that?s really energy and environmental resource management, so not just energy but you can think really sort of all of the inputs into the business whether that?s energy for other resources in other words very much you could think of it as a traditional SAP strength, you think around energy. Although, it is a different challenge as you know because there is the utility as well, involved in that and that?s somewhat complex, there is definitely demand for that, is one of the fastest grown, it?s not biggest business yet, but it is the fastest growing. And then we continue to see a smaller market, but still increasing around analytics, reporting strategy management, setting targets, managing to those and then reporting out to I don?t know the global reporting initiative et cetera on sustainability performance, but for the majority where we are making our money today with our product lines is really around that risk management and compliance activities.
Tom Raftery: Okay and the whole sustainability area is a relatively new business area, is it one that you see is going to be going big time, is it, I mean we?ve seen a jump in last couple of years just because companies started getting into it, but you know is it on a hockey stick or is it kind of plateaued or where about is it?
Jeremiah Stone: Well yeah, I mean it?s very rapidly growing market. We see the overall market size growing compound annual growth rate of around 18% to 20%, so it?s a pretty significant growth in the current spending environment. Lot of that?s because of loss control. So if you think of the current global environment, access to credit isn?t available, stability of financial market we?ve learned, interested in making capital investments if they can?t ensure that that capital investment will be safe.
Tom Raftery: Yeah.
Jeremiah Stone: So in ironic way you know really is that sort of resource constraint or fear of loss that?s driving sustainability as well from any investment. So it isn?t necessarily a, you know there is a joke even people when they spend money on software for you know greed, fear or aspiration, most people assume it?s aspirational in nature when people make sustainability investments, because you want a halo or improve your brand image which — there is some of that, but most of our customers it?s really around the loss management. And to a certain extent the — you know the ambition to grow your brand, grow your business. We do have customers like Solvay for example, I think you may have gotten to talk to them over here.
Tom Raftery: I?m going to see them this afternoon, yeah
Jeremiah Stone: Okay, so I mean they — you know, really say that they are more competitive as a result of the investments that they make in sustainability. So it is a growing, it is an evolution of some older lines of business in this case environment health and safety management that has been there for a very long time. And you know we invested and purchased data that?s strategic to us a couple of years ago but we are on a pretty furious trip to double the pre-acquisition revenue relatively soon. So it is a fast growing market, we are having a lot of success with it and you know we believe that it will continue to be a strategic fast growing market, so.
Tom Raftery: Fantastic. Thanks a million Jeremiah. That was great.
Jeremiah Stone: Thanks for having me Tom.
Disclaimer – SAP paid for most of my travel, food and accommodation expenses to attend this event.