Cloud Adoption Slow and Steady Among SAP Chemical Users

Last week I had the pleasure to attend the Best Practices for Chemicals Event in Houston this year.

Digital Transformation in Chemicals

While there I spoke with SAP about Digital Transformation in the chemicals industry.  Apparently, chemical manufacturers, particularly those focused on agri-business, paint and coatings, are leading the charge in response to acute competitive pressures.  The old architecture doesn’t provide the right foundation for this transformation, which is why the company promotes S4/HANA. Customers, however, struggle over where to start.  To this question, SAP offers a “Digital Transformation Navigator” tool and a Best Practices package with about 100 pre-configured processes.

SAP also discussed its Leonardo Portfolio which it uses to “bridge things with processes.”  SAP wants Leonardo to enables customers to not only realize digital transformation of existing end-to-end business processes, but also enable them to evolve new business models to run digitally. ARC sees this as a dire need in industry overall, not just in chemicals.  Properly leveraging new technology demands that organizations adapt their processes.  Such change, though needed, is painful.  Companies need to partner with suppliers to help them address their pain-points and navigate the “brave new world” of what is possible.

Cloud Adoption

While there, I moderated a round-table discussion which focused on Cloud adoption within the chemical industry. Here are the key takeaways:

Companies are at different stages in terms of cloud adoption readiness. Some companies have a clear Cloud strategy, some are in the process of moving their test systems into the cloud, others are still waiting. Overall, though, attendees agreed  that moving to the cloud should be part of system migration considerations targeting at Total Cost of Ownership and complexity reduction through standardization.

Cybersecurity is still a major concern in the chemical community, but there are several different opinions on this – some feel that it is better trusting cloud vendors as vendors have to develop cybersecurity as a core competency, others feel more comfortable in keeping mission critical applications in house. The cloud vendors may also have a better chance to attract the limited cybersecurity talent available in the market.

Another question which was heavily debated was public vs. private cloud. The latter offers more flexibility, but compromises on cost benefits typically available from a multi-tenancy architecture. In this context, the possible needs of multiple cloud instances, driven by legal requirements to have the cloud in the region or even in the country, was discussed, ultimately calling for integration between different cloud instances.

Attendees also discussed the optimal length of service contracts and change intervals, driven by the rapid changes in technology and solutions from a service perspective.

Overall, no clear answers for these topics and issues came to light, however, there was a common understanding about 2 key facts:

  • Success requires positive Cloud vendor services and vendor relationships
  • The market needs a Cloud platform that orchestrates different clouds and manages integration and solution modifications to promote customer differentiation