HIGHLIGHTS: Christian Klein - CEO of SAP

0:00Hi everybody, tune in to this short version of the podcast which we do every Friday. For the long version, tune in on Wednesdays. Hi everybody, I'm Nikolaj Tangen, the CEO of the Norwegian Southern Wealth Fund. And today I'm in really good company with Christian Klein, the CEO of the software giant SAP. Now, SAP is now the largest company in Europe, third largest software company in the world. And we own just under 3 % of the company,$9 billion, equivalent to 100 billion Norwegian kroner, or 20 ,000 kroner per Norwegian. So it's a very big and important position for us. Christian started as a student intern in SAP.

0:39Like 20 years ago, he became the CEO. Wow, what a journey, Christian. Yeah, but you see my gray hairs. First of all, now, just to get a feel for the importance of SAP, how much of the world's business touches an SAP system? Yeah, Nikolai, first of all, thanks for the trust into SAP And indeed, it was a remarkable journey the last four years. But of course, you feel that a lot of the world's transactions are relying on SAP systems. And now, especially with the cloud, I mean, clients are very serious about how do we want their most mission-critical systems. And to your question, 80 % of the world's B2B transactions want and touching an SAP system.

1:22Wow. How many of the largest companies in the world use your system? Actually, 95 % use one or the other SAP system, many of them finance, supply chain, obviously, but we have HR. I mean, we have probably in the SaaS space the broadest portfolio in our industry. It's unbelievable. Now, for the people who don't know what ERP is, what stands for Enterprise Resource Planning System, what kind of things are you involved with? I mean, there's a lot of talk about digital transformation these days. And just to maybe illustrate a bit what is the role of an ERP. because ERP oftentimes sounds like back office, but it's not at all back office.

1:59At the end of the day, this morning, I had a big car manufacturer, and they actually want to offer mobility as a service in the future. So they need to change their license model, their pricing model. They also want to improve delivery times, and that is all connected to their ERP. The way how you quote, the way how you price, the way how you manufacture, deliver, I mean, that is all part of an ERP. And then we even go to the front line with commerce and with our CX portfolio. So it's really covering the value chain, the mission critical part of each value chain of a company. And here comes also my passion.

2:35It's a piece of technology, Nikolai. But at the end, what it does, it connects business. It actually runs business processes. And that is actually the fascination, what is so special about SAP. We are running the world's most mission critical business processes. One of the things we've seen more of lately is technological nationalism. What are the issues here for you? Yeah, I mean, these days it's big. And tariffs, protection, new sovereignty laws. And obviously, for us, running businesses in almost over 140 countries, that is our commitment to our clients, No matter if you do business in China, in the US, in Europe, in Southeast Asia, everywhere, we will adhere to local laws.

3:25And not only local tax requirements, but also sovereign clouds. So we're building now a lot of sovereign clouds based, of course, on local laws about data security, who's touching the data, data sovereignty, where does the data will be located. And that's part of the business. I mean, and that becomes, of course, now these days more and more important. Are you seeing more demand now as European companies want to have a European alternative to some of the large U.S. providers? Yeah, I mean, I see signs for that. People, customers asking, hey, when this continues, you know, how safe is my data when it goes to the east, when it goes to the west?

4:06So they are asking definitely, hey, SAP, can we also localize our data more and more in Europe, even, you know, in non-regulated industries? I mean, in the public sector and the regulated industries, sovereign cloud was always a big part of the business. But also now we see more and more non-regulated business. Not that, you know, customers now are suddenly shifting systems already around, but you see, you know, the risk is increasing. So there's also some uncertainty around that topic. Absolutely, yeah. Let's move to AI. What excites you the most with AI? The possibilities, the opportunities, what you can do with this technology.

4:43I mean, I see it always in the context of our customers' business. And I just had, you know, yesterday a big, you know, French retailer here, and they do millions of changes to orders. They change orders every day because consumers, you know, actually, you know, do a change of what they order. They do a lot of order changes in the supplier space. And now when you can see how you can automate that with AI, I mean, for them it's like a big productivity booster. So if you look at the possibilities here, and so if you were to try to rank them, what are the kind of the most amazing things you're seeing here?

5:19Starting from the biggest changes over the next three to five years. The biggest changes is actually in the context of SAP and AI is definitely on the analytics space. I mean, today you're going to figure out, you know, your own planning simulations. You're figuring out how does my supply chain planning work in context with the demand which is coming. And when you see now how AI and all these algorithms will work, and now you can not only bring business data in, but also a lot of other content in. I mean, that makes, of course, you know, financial planning, supply chain planning, workforce planning, I mean, will be absolutely moved to a completely different level.

5:54So in the work of intelligence, the way how these plans are integrated, and of course, how you then at the end can optimize and run your business. Or take another example on the supply chain side. I mean, a lot of our customers spend billions of dollars on asset management. So predictive maintenance for assets is something which will be, of course, hugely impacted by generative AI, but also traditional AI. So that is definitely an area of uptime of machines, uptime of factories. I mean, it's absolutely a big potential there with AI to actually try further productivity for a company. So these are some of the use cases we are driving on.

6:35What is work going to look like in 10 years' time? In 10 years' time? Look, I really believe that when you look at, no matter in a company, which function you want to take, I would say people can be way more focused on building great strategy, how is my industry transforming, but really not so much into anymore going into data, analytics, etc. I mean, there will be a lot, you know, what will be done by AI or software to really supplement, you know, your strategy work way more. And the same is true for, you know, as I said before on finance or HR. There's still today a lot of, you know, manual transactions documents which you need to screen, a lot of bureaucracy you have to deal with.

7:21And I'm totally convinced a lot of that will be taken out and will allow HR business partner to think more about, hey, what is the workforce I need in five years from now? How will my skills change? And a lot will be done, you know, in the back by software and AI. So what about the situation with humanoids and robots? So I met this robotic company earlier in the week. I'm just amazed by how soon they will be all over the place. Yeah. how is this going to impact society? I mean, the impact is there already today. I mean, I have seen warehouses in China and other places in the world where 95 % of the work in a warehouse is done by robots.

8:02And I mean, that is already, you know, today changing. And that will continue. I mean, also the way how you maintain factories, how you maintain machines will be completely automated also by AI, not only robots. And so your workforce will change. I mean, even at SAP, look at SAP. I mean, we actually have today a profile of a developer. So we will still have many developers also in five years from now. But the skill profile of a developer will change a lot. So the way how we code, the way how we will deliver software will radically change. So it's very important for every company to also think about, okay, this is my workforce here and today.

8:41But also how does my workforce need to transform skill-wise? And what kind of jobs do I need? And which kind of jobs do I won't need anymore in the future? Moving on to leadership. So you became the CEO before you turned 40. It's quite extraordinary. How was that? I mean, I look at my career at SAP and I feel this is the strength of SAP. I mean, I started here as a student. and since then I always had, first of all, people, mentors, who actually gave me a lot of knowledge, who actually gave me a platform to grow my career and they gave me a lot of trust and responsibility. I had my first team here at SAP with seven people when I was 26, 27.

9:28Others are still at the university. And then I had the opportunity not to only see one part of SAP. I mean, we have here a big internal job market. So the ability to rotate and seeing different parts of the business is absolutely there. And that helped me a lot to not only have great mentors, but also then to learn business end to end. How was it to lead people who were a lot older than you when you were so young? Actually, I didn't think so much about it. I always, you know, wanted to convince people about, you know, leadership, about making decisions, also convince them about, you know, with knowledge and expertise and also, you know, always not be there to also help them to do that job better.

10:17And I guess when people feel that there is someone who understands the business, who is also helping me, you know, in my own career, helping me, you know, to move on, I guess then you also, you know, create, you know, the acceptance you need. And then I guess age doesn't matter so much.