SAP CEO Christian Klein is bullish about India, says country is a 'clear winner in next phase of globalisation'

Christian Klein is bullish about India. The reason, he explains, is because in the current geopolitical circumstances, what companies are looking for is a market that has great talent and an environment to invest. And India has both, says the 43-year-old CEO and member of the Executive Board of SAP, the German enterprise technology and cloud solutions provider that had revenues of €30.87 billion in FY22, and whose solutions are used by over 400,000 businesses globally. In an exclusive interview with Business Today’s Nidhi Singal, Klein opens up about the integration of Generative AI, India’s skilled workforce and the next big thing in technology. Edited excerpts:

Q: We live in a VUCA (volatility, uncertainty, complexity, and ambiguity) world. How do you see this impacting the global demand for and spending on technology solutions?

A: During my recent visit to India with German Chancellor Olaf Scholz to meet Prime Minister [Narendra] Modi and the government, and to talk to companies [in India], what did we learn? They need technology to transform their businesses.

So, a big trend in India is the move to clean energy. Indian energy providers say they are interested in using technology to move to clean energy. Or take the very successful car manufacturers in India; they want to move into more mobility services... they want to change the way people buy and consume all the services inside and outside the car. They need technology for that.

Then consider the huge mid-market—the 60 million [small and medium enterprises, or SMEs] in India—they want to grow their business, and they need technology to help them to get their products and services from India to everyone in the world. And this is where technology can help.

And, last but not least, when you look at sustainability, India has huge ambitions. Your government is focussed on decarbonisation, and there is technology—such as Green Ledger from SAP—that can help to create transparency around how much greenhouse gas emission there is in a product, and how we can act on that to reduce the carbon emissions across the supply chain. So, technology is extremely relevant, especially in a market like India. I see a very bright future and what is good about India [is that] you are embracing technology to succeed and win in the market.

We don’t see a lack of IT budgets; it’s just the opposite. We see a lot of interest to invest further.

Q: In Davos earlier this year, you talked about the next phase of globalisation. Is India a part of that?

A: I can tell you [that in] the next phase of globalisation, I see India as a clear winner. Look at all the geopolitical tensions going on—between the US and China, and what’s happening in Russia. During my recent visit, the interest was high among all the other CEOs visiting [the country]—from car manufacturers to chemical companies—to invest in India, because the supply chains will change.

What companies are looking for is a market where you have great talent and an environment to invest. You have to have the infrastructure, and the government needs to have a vision when it comes to sustainability, making it easier for companies to invest. And when you look at all of that, I feel India will be the winner because a lot of companies are choosing to invest in countries where they see all of these, to be successful in the future.

Q: SAP was an enterprise resource planning (ERP) software company and then you migrated to the cloud. What is the next big technology you are looking at?

A: When I look at all our customers in India—no matter if it’s large enterprises like Tata, or HCL [or the mid-market ones]—they want to move fast. And this is what they get in the cloud [where] we can continuously ship new innovations. I really like how all our customers are embracing this journey. Mid-market customers also have high ambitions to grow their business, and for them, we have an offer called Grow with SAP, where we give them the industry’s best practices with the software to scale or accelerate, and to rise to the top in the industry.

What comes next? You have seen what is possible with AI... now we are taking AI to the next level. In the future, Generative AI will help our customers in India ask any kind of business-related question. And the software will give you intelligent answers, will give you recommendations to make more informed decisions that help you better manage your business, or to access new capabilities. And you have to have the best workforce—it’s all about the people. Generative AI can help us close the skills gap by helping educate your workforce in the best possible way. And that happens with AI now, not just by human endeavour.

Q: What are you doing to make it responsible Artificial Intelligence?

A: When it comes to AI, we have appointed a board of external advisors who are making sure that our AI is developed in a responsible way. This means we are applying the right values [to the AI] and there [is] no bias in the algorithms. This [board] makes sure [that not only do] customers see all the benefits but that we are also applying AI in a responsible way.

Q: You talked about Generative AI. What will you focus on in the future?

A: I’ve spoken a lot about the business network (a B2B collaboration platform connecting processes, and devices across multiple enterprises, digitising transactions, and creating transparent, resilient, and sustainable supply chains). And I would love to give you a little bit more insight into why I feel this is the crown jewel in our portfolio and will change the way how businesses run.

Many Indian companies have faced certain supply chain restrictions and disruptions due to the high demand for certain raw materials. For example, the need for chips in the car industry. And to lift the business network, we are connecting the supply chains of car manufacturers, services companies, life sciences [companies, and more]. What you will get is a certain visibility—end to end—across your supply chain to make sure there are no disruptions.

Now, we will also track and trace the carbon footprint. So, in the future, when you buy new products or new ingredients for your products with SAP systems, our Green Ledger initiative can track and trace the carbon footprint—not only from your direct suppliers, but also from all of their suppliers—to make sure you can measure the carbon footprint, including Scope 3 emissions. We are standardising this in Green Ledger so that our customers not only gain more transparency around greenhouse gas emissions, but are also able to act on them to help reduce carbon emissions.

Q: Have you seen any interest from Indian companies?

A: A lot! CEOs are telling us, ‘Hey, I have to report my ESG in a standardised way. But today, I’m working with too many estimates. That’s not enough [as] we need standardised reporting based on actuals.’ And this is what our software can do. Because when you purchase your materials with SAP software, we can make sure that we record ESG and carbon emissions data in our system so that you have actual data. And that’s exactly what Indian companies are also asking for.

Q: SAP caters to 26 industries globally. Which are the key industries for SAP in India?

A: Right now, when you look at where there is high need for technology in India, it’s car manufacturers that are moving to electric vehicles. Green energy transition in India is super important. And technology plays a key role in manufacturing. When I was in India, we talked about the commerce platform you are going to build for SMEs to offer their products and services digitally. We also see a huge demand for technology in retail. So, these are a few key industries that just come to mind. But there will probably be a great example for every industry.

Q: Are SAP solutions relevant for Indian farmers, given the impact of climate change?

A: First, kudos to your PM. He talked a lot about digital, and wants the public sector to be the front-runner. And his second focus was about wanting India to be more sustainable and be a front-runner in decarbonisation. With regard to farming, he said, ‘How can we make sure that from the big companies down to the farmers, we have transparency around what is the most sustainable way to grow and produce certain goods? And how can technology help us reduce carbon emissions?’ So, we also want to make sure that the big companies can source and help the farmers produce in a more sustainable way. The whole value chain down to the farmers should not only be transparent, but with that transparency must come awareness and the need for action, to help all farmers produce goods in a more sustainable way. And yes, that was a big topic with your government.

Q: How important is India as a market for SAP? What is the kind of growth you are seeing and what is your future strategy?

A: I would say India is for me, end to end, the most important market because our biggest lab outside of Germany is not in the US, but in India. We have big plans to hire more young talent in India, as we see a great talent base there. I’d ask the Indian government to double down on education, because at the end, it’s the people and their skills that will make sure that India will thrive in the future.

The second thing is that India has some 60 million SMEs (the mid-market). That’s like almost all the people living in Germany! And the great thing is all of these companies [are] looking at technology to succeed in the market. It’s not like we need to convince these companies; now they come and tell us, ‘Hey, we want to have SAP helping us to grow our business.’

Last but not least are our partners. Our biggest ecosystem is in India—HCL, TCS, Wipro, Infosys—SAP cannot be successful without our partners in India. They are helping us bring the software to all corners of the world. You have the biggest ecosystem now helping us to develop and implement our software. This is India. And now you also hopefully can understand why I’m spending so much time in India, because it’s a very, very important market for us.

Q: What kind of expertise does SAP look for when hiring in India?

A: First, I can only emphasise how important it is to further invest in education. We are hiring from Bengaluru, Mumbai and Delhi. But when I look around, there are also a lot of Tier 2 locations. Our Chairman-designate [Punit Renjen], who knows India really well, said to me, ‘Christian, there are [other] places and locations in India we should definitely look into to further expand, because of the talent there.’ Compare this with Germany or the US [and] you have an incredibly big talent pool.

What are the future profiles we are looking for? AI specialists, data scientists, cybersecurity and data privacy [experts]. These are profiles you don’t find everywhere in the world. We would strongly recommend policies that invest in skilling and education for these profiles.

Having smart people who can talk about digital transformation and making sure you’re connecting businesses with technology [is important], because in the end, digital transformation will only happen if you have people who understand an industry and can connect it to technology. Because a piece of technology on its own [has] no value. Getting your landscape to the cloud with a hyperscaler will not transform your company; what will transform your company is the software—rather applying the software of SAP to the specific business of our customers. So, this combination of skills and industry knowledge, in combination with technology, is a great skill to have in the future, and is relevant for all of our customers in India as well.

Q: How was your meeting with Prime Minister Narendra Modi earlier this year?

A: I was amazed [at] how much your Prime Minister knew about SAP, about our technology and what we do for India. He had concrete plans and thoughts about how technology can help India thrive around sustainability, commerce, and the supply chain. That was great to see. Your government and your Prime Minister are on top of digitisation, and see technology as a great opportunity for India to drive the economy.

We talked about the digitisation of the railways, green transition, helping some of the energy companies to move to clean energy. We talked about commerce and helping the SMEs, the mid-sized companies in India, to thrive and digitise their sales—and help them expand their business to the world. These were a few concrete topics, and he took out a lot of time to meet us. And I guess all the German CEOs, including me, left the meeting with the impression that India is the place to be, and we definitely want to double down on India.

Look, with all the tensions [that] are going on worldwide, companies are thinking: ‘Where do I build my next factory? Where do we invest in our next lab? Where do we invest into our go-to market, into local resources?’ And there are a lot of strong arguments to invest in India right now. And that’s why I’m very optimistic when it comes to the future of India.

@nidhisingal