Inside SAP’s New York innovation community center

Old technology giant SAP is getting a newer, younger look.

Known for “enterprise resource planning” solutions and other boring software for business processing, SAP’s banking and insurance business has almost 20,000 customers (out of more than 350,000 total) across 150 countries that include 14,100 banks and 5,600 insurers. Its banking customers manage more than $70 trillion in assets and service more than 140 million active banking accounts globally.

About a month ago it moved 400 sales and marketing employees (of its global 84,000 total) into the top five floors of a shiny new 52-story commercial office tower on Manhattan’s far west side to show customers it’s not stuck in its old ways, it’s ready to fast forward into the future. There is also a small number of existing corporate functions, like investor relations and IT support.  SAP has added 60 jobs this year and plans to add headcount throughout 2018.

SAP something

Executive offices still reside in Times Square. The Hudson Yards offices are more of a show for customers, who are brought to the 52nd floor.

“We’re showing the outside world things you wouldn’t think first of us as a company, it shows where we stand today,” Toni Tomic, vp of insurance and global head of industry business development, said of the new facilities. “You can feel it, touch it, smell it. If we come here with customers they’ll recognize we’re a different animal than they thought.”

pepper SAP

But down on the 48th floor is the SAP Next Gen Lab, where the 45-year-old SAP wants to act as a “matchmaker” for those customers and new New York talent — students, startups, academics, researchers, accelerators, venture firms and other potential innovation partners. The space boasts floor-to-ceiling windows with panoramic views of the city with lounge areas and a Brooklyn Roastery cafe. There are designated work areas for designers, technology builders, entrepreneurs and researchers. It plans to foster a vibrant Meetup scene and host technology bootcamps for bankers.

SAP is sort of rebranding itself an international player that can foster an international ecosystem, instead of being merely a technology vendors to some big companies. For the last few years the story of fintech has been about the old versus the new, the banks versus the startups. (Incidentally, it’s not just the major corporations that use SAP’s technology. SAP has identified more than 5,000 startups, 850 of which have developed products using its technology, Tomic said. About 250 of them are active today, 60 are applicable to SAP’s customers and about 20 are “hardcore fintechs.”) Now SAP has made a real estate investment it hopes will foster innovation by creating a more cohesive environment for it, according to Falk Rieker, global head of industry business unit banking.

SAP makers

“Banks have really been brought to accelerate their innovation efforts… change the way they interact with the customer,” he said. “In the world I grew up in, the banker waited in the bank until the customer came in. The banker would tell you what’s best for you. In the new world, the bank needs to come to the customer, the customer determines what the product looks like.”

That’s true whether the customer is a consumer or a business.

“Banks need to consider not just their own product, but giving their customers choice,” Rieker added. Hence, a new space for co-creation. “If banks get their act together, they have a bright future.”

coffee SAP

The company is running with various emerging themes that technology has brought to financial services: it understands it can’t not innovate and stay relevant, and it can’t innovate alone. And it’s not longer about big companies eating up small startups, it’s about fast companies beating out slow companies no matter the size or reputation.

“We don’t innovate just in a silo, we have to work and collaborate with the minds of startups, academia and young people,” said Ann Rosenberg, global head of SAP Next-Gen, nodding to the energy of New York City and its contrast to Silicon Valley.

SAP designers

The tower is one of several planned for the $20 billion, 27-acre Hudson Yards redevelopment project, the city’s largest private real estate development since Rockefeller Center and the largest in U.S. history. SAP did not share how much money it’s investing, but asking rents for Hudson Yards office space average $90 per square foot, according to the commercial real estate agency Cogent Realty Advisors, which puts annual rent at about $13 million for the 144,000 square feet SAP now occupies.

“Don’t ask me about ROI,” Rieker joked, when asked what exactly SAP plans to get out of this multi-million dollar investment. “Three things: expertise — we have the skills of the financial services industry right here in the city; its excitement — the city of New York is fully committed to financial engineering and software; and the energy level — everyone speaks about Silicon Valley, I’m really pumped up about the energy in New York.”

SAP new york

SAP’s Kris Hansen on blockchain: ‘Put the trust into the algorithm’

In our coverage of bitcoin and supporting blockchain technologies, it’s clear that the hype way overshoots what’s actually happening on the ground. So, to better understand how companies are actually interacting with distributed ledger tech, we went to Kris Hansen.

Kris is a senior principal at SAP, focused on financial services at the global software player. In his role on the value engineering team, he works to identify ways that digital approaches can be used to find interesting opportunities to create disruptive business value. A self proclaimed “recovering” chief architect of a bank, he brings an interesting perspective on changing business models and technology platforms in financial services.

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Below are highlights, edited for clarity, from the episode.

The challenging transformation of today’s banks

I often refer to myself as a recovering chief architect from a bank. It can be a tricky job. You have all this technology complexity and legacy investment. And then you have the business showing up and saying it wants to do something completely different. You’ve got to somehow get this massive legacy shaped and formed in the right direction to go forward. Occasionally, you get an opportunity to transform and rethink the legacy. But that becomes a challenge in managing scope and finding a solution that’s really going to make a difference. You’re on the hook for feasibility (the stuff has to work) and the business outcomes (the business has to be happy with what they get). Being a bank architect is a tough job.

Preparation for the coming blockchain movement

Personally, I’m a tacit learner. For me to understand Bitcoin and Ethereum, I set up a node to see it and understand it. Businesses need to start getting hands-on. Understand what cryptocurrencies are and the differences in the platforms. From there, you have to start thinking about what it would take to connect the existing world to this new world. Quantifying that gap and determining what’s involved to change is where organizations should be at this point.

Industry cooperation around distributed ledgers

I’d really like to see us get to industry-wide collaboration. One of the great advantages of the consensus protocol is that we can establish trust where trust doesn’t need to be explicitly built between counterparties. We can put the trust into the algorithm. We can put the trust into cryptography.

I don’t see a lot of that happening with most of the enterprise adoption of these platforms. We aren’t there, yet. There tends to be more of a closed network. Some of it is the challenge of building the network and getting people to the table and agree on how to run these proof of concept projects. It’s hard enough to get multiple divisions in a bank to work together. Multiply that by 40 and you can see the challenge with some of the blockchain consortia. They have a lot of meetings. What we need to see is some of the bureaucracy-breaking concepts built into the platforms. Instead of having meetings, let’s lean on consensus technology to agree on how we’ll form this consortium. So far, the technology hasn’t helped align these groups.