SAP: Bringing the ‘Operating System’ of a Company into the AI Era with CTO Philipp Herzig

**Sarah Guo** (0:05)
Hey, listeners, welcome back to No Priors. Today, I'm here with Philipp Herzig, the CTO of SAP, the enterprise juggernaut. We talk about their AI strategy, why SAP has endured and thrived through several technology transitions.
Why entrepreneurs are underestimating the challenges of scale.
Why AI is a business model transition, not just a technology transition. Why he thinks that LLMs are not enough for predictive analytics and even about the traveling salesman problem in the real world and the straight-up hermeneuse. Welcome, Philipp. Philipp, thanks so much for being with us.

**Philipp Herzig** (0:39)
Yeah, it's a pleasure to be here. Thank you.

**Sarah Guo** (0:41)
Everybody knows the name SAP, but I do think that for lots of engineers or people who aren't close to the system in a larger enterprise, they don't really know the breadth and function of the platform. Can you just describe what you guys do for customers?

**Philipp Herzig** (0:59)
Oh, absolutely. Look, SAP is the market leader in enterprise, software applications and platforms. It has 400,000 enterprise customers. Usually, I just running their finance, HR, and supply chain, manufacturing, execution, logistics, warehouse management, and then of course everything on the customer side, sales services, commerce, procurement, you name it.
End-to-end, like SAP, we always say we have the broadest portfolio in terms of end-to-end running the business end-to-end. This is where SAP started with, giving real-time insight. Usually, I really describe this as it's not just software in itself, it's kind of the operating system of a company essentially, in order to get from everything from order to cash, from source to pay, right? End-to-end managed for companies around the entire globe.

**Sarah Guo** (1:57)
I definitely want to talk about AI, LLM, some of the stuff that you guys are doing internally, and then around predictive models as well. But just because the macro backdrop is on everyone's mind, both from a technology and an economic perspective. I want to talk about SAP's position in the market a little bit. SAP has stood the test of time through multiple technology and market cycles. I, as an early stage venture capitalist, I'm on the other side of this where the narrative is like, well, when you have internet and cloud and mobile and AI and social, like you have an opportunity for new players.
What do you, like, SAP, you know, even today is the, I believe, the largest like market cap enterprise software vendor versus sort of the last generation of the new guard, like the sales forces of the world. How does that happen? Like, how did you do it? And what makes it so durable?

**Philipp Herzig** (3:04)
Well, what makes it so durable, right? At the end of the day, I mean, if you think about this, and it's happening a little bit the same way also when we talk about the Saas-Estedt Narrative or the Saas-Pakka Lips. I mean, anyway, I have the feeling like in this market, last year, AI was in a big bubble and everybody was kind of saying, no, it's not, and now this year Saas-Estedt and so on and so forth. Look, the reality is now, of course, with the costs of building being so low, right? With specifically agentic coding and all these latest powerful models. I mean, something has always prevailed over the years because even when SAP was founded in 1972, a long time ago, I mean, why was it started? Because actually in the 70s, when the founders of SAP were still at IBM, what did they do? They went to each customer and they implemented the finance system again and again and again and again. And then they said like, hey, this makes no sense, right? Because the economics, it doesn't scale, right? Because of course, you can do this, right? But you can only add so much value in any given time. And by the way, we are basically programming the system very similar. Of course, there's always a little bit that is specific then to the customer. And this was the idea where standard, the notion of the standard software was born essentially, right? And then of course, that stood the test of time, right? Because there is simply things and companies that need to get managed, right? From time to end. And that also has transformed throughout the years. You've mentioned that, right? First from the mainframe to client server, right? Then to the internet, then mobile. And now of course, AI.
So of course, the software has changed and evolved all along with these technologies. What hasn't changed is what customers are seeking for, which is outcomes, right? Outcomes and return on their investment in order to get the things done, right? And of course, now AI is an amazing technology that again helps to get more things done in the enterprise, right? And then that is actually what SAP is standing for, right? And so what we are really doing is in given, of course, also the breadth of the portfolio and the customers is, of course, to help customers to achieve more by deeply embedding AI, AI agents, and of course, transforming now the user interface, and so on and so forth, to help them get more, right, done in whichever industry that they are working in.