There are persistent signs that all is not well in the land of SAP.

The German enterprise applications leader is in the midst of laying off thousands of people. Its cloud efforts have sputtered. Its product line confuses customers. HANA, the in-memory columnar database that was supposed to save the company, has been eclipsed by newer, more cloud-friendly players.

With the throng of cloud native enterprise resource planning providers nipping at SAP’s heels, it has found itself in need of game-changing innovation – and it looks like the company has moved its chips all-in on artificial intelligence.

Whether Leonardo, SAP’s core AI offering, will save the company is still an open question. Is it one more item on a too-long list of SKUs? Can it compete with the likes of IBM’s Watson or Salesforce’s Einstein, or any other AI product named after some smart dead white guy?

It seems that AI-washing is de rigueur for enterprise software providers this year. Is SAP following suit, or is it executing on true innovation that can save the company?

Making sense of the confusion

As many large companies do, SAP has made a number of acquisitions over the years, resulting in a complex and confusing product line. For example, SAP sells SAP HANA, C4/HANA, S4/HANA and HANA Cloud Platform – and that’s just its HANA products.

SAP co-founder Hasso Plattner has been forthright about this challenge. “The interesting effect of having a strategy understood by the majority of people, and having a brand name which is at least as good looking as S/4HANA… it helps,” Plattner said last year. “It didn’t help that we have Hybris, Hybris for Marketing… all these names and they were changing faster than I could memorize.”

HANA’s leadership agrees with Plattner’s assessment. “There is confusion over HANA, and we can always do more to explain what exactly each one can do for you,” Matthias Haendly, vice president of S/4HANA incubation and co-innovation at SAP, said last month.

Confusion over HANA, however, doesn’t account for the recent round of layoffs, as SAP sheds some of its older staff in favor of talent in AI and analytics areas. There is concern, however, that the bathwater SAP is dumping still has too many babies in it in the form of key software leaders that have been driving innovation for the company.

All-in with AI

According to Andreas Bitterer, chief analytics evangelist at SAP for Europe, the Middle East and Africa, who spoke at the IRM UK Business Change & Transformation Conference Europe last month, AI is the key to business transformation – for SAP’s customers, certainly, but more important for SAP itself.

The starting point: data. “Becoming a digital business means intelligently connecting people, things, and businesses,” Bitterer explained. “It’s all about the data.”

SAP has always been a data-centric company. “SAP is known for transactional data – transactions, customers, products, point of sale, structured data,” Bitterer continued. “People think business intelligence is about reporting. That’s just the beginning.”

These data form the foundation of what SAP calls the Intelligent Enterprise. “Businesses need to make sense of a growing volume of data, create a step change in productivity, and innovate with relentless clock-speed,” according to an SAP eBook. “In other words, they need to accelerate value creation. This is the heart of the Intelligent Enterprise.”

In fact, the company’s Intelligent Enterprise campaign is more than mere marketing, since it represents a shift in SAP’s investment in AI.

Instead of focusing its efforts on Leonardo as a separate product, the company is integrating AI throughout its product line. “SAP Analytics Cloud extends access to over 150 cloud data sources,” according to an SAP announcement from June 2018. “Enhancements to SAP Analytics Cloud include prebuilt content and business logic for more than 20 SAP products, including SAP SuccessFactors, SAP Ariba and SAP Hybris solutions and SAP S/4HANA.”

What’s particularly interesting about the way SAP is integrating AI into so many products is how pragmatic the company is being. “It’s a misconception that AI is for new things,” Bitterer said. “People are using AI for the exact same things they were using BI for, only faster, cheaper, more reliable and with a lot more data.”

The difficult part of transformation

Getting the technology right – that is, of sufficient quality and functionality to delight current customers and attract new ones – is difficult enough, but SAP faces even greater organizational challenges.

Reorganizations are always painful, as the company is losing some spectacular people, and hiring AI experts to replace them is hen’s teeth territory in this job market. The company still has too many product lines, with the bureaucracy and organizational inertia that go with them.

Transforming its business along customer lines rather than a motley collection of silos is unquestionably SAP’s greatest challenge – a fact that it is quite aware of. “Business change and transformation are happening right now,” Bitterer said. “If organizations aren’t paying attention, it’ll be really hard to survive. If you want to change something, you need to make a hard strategic decision.”

With its investment in AI, SAP is on the right track, but it remains to be seen whether it will be able to successfully transform itself to take full advantage of the power of the technology. The company cannot afford to falter, because its competition certainly won’t.

Jason Bloomberg, a leading IT industry analyst, author, keynote speaker and globally recognized expert on multiple disruptive trends in enterprise technology and digital transformation, is founder and president of agile digital transformation analyst firm Intellyx. The firm publishes the biweekly Cortex newsletter, advises companies on their digital transformation initiatives and helps vendors communicate their agility stories. Bloomberg, who can be followed on Twitter and LinkedIn, is also the author or coauthor of four books, including “The Agile Architecture Revolution.” (Disclosure: IBM and SAP are former Intellyx customers. IRM UK paid part of Jason Bloomberg’s travel costs to its conference, a standard industry practice.)

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